Improving Equity in Education Boosts Economic Growth and Health

The Gonski funding plan is directed at improving equity in education by lifting school results for disadvantaged students. Several studies published in the last few months show that there are significant benefits associated with greater equity in education.

Economic growth
Two recently-published studies show that inequality in education is a significant factor affecting economic growth. They find that income inequality limits economic growth because low income families tend to under-invest in education and improving school outcomes of children of these families would increase workforce skills, productivity, incomes and economic output.

An OECD study published last December titled Trends in Income Inequality and its Impact on Economic Growth shows that the gap between rich and poor in OECD countries is now at its highest level in 30 years and it has significantly restricted economic growth. It says that the evidence strongly points to education as a central factor in how income inequality affects growth. Income inequality undermines education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.

It says that policy needs to confront the historical legacy of under-investment by low income groups in formal education.

The evidence strongly suggests that high inequality hinders the ability of individuals from low economic background to invest in their human capital, both in terms of the level of education but even more importantly in terms of the quality of education. This would imply that education policy should focus on improving access by low-income groups, whose educational outcomes are not only worse on average from those of middle and top income groups, but also more sensitive to increases in inequality. [p.29]

The second study titled Reducing Inequality in Education and Skills: Implications for Economic Growth was published in February by a think tank sponsored by the European Commission. It found that improving equity in education increases economic growth. It says that poorer parents are unable to invest adequately in their children’s education and this leads to lower levels of education in the next generation and therefore lower growth.

The study found evidence of high returns to increased education and skills for low socio-economic families across countries. The main return is the increased productivity and higher earnings.

The main expected return to higher education and skills is the increased productivity that is made possible. Although socio-economic background is a strong predictor of educational attainment, the evidence reviewed here suggests that if economically disadvantaged individuals did acquire education and skills to equal their more advantaged peers, they would be (at least) similarly rewarded for their productivity – and thus contribute similarly to economic growth. [p.36]

It identified two approaches to reducing educational inequality. The first is to pursue redistributive policies and remove institutional mechanisms that discriminate against low income people (such as selective school admissions). The second is to use the most effective educational policies to directly improve the achievements of disadvantaged children, including targeting increases in funding as proposed under the Gonski funding plan.

The study concluded that the important priority is that:

Policies should be developed with the needs of the most disadvantaged students in mind (and not only the average student) because this is the way to both reduce inequality and achieve economic growth. [p.36]

Another study was published in the April issue of the Journal of Economic Surveys found that more education and higher quality education reduces income inequality. This study analysed the result of 64 statistical studies of the relationship between education and income inequality. It found that that the number of years of schooling and educational attainment at secondary school are significant factors affecting income inequality.

Health and well-being
A recent Australian study in the February issue of the journal Social Science and Medicine also shows that that extending the years of education improves health outcomes. It shows that more education improves people’s diet and their tendency to have more regular exercise but not necessarily to avoid risky health behaviours such as smoking. The results imply that increasing the proportion of students, particularly low SES students, who complete Year 12 will have a positive effect on health outcomes.

Implications for education policy
These recent studies have important implications for education policy in Australia. The incidence of low education and poor health are strongly associated with socio-economic background.

According to the latest Report on Government Services, 32 per cent of low socio-economic status (SES) students, 32 per cent of remote area students and 59 per cent of very remote area students did not complete Year 12 in 2013 compared to 21 per cent of high SES students. In addition, the latest NAPLAN results show gaps of three to four years in learning between low and high SES students.

According to a report by the National Centre for Social and Economic Modelling (NATSEM), the most socio-economically disadvantaged are twice as likely to have a long-term health condition and will die on average three years earlier than the most affluent. The 2011–12 National Health Survey shows that low SES people and those living in remote areas are more likely to engage in risky health behaviours such as smoking, not exercising, and being overweight and/or obese.

Increasing the education outcomes of low SES and other disadvantaged children would not only increase their life chances and their health but would also reduce income inequality and increase economic growth.

Gonski is imperative
The Gonski school funding plan is directed at increasing the school outcomes of disadvantaged students in both public and private schools. The findings of these recent studies suggest that the refusal of the Federal Government and several state governments, including the new Victorian Labor Government, to commit to the plan is likely to see education and health disadvantage continue which, in turn, will restrict future productivity growth and national economic prosperity by denying the opportunity to improve workforce skills. It also denies governments the opportunity to improve the fiscal balance and reduce long-term expenditures associated with low educational and health outcomes.

The findings further suggest that it is in the interests of the business community to support the full implementation of the Gonski plan. It is about time for business organisations to get on board to support Gonski instead of advocating reduced government expenditure and public services.

Trevor Cobbold

This article was originally published in the Term 2 issue of ParentACTion, the newsletter of the ACT Council of P&C Associations.

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