OECD Report Shows That Refusing to Fund Gonski is Short-Sighted

A new OECD report shows that the refusal of the Federal Government and several state governments to commit to the full Gonski funding plan is incredibly short-sighted. It will mean substantially lower economic growth over the next 80 years than could be achieved by getting all students to a basic skill level at school.

The Gonksi funding plan was designed to support improvement in Australia’s school outcomes, which have declined or stagnated over the past 15 years. The new OECD report published last week says that “stunning” economic gains can be made from increasing student achievement.

At present, 18 per cent of Australian students do not achieve basic skill levels. The report estimates that if all students were to achieve this level by 2030, GDP in 2095 would be 119 per cent higher than current GDP. It estimated that GDP in 2095 with the education improvement would be 10 per cent higher than if there had been no improvement.

The gains would be higher still if all students participated in secondary school at age 15 and achieved basic skill levels – the report calls this improvement “universal basic skills”. At present, slightly less than 100 per cent of Australian 15 year-olds are enrolled in school. In this case, GDP in 2095 would be 130 per cent higher than at present and 11 per cent higher than if there with no change in current participation rates and skill levels.

The gains from increasing the average performance of current students would be even higher. The report estimates that increasing the average mathematics score by Australian students on the international Programme for International Student Assessment (PISA) tests by 25 points by 2030 would increase current GDP by 335 per cent 9 in 2095. GDP in 2095 would be 29 per cent higher than that expected with no change in today’s skill levels.

Increasing average PISA results by 25 points over the next 15 years is feasible. Many countries have done this over the last 15 years, including Korea which is now one of the top performing countries. In contrast, Australia’s results have declined.

The economic gains for Australia are similar to those for other high income countries. For example, the report found that achieving universal basic skills across these countries would increase GDP by an average of 162 per cent.

If anything, the report under-estimates the likely benefits of achieving universal basic levels of education because it does not include the positive impact that improving the achievements of low-performing students will have on the higher-achieving ones. The evidence from PISA indicates that improved performance at the lower end of the achievement distribution invariably also help increase performance by students higher in the distribution.

Furthermore, the study limits itself to examining the economic impact of increasing test scores and ignores the impact of improving non-cognitive skills. Many research studies that improving non-cognitive skills also increases economic growth.

The report also estimated the average gains in GDP with universal basic skills over the 80 years. The gains are smaller in the earlier years up to 2030 but increase over the period. The average annual gain in GDP for high income countries was estimated at 3.5 per cent. The report says that this average annual economic gain from eliminating under-performance in high-income OECD countries would be sufficient to pay for all, or nearly all, schooling.

When these gains are compared to the total spending on education – typically 3-5% of GDP – arguments against school improvement based on limited funds are indeed shortsighted. The gains from meeting the goal of universal basic skills would cover most, if not all, of the costs of the entire education system, even in the most developed economies. [p.82]

The report estimated that the average annual increase in GDP over the 80 years for Australia at 2.8 per cent. This would cover 75 per cent of the current cost of government funding of schools. In 2010, public expenditure on schooling in Australia was 3.7 per cent of GDP.

The report dismisses the argument that pursuing universal basic skills is too costly. It says that “….forward-looking governments must understand that changing the economic future requires investment” [p. 84].

It is a lesson that the Federal Government and many state governments, including the Victorian Labor Government, should heed. Full implementation of Gonski will pay off in the long term.

The report draws on extensive research showing a strong and direct relationship between the cognitive skills of national populations, measured by international tests of mathematics and science achievement, and countries’ long-run growth. The studies show that if a nation improves the skills of its population, it can expect to grow faster.

The study included 76 countries that participated in international tests and had comparable data on GDP. The measure of basic skills was fully mastering skills at Level 1 on the PISA mathematics test, which is equivalent to a score of 420 points.

The report also notes that increasing economic growth through better education outcomes brings additional benefits. Poor education skills severely limit people’s access to better-paying and more rewarding jobs. The report shows achieving universal basic skills reduces gaps in earnings. It estimates that the increase in average earnings from attaining a baseline level of skills amounts to some 4.2 per cent across 28 countries with universal enrolment in secondary schools.

Moreover, the OECD’s 2012 Survey of Adult Skills also shows that individuals with poorer foundation skills are far more likely than those with advanced literacy skills to report poor health, to believe that they have little impact on political processes, and not to participate in associative or volunteer activities. As the report states:

…. the economic development that follows from reaching universal basic skills would contribute to poverty reduction, better health care, development of new and sustainable technologies, and other improvements that come with increased resources. Or to put this the other way, only improved knowledge capital makes these larger social goals feasible. [p.84]

The key lesson from the report is that failing to improve student achievement has a high cost. It means lower economic growth and poorer social outcomes. While money isn’t the whole answer to improving education outcomes, it is a necessary component. Governments in Australia need to come to their senses and realise that full implementation of the Gonksi funding plan will have major education, economic and social benefits.

Eric A. Hanushek & Ludger Woessmann, Universal Basic Skills: What Countries Stand to Gain, OECD, Paris.

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