School funding shortfalls are an economy-wide problem

In response to the concern around the world about the effects from the loss of learning after COVID-driven school closures, the Organisation for Economic Co-operation and Development conducted research to identify what those effects might look like. What it discovered was pretty significant.

The researchers reported that students in grades one to 12 that shifted from face-to-face learning to online classes could expect roughly 3% lower income throughout their lives.

“For nations, the lower long-term growth related to such losses might yield an average of 1.5% lower annual GDP for the remainder of the century,” the report said.

That was after less than one year of remote education – the report was published in September 2020.

If seven months of online education can have such a negative effect on earnings, and on the national economy, what effects can a properly funded school system have on Australia over several decades?

The Australian Government commissioned Deloitte Access Economics to look into this topic, identifying several outcomes of an improvement in the quality of schooling, including:

• A 1% increase in student achievement increases wages by 0.12%, and the results are linear, so a 5% increase in student achievement should increase wages by 0.6%.
• A 1% increase in student achievement is estimated to increase the chance of obtaining a bachelor degree by 0.5%, and of being employed by around 0.07%.

In terms of the effect on the national economy, the report said that:

• A 1% increase in student achievement would increase GDP by 0.16%.
• If the lowest-performing schools were lifted to the quality of the highest performing schools, GDP would be about 0.5% higher – or $8 billion based on the GDP when the research was conducted in 2016.
• A lift in student achievement scores of 5% would raise Australian outcomes to those of Canada, while 10% improvement would bring us up to those in Korea.
• A 5% increase in schooling quality, when measured against results from other nations, would increase GDP by around $26 billion.

All of that was in 2016. The report also argued that the proportion of workers in highly skilled occupations would increase from 36% to 39% by 2036. The impact on employment, income, and GDP tied to education quality is likely to increase over the same period.

“The impact on the economy from a given change in schooling quality may be around 3% higher in 2036 than it is currently,” the report said.

More recently, just a few weeks ago 51 economists were asked to select the three most important measures, from a list of 11, that would allow Australia to sustain lower rates of unemployment, ‘Improving primary and secondary education’ came in at number one (55%).

So this week, when we spoke with Henry Rajendra, New South Wales Teachers Federation’s Acting President, about school funding, what we heard was a great missed opportunity.

“Public schools remain at 90% of their Schooling Resource Standard – the agreed minimum level of funding considered necessary for all students to achieve their very best,” Rajendra says.

The Schooling Resource Standard identifies a school’s funding needs based on a minimum level of funding needed to educate each student in a school, with additional loading for factors including disability, location and socio-economic disadvantage.

Not meeting this minimum funding standard, calculated to meet specific outcomes, should be a matter of great concern to the nation. Not only from an equity point of view – private school funding has not been similarly constrained – but also from an economic growth perspective.

What about Gonski?

When the Gonski Review Report was released in 2012 it was met with great concern.

The Senate Committee on School Funding said that “…over the past decade, the performance of Australian students had declined at all levels of achievement compared to international benchmarks. Furthermore, a concerning proportion of Australia’s lowest performing students were found not to be meeting minimum standards of achievement.”

Then-Prime Minister Julia Gillard, who had commissioned the Gonski Report when she was Education Minister, drove a funding plan, eventually agreed by states and territories.

“It took her a while to get there, but Gillard agreed to fund much more than the Commonwealth had previously,” says one expert we spoke with, who was in a leadership role in a major education union during the Gonski period and is now a teacher.

“The Gonski study had worked out the number of dollars required for every child to get the basic education to meet their potential. Gillard agreed that the Commonwealth was going to pay whatever the states needed to get themselves up to the 100% Schooling Resource Standard that Gonski had developed.”

Following the Federal election at the end of 2013 and a change of government, Gonski 2.0 represented a 180-degree turn on school funding, guaranteeing Commonwealth funding of just 20% of the Schooling Resource Standard total for each state and territory’s public schools.

“So the Northern Territory, which has a far lower fundraising capability than most states and therefore could only put in 60% of school funding requirements, dropped back to 80% [of the Schooling Resource Standard],” the education expert recalls. “But the ACT was already funding 86% of its school costs, so the 20% from the Commonwealth represented a saving of 6%. It’s not exactly a fair funding program.”

Where does all of this leave us, now?

“Just recently, we were reminded that while more than 98% of private schools funded by the Commonwealth and state and territory governments are above the Schooling Resource Standard, over 98% of public schools are funded below it,” Rajendra says.

“This must be reversed. If not, we’ll see a deepening inequality and segregation of education, the consequences of which will be far-reaching, not only for individual students but our society as a whole.”

What is the government doing now?

In March, the Minister for Education Jason Clare announced the appointment of Dr. Lisa O’Brien AM, Chair of the Australian Education Research Organisation, to chair a panel of experts tasked with advising the government on key education targets and specific reforms.

The panel’s advice is intended to help guide funding for the next National Reform Agreement. What those funding decisions will be, we can only guess.

“At the election, we made a commitment to work with State and Territory Governments to get every school on a path to 100% of its fair funding level,” Clare said.

“Fifteen years ago, the gap in the reading skills of eight-year-olds from poor and wealthy backgrounds was a bit over a year. Now it is over two. And with every year, that gap grows bigger.”

Rajendra puts it more bluntly.

“An entire generation of students has been let down by governments who knew what was needed and failed to deliver,” he says.

“Negotiations for the new National Schools Reform Agreement must be expedited to deliver public schools the funding our students need and deserve.”

Not only do the students need it – so does the economy.