By Rodney Clifton
Frontier Centre for Public Policy
and Ben Eisen
Atlantic Institute for Market Studies
HALIFAX, NS, and WINNIPEG, MB, Mar 21, 2014/ Troy Media/ – Education costs are growing across Atlantic Canada, and there is little evidence that the rapidly increasing spending produces better outcomes for students. Policy reforms that bring more consumer choice and competition into education are sorely needed to protect both taxpayers and students.
William Baumol, professor emeritus of economics at Princeton University, coined the term “cost disease“ to describe the observed phenomenon that the cost of delivering social services, such as health and education, tend to increase at a much faster rate than most other goods and services. In his recent book entitled The Cost Disease: Why Computers get Cheaper and Health Care Doesn’t, Prof. Baumol says that the cost of the social services is “condemned” to increase faster than inflation because the number of people providing and using the services cannot be easily reduced.
Data from Statistics Canada clearly shows that the cost disease has infected the education system in Atlantic Canada. Between 1999 and 2010, per-student public school spending has increased at a much faster rate than inflation as measured by the consumer price index (CPI). During this period, the CPI increase went up by 25.5 per cent. In New Brunswick, per-student spending increased by 73.3 per cent – nearly triple the rate of inflation. Per-student spending increased by 74.7 per cent in Nova Scotia, 93.7 per cent in PEI, and 111.1 per cent in Newfoundland and Labrador. In comparison, the lowest increase in Canada was in B.C. at 53.3 per cent.
One important reason for this rapid growth in per-student costs is that, while all across the region public school enrolment has been declining, the number of educators has actually been increasing. From 1999 to 2010, public school enrollment decreased in all four provinces: 17.8 per cent in New Brunswick, 19 per cent in Nova Scotia, 11.7 per cent in Prince Edward Island, and 27.3 per cent in Newfoundland and Labrador. Paradoxically, the number of educators increased in three of the provinces: 1.5 per cent in New Brunswick; 3.7 per cent in Nova Scotia, and 14.1 per cent in PEI. Only in Newfoundland and Labrador did the number of educators decrease, and only by 12.6 per cent when the number of students decreased by more than twice as much.
In all four provinces more resources continue to flow into less-than-full schools, with fewer students in classrooms, expanded bureaucracies, and higher salaries for administrators and teachers. If the cost of educating students had been held to the increase in CPI since 1999, provincial governments in the region would have saved hundreds of millions of dollars in the last fiscal year alone.
Provincial ministers of education and school administrators often claim that students benefit from lower student-teacher ratios, better facilities, more divisional administrators, and higher-paid teachers. But there is little evidence to support this claim.
Rethinking the way education is funded and administered is long overdue. There is a pressing need to lower expenditures and improve students’ educational achievement. One effective way of doing this is to tie funding directly to demand by using vouchers that increase at the rate at the CPI or a few percentage points above it. These vouchers would allow parents to send their children to any public or private school they choose. Higher enrollments would mean larger budgets, and lower enrollments would mean smaller budgets.
Consumer-controlled expenditures would also eliminate large swaths of public school bureaucracies that absorb considerable resources. Schools would turn away from maximizing spending on peripherals and focus on objective, measurable, outputs that are essential for educating informed, enlightened, and employable citizens.
As a result, students would be tested on the core subjects, and the results would be published so that excellent schools would attract more students and low-performing schools would either find a way to improve or else wither and close as enrolment falls. Under this type of competitive model, schools would be free to experiment with new teaching and administration strategies, but they would need to deal with the consequences, both positive and negative.
These changes would save considerable money for provincial governments, making schools much more responsive to the needs of students and parents and much more palatable to taxpayers. The cost disease has clearly infected our education system. Choice and competition are the best medicines to heal the patient.
Rodney A. Clifton is the author of The Cost Disease Infects Public Education Across Canada, published by the Atlantic Institute for Market Studies and the Frontier Centre for Public Policy. Ben Eisen is the Director of Research at AIMS. (www.aims.ca)
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