Another Study Shows That Money Matters in Education

A new review of research studies has found that money matters in education. It shows that there is strong evidence of a positive relationship between school funding and student achievement and that particular school resources that cost money have a positive influence on student results. As well, more equitable allocation of funds between schools increases equity in student outcomes.

In short, money matters, resources that cost money matter, and a more equitable distribution of school funding can improve outcomes. [p. ii]

The new study reviewed three types of empirical studies of the relationship between school funding and student outcomes. The first type of studies reviewed are on the aggregate relationship between school funding and student outcomes. The review shows that a widely cited 1986 study by economist Eric Hanushek that found no relationship between funding and outcomes has been contradicted by a re-analysis of his study and by many subsequent studies.

On average, aggregate measures of per-pupil spending are positively associated with improved or higher student outcomes. The size of this effect is larger in some studies than in others, and, in some cases, additional funding appears to matter more for some students than for others. Clearly, there are other factors that may moderate the influence of funding on student outcomes, such as how that money is spent. In other words, money must be spent wisely to yield benefits. But, on balance, in direct tests of the relationship between financial resources and student outcomes, money matters. [p. i]

By the early 2000s, the cloud of uncertainty conjured by Hanushek in 1986 had largely lifted in the aftermath of the various, more rigorous studies that followed, with finance scholars using detailed datasets to examine more finely grained relationships between money and student outcomes.
The uncertainty has been replaced with an empirically grounded confidence that funding does matter. [p. 5]

The second type of studies reviewed are those that analysed the relationship between particular school resources that cost money and student outcomes. The review found that there is a substantial body of literature showing that teachers’ overall wages and relative wages affect the quality of those who choose to enter the teaching profession, and whether they stay once they get in. Teacher salaries do affect the quality of the teaching workforce, which in turn affects student outcomes.

….the average salaries of the teaching profession, with respect to other labour market opportunities, can substantively affect the quality of entrants to the teaching profession, applicants to preparation programs and student outcomes. [p. 7]

The review also found ample research indicating that children in smaller classes achieve better outcomes, both academic and otherwise, than in large classes and that class size reduction can be an effective strategy for closing racial and socioeconomic achievement gaps. A large body of the literature on the effectiveness of class size reduction relies on data the Tennessee STAR experiment, a large-scale randomised project that is probably the best designed class size study ever undertaken.

The review notes that studies finding little or no positive effects of class size reduction often lack the weight of large-scale randomized studies, such as the Tennessee STAR Project, and instead rely on natural variations in class sizes across schools.

Most class size studies focus on the early years of schooling and there are few studies of class size reduction in upper primary and secondary school.

There are also few studies comparing the effectiveness of class size reduction and alternative approaches. The review notes that while one recent study found that the benefits of class size reduction were not particularly large given the large costs, it also found that the cost-effectiveness of class size reduction focused on students in the poorest third of schools is within the range of other policy interventions.

Schooling resources that cost money, including smaller class sizes, additional supports, early childhood programs and more competitive teacher compensation (permitting schools and districts to recruit and retain a higher-quality teacher workforce), are positively associated with student outcomes. Again, in some cases, those effects are larger than in others, and there is also variation by student population and other contextual variables. On the whole, however, the things that cost money benefit students, and there is scarce evidence that there are more cost-effective alternatives.

The review also found that the way governments distribute money between schools matters. It reviewed studies analysing school finance reforms in many US states that increased expenditure in low-spending school districts and found that the reforms improved student achievement.

On balance, it is safe to say that a sizeable and growing body of rigorous empirical literature validates that state school finance reforms can have substantive, positive effects on student outcomes, including reductions in outcome disparities and increases in overall outcome levels. [p. 12]

The review also considers the commonplace view that how money is spent is much more important than how much is spent. It says that there is no actual empirical evidence to support this view. It also makes the further point that “how money is spent” is constrained by whether there is sufficient money to begin with.

…. while the assertion that “how money is spent is important” is certainly valid, one cannot reasonably make the leap to assert that how money is spent is necessarily more important than how much money is available. Yes, how money is spent matters, but if you don’t have it, you can’t spend it. [p. 18]

It is certainly reasonable to acknowledge that providing more money, by itself, is not a comprehensive solution for improving school quality. Clearly, money can be spent poorly and have limited influence on school quality. On the flip side, money can be spent well and have substantive positive influence. However, money that’s not there can’t do either. [p. 20]

Given the preponderance of evidence that money matters in schools, the review finds it surprising that there is so much political rhetoric asserting that money doesn’t make a difference, that it is not a necessary condition for school improvement and that reduced funding is unlikely to harm educational quality. Such assertions have even been used to justify large cuts to education budgets over the past few years.

The review says that such assertions are unfounded as they have little basis in the empirical research:

The growing political consensus that money doesn’t matter stands in sharp contrast to the substantial body of empirical research that has accumulated over time… [p. 2]

It concludes emphatically:

The available evidence leaves little doubt: Sufficient financial resources are a necessary underlying condition for providing quality education. [p. 20]

Trevor Cobbold

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