OECD Study Says Markets in Education Have Not Worked

A major new study published by the Organisation of Economic Co-operation and Development (OECD) has found that the introduction of market reforms in education had little positive effects on student achievement, generated little innovation in education and brought greater likelihood of increased segregation by race and class.

The report found that the market mechanisms of choice and competition do not work well in education. It says that parent choice behaviour “is best predicted by school composition” rather than school results and popular schools tend to restrict their capacity in order to control the social composition of their enrolments. It says that the notion of “local hierarchies of schools” is central to understanding choices made by parents and the responses of schools to competition.

The report reviewed two decades of academic research on the impact of market reforms such as charter schools, voucher programs and the abolition of school zoning. It found that studies of the effect on student achievement ranged from positive to no effect at all, with many finding differential effects.

Some studies show positive effects, but these are generally small and vary by subject. Positive effects for reading tend to be larger than for mathematics. In many cases, positive effects are limited to some grades, some groups of students or some measures and tests.

In particular, the positive effects of greater competition shown in some studies often depend on how the effects are measured. For example, a study of competition from independent schools in Sweden found positive effects on public school performance when competition was measured one way, but not in others. Such differential effects have been found in other studies in Great Britain and the United States.

The report states:

One interpretation of differential effects is that market mechanisms may benefit some students, in some ways, in some circumstances. Another reading is that positive effects resulting from market mechanisms are so small that it is a matter of chance whether a particular effect is statistically significant or not. [p.13]

The report also notes that several studies also show that the introduction of market mechanism in education had no effect on student achievement.

Many studies show increased segregation between schools by race, socio-economic background and ability in many countries including Chile, Denmark, Netherlands, New Zealand, Sweden, the United Kingdom and the United States. For example, several studies show that both ethnic and socio-economic school segregation increased after the introduction of open enrolment in the United Kingdom. The introduction of extensive market-based reforms in Chile resulted in middle class flight to private schools and increased segregation along socio-economic lines.

Studies also show that market mechanisms do little to increase innovation in education. The report says that pedagogical and curricular innovations seem to have stronger links with government intervention.

After reviewing the major studies, the OECD report investigated why market reforms have so little an impact on education outcomes and why the effects are inconsistent between contexts. It concluded that market mechanisms vary in practice and their impact is related to other policies that influence parent choice and school actions.

It found that two specific features of market mechanisms help explain behaviour by parents and schools.

First, education markets are essentially local in nature as parents tend to choose schools within travelling distance. The degree of competition varies according to the number of schools within local areas.

Within these markets there is a local hierarchy of schools which is partly based on school composition. Schools with white students from advantaged backgrounds rank highest in the hierarchy, irrespective of objective measures of education quality. Some groups of parents try to gain access as high up as possible in that local hierarchy while schools try to position themselves in the hierarchy by either overtly or covertly attracting the most desirable students.

A second feature is that demand and supply responses are relatively weak in education. The report shows that most parents do not respond strongly to poor school results. The vast majority of parents are satisfied with the school they attend and do not leave or bypass a school if it has low results. Even where parents are aware that a school has low results, only a small number leave the school. In other words, choice in education doesn’t work in the same way as in other markets. As the report states:

This indicates that market mechanisms by themselves are unlikely to provide the strong forces needed at the demand side of the market which could improve the quality of education in a substantial way. [p.42]

It is mainly parents from higher socio-economic backgrounds who exercise choice of school, but this is largely governed by school composition. More affluent parents are often found to avoid schools with high proportions of low-income students.

The saying “actions speak louder than words” also applies to parental choice. Although research indicates time and again that parents attach the most weight to quality and academic aspects of schools, their actual behaviour is best predicted by indicators of school composition. Middle-class parents in particular seem to opt for schools attended by children from similar backgrounds. [p.42]

As a result, published indicators of school performance play a limited role in school choice. The report says that their potential impact is easily overestimated and that “reputation” seems at least as important, and is based on many different kinds of information and information sources, including social networks.

On the supply side, schools cannot easily expand if an increasing number of students wish to enrol. For any market to function, a certain amount of over-capacity or ready facility to expand capacity must exist so customers can change from one supplier to another. Governments are often unwilling to provide excess capacity in schools. Popular schools are often unwilling to expand because they want to utilise their “market power” to improve their status in the local hierarchy of schools.

Schools facing more competition tend to respond by spending more resources on promotion and marketing, while some turn to more sophisticated efforts in the realm of public relations.

Studies show that schools facing competition also attempt to get control over their intake. When the number of applicants exceeds the number of places, schools are in a position to select students. Students who are white, perform well, have well-educated parents and come from affluent backgrounds were repeatedly found to be the most desirable students. Selecting students, offering programmes middle-class parents find more desirable, and creating separate settings for middle class students is a recurring pattern in school responses to competition.

Sometimes the mechanisms schools use to attract students from more affluent backgrounds are quite subtle. For example, one study has shown that secondary schools in the UK try to avoid a reputation as a vocational school. As pre-vocational programmes are associated with less desirable students, schools were reluctant to offer such courses even though students might benefit from them.

The report concludes that these “external” adaptations to competition are much easier to make for schools than adapting the “hard core” of the school, that is, the quality of teaching and learning.

All in all, there is little evidence that the introduction of market mechanisms in education is more effective in reaching this core of education than are other policy interventions. [p.62]

This report by the OECD is the latest in what is now a long line of studies that show market-based reforms in education are not delivering what their advocates promise. There is now substantial evidence that they do not work. Yet, the Australian Government continues to ignore the evidence and maintain its faith in ideology.

Sietske Waslander; Cissy Pater and Maartje van der Weide 2010. Markets in Education: An Analytical Review of Empirical Research on Market Mechanisms in Education. Education Working Paper No. 52, OECD, Paris, October.

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