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Who Pays the Piper? Can Low Price, Fee Paying Schools Self Finance and Enrol the Poorest? Keith M Lewin

PERIGlobal
PERIGlobal

Low price fee paying schools are argued to be accessible to the poorest. They are also thought to benefit from competition and the assumptions of efficient markets. This presentation will: identify the main drivers of costs in national education systems illustrate the range of prices that are needed for solvent school financing in countries with different levels of GDP per capita identify likely levels of teachers salaries necessary for self financing at different fee levels compare costs to households with household incomes discuss under what conditions an efficient markets hypothesis might hold and under what conditions it will not.

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Who Pays the Piper? Can Low Price, Fee Paying Schools Self Finance and Enrol the Poorest? Keith M Lewin www.create-rpc.org
Outline Meanings, Markets, Mechanisms and Motives Definitions and Concepts Setting the Scene for Discussions of Finance and Effectiveness Do Efficient Market Propositions Hold for School Choice? How far is affordability a constraint and what are the prices needed for solvent school financing? Privatisation of public or publicisation of private?
Definitions and Key Concepts Private school are schools financed wholly by income from fees and charges for students (and voluntary donations by others?); to qualify private schools must be or aspire to be legal entities subject to public benefit regulation This definition excludes many other types of privately managed but publicly financed schools and community financed schools that are run with CSO type governance and are not for profit. Private schools must have a business model (they are businesses); they must be legal entities, they must publish accounts, they must declare beneficial ownership, and it should be clear how they are financed, and what rates of return they generate on invested and borrowed capital Private schools must employ teachers and other staff legally at or above minimum wages. There is no private schooling (pedagogy, curriculum, examination), only privately financed schoolng, that may or may not emphasise different methods, choice of content, and may elect to take different (public) examinations. There is no private school system in most counties, but a collection of private sector providers mostly operating independently
Financing Education: States and Markets Who Pays for What? 100 GDP 90 80 70 60 %GDP for Devt 50 Govt LDC %Govt 40 Budget for Ed 30 20 %GDP for Ed 10 0
Demographics, Labour Markets and Choice More workers than children Falling numbers enter labour market
Demographics, Labour Markets and Choice Fewer workers than children Growing numbers enter labour market
Zones of Inclusion and Exclusion Where are the Private Sector Providers? 100 Unlikely Zone 1 to Enrol No Never 90 Enrol Should Access CREATE Enrol Zones of Exclusion 80 Zone O www.create-rpc.org 70 Zone 2 No No Pre- Primary Drop Outs Access 60 % Participating School 50 Zone 4 40 Zone 3 At Risk Primary Leavers Overage, Low Attenders and Achievers No 30 Zone 5 Drop Outs Access 20 Zone 6 At Risk At Risk 10 Secure Enrolment, Attendance and Achievement Access 0 1 2 3 4 5 6 7 8 9 10 Primary Grades Lower Secondary Grades
Performance Skews and Implications 70 70 60 60 Percentage of Schools Accra Percentage of Schools --Accra 50 50 Public 40 40 30 30 20 20 Private Public 10 0 Q5 Q4 Q3 Q2 Q1 Quintile of School by Average Score
India
Where are the private schools?
The Efficient Market Hypothesis Are the Propositions Valid for LFPS for the Poor Choice is only determined by price and not constrained by wealth, location, social/religious group, transfer costs, opportunity costs etc The universe of possible choices is wide i.e. many viable options Information is freely available (e.g. on performance, facilities, fees charges) to all actors in a timely way and is independently verified There are no significant barriers to exercising choice (e.g. enrolment fees, calling in of credit, opportunity costs, social exclusion) Principal (purchaser) and agent (service provider) share the same goals and motivations and are not displaced by intermediaries; what is sold is what is bought Supply and demand are not distorted by public subsidies either open (e.g. capitation, scholarships, teachers salaries) or concealed (teacher training, curriculum development, cost of buildings) Markets for capital do not fail, and behave rationally in seeking returns
Choice, and Location Constraints on Choice Costs Transfer Costs Distance Safety Social Group Information Capacity Public Low Fee Mid Fee High Fee
Choice, Affordability and Perceived Quality Costs Perceived Quality
Tanzania - Affordability Affordability 50000 45000 40000 35000 30000 25000 Total Urban Household Expenditure/ month 20000 Government School Fees ++ /month 15000 Total Rural Household Expenditure/ month 10000 5000 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101 105 109 113 117 121 125 129 133 137 141 145 149
Poorest = GBP 200 week = USD 300 = USD15,600 per year 10% on education costs = USD 1560 per year per household Income per class PTR 25:1 = 25* 1560 = USD 39,000 No default Direct cost of qualified teacher = USD 50,000 + on costs = USD 75,000 Infrastructure, ancillary staff, overheads = +USD 75,000 Building costs/ rent = USD 75,000? Profit/investment = USD 25,000 Total Income needed per 25 students =USD 250,000 Fee per student =USD 10,000 Low cost private schools in London charge USD 11,000 = 贈7,000 This is affordable at 10% for income 贈70,000 = USD 100,000+
Affordable Costs for Households + School Cost Drivers Self Financing Fee Costs - Simulations Primary Lower Sec Upper Sec HE + Other Total Pupil Teacher Ratio 30 25 20 Teacher salaries /GNP/capita 1.5 2 2.5 Non teaching salaries/GNP/capita 0.5 1 2 Non salary expenditure/GNP/capita 0.5 1 2 Teacher salaries as % of total recurrent 60% 50% 38% Total unit cost % GNP /cap 8% 16% 33% School age pop as % total pop 20% 6% 5% % school age pop enrolled (GER) 110% 105% 105% % budget on higher ed + other education 20% %GNP Needed 1.83% 1.01% 1.71% 0.91% 5.46% GDP Primary L Sec U Sec 500 42 80 163 1000 83 160 325 1500 125 240 488 2000 167 320 650 10000 833 1600 3250 50000 4167 8000 16250
Markets and States Contentious Propositions Are they True? States are failing to met the educational needs of their populations; the private sector can reach the places and people the public sector cannot in ways which are equitable The private sector is more efficient and effective than the public sector in delivering educational services to the poor; Effective demand generates affordable low cost providers Competition between the private and public sector for children, teachers, and other resources promotes improved standards and has no adverse effects The private sector has sufficient capacity to meet a substantial proportion of additional demand for educational services Public Private Partnerships can offer enhanced service delivery with more access, greater efficiency and effectiveness, and positive effects on equity but for which services, for which purposes, at which levels, under what conditions, and what kind of impact on equity?
Who Pays the Piper? Can Low Price, Fee Paying Schools Self Finance and Enrol the Poorest? Keith M Lewin www.create-rpc.org

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Who Pays the Piper? Can Low Price, Fee Paying Schools Self Finance and Enrol the Poorest? Keith M Lewin

  • 1. Who Pays the Piper? Can Low Price, Fee Paying Schools Self Finance and Enrol the Poorest? Keith M Lewin www.create-rpc.org
  • 2. Outline Meanings, Markets, Mechanisms and Motives Definitions and Concepts Setting the Scene for Discussions of Finance and Effectiveness Do Efficient Market Propositions Hold for School Choice? How far is affordability a constraint and what are the prices needed for solvent school financing? Privatisation of public or publicisation of private?
  • 3. Definitions and Key Concepts Private school are schools financed wholly by income from fees and charges for students (and voluntary donations by others?); to qualify private schools must be or aspire to be legal entities subject to public benefit regulation This definition excludes many other types of privately managed but publicly financed schools and community financed schools that are run with CSO type governance and are not for profit. Private schools must have a business model (they are businesses); they must be legal entities, they must publish accounts, they must declare beneficial ownership, and it should be clear how they are financed, and what rates of return they generate on invested and borrowed capital Private schools must employ teachers and other staff legally at or above minimum wages. There is no private schooling (pedagogy, curriculum, examination), only privately financed schoolng, that may or may not emphasise different methods, choice of content, and may elect to take different (public) examinations. There is no private school system in most counties, but a collection of private sector providers mostly operating independently
  • 4. Financing Education: States and Markets Who Pays for What? 100 GDP 90 80 70 60 %GDP for Devt 50 Govt LDC %Govt 40 Budget for Ed 30 20 %GDP for Ed 10 0
  • 5. Demographics, Labour Markets and Choice More workers than children Falling numbers enter labour market
  • 6. Demographics, Labour Markets and Choice Fewer workers than children Growing numbers enter labour market
  • 7. Zones of Inclusion and Exclusion Where are the Private Sector Providers? 100 Unlikely Zone 1 to Enrol No Never 90 Enrol Should Access CREATE Enrol Zones of Exclusion 80 Zone O www.create-rpc.org 70 Zone 2 No No Pre- Primary Drop Outs Access 60 % Participating School 50 Zone 4 40 Zone 3 At Risk Primary Leavers Overage, Low Attenders and Achievers No 30 Zone 5 Drop Outs Access 20 Zone 6 At Risk At Risk 10 Secure Enrolment, Attendance and Achievement Access 0 1 2 3 4 5 6 7 8 9 10 Primary Grades Lower Secondary Grades
  • 8. Performance Skews and Implications 70 70 60 60 Percentage of Schools Accra Percentage of Schools --Accra 50 50 Public 40 40 30 30 20 20 Private Public 10 0 Q5 Q4 Q3 Q2 Q1 Quintile of School by Average Score
  • 10. Where are the private schools?
  • 11. The Efficient Market Hypothesis Are the Propositions Valid for LFPS for the Poor Choice is only determined by price and not constrained by wealth, location, social/religious group, transfer costs, opportunity costs etc The universe of possible choices is wide i.e. many viable options Information is freely available (e.g. on performance, facilities, fees charges) to all actors in a timely way and is independently verified There are no significant barriers to exercising choice (e.g. enrolment fees, calling in of credit, opportunity costs, social exclusion) Principal (purchaser) and agent (service provider) share the same goals and motivations and are not displaced by intermediaries; what is sold is what is bought Supply and demand are not distorted by public subsidies either open (e.g. capitation, scholarships, teachers salaries) or concealed (teacher training, curriculum development, cost of buildings) Markets for capital do not fail, and behave rationally in seeking returns
  • 12. Choice, and Location Constraints on Choice Costs Transfer Costs Distance Safety Social Group Information Capacity Public Low Fee Mid Fee High Fee
  • 13. Choice, Affordability and Perceived Quality Costs Perceived Quality
  • 14. Tanzania - Affordability Affordability 50000 45000 40000 35000 30000 25000 Total Urban Household Expenditure/ month 20000 Government School Fees ++ /month 15000 Total Rural Household Expenditure/ month 10000 5000 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101 105 109 113 117 121 125 129 133 137 141 145 149
  • 15. Poorest = GBP 200 week = USD 300 = USD15,600 per year 10% on education costs = USD 1560 per year per household Income per class PTR 25:1 = 25* 1560 = USD 39,000 No default Direct cost of qualified teacher = USD 50,000 + on costs = USD 75,000 Infrastructure, ancillary staff, overheads = +USD 75,000 Building costs/ rent = USD 75,000? Profit/investment = USD 25,000 Total Income needed per 25 students =USD 250,000 Fee per student =USD 10,000 Low cost private schools in London charge USD 11,000 = 贈7,000 This is affordable at 10% for income 贈70,000 = USD 100,000+
  • 16. Affordable Costs for Households + School Cost Drivers Self Financing Fee Costs - Simulations Primary Lower Sec Upper Sec HE + Other Total Pupil Teacher Ratio 30 25 20 Teacher salaries /GNP/capita 1.5 2 2.5 Non teaching salaries/GNP/capita 0.5 1 2 Non salary expenditure/GNP/capita 0.5 1 2 Teacher salaries as % of total recurrent 60% 50% 38% Total unit cost % GNP /cap 8% 16% 33% School age pop as % total pop 20% 6% 5% % school age pop enrolled (GER) 110% 105% 105% % budget on higher ed + other education 20% %GNP Needed 1.83% 1.01% 1.71% 0.91% 5.46% GDP Primary L Sec U Sec 500 42 80 163 1000 83 160 325 1500 125 240 488 2000 167 320 650 10000 833 1600 3250 50000 4167 8000 16250
  • 17. Markets and States Contentious Propositions Are they True? States are failing to met the educational needs of their populations; the private sector can reach the places and people the public sector cannot in ways which are equitable The private sector is more efficient and effective than the public sector in delivering educational services to the poor; Effective demand generates affordable low cost providers Competition between the private and public sector for children, teachers, and other resources promotes improved standards and has no adverse effects The private sector has sufficient capacity to meet a substantial proportion of additional demand for educational services Public Private Partnerships can offer enhanced service delivery with more access, greater efficiency and effectiveness, and positive effects on equity but for which services, for which purposes, at which levels, under what conditions, and what kind of impact on equity?
  • 18. Who Pays the Piper? Can Low Price, Fee Paying Schools Self Finance and Enrol the Poorest? Keith M Lewin www.create-rpc.org