Sunday, August 28, 2005

Educational mobility

An Economist opinion editorial from July 14th (“The Missing Rung In The Ladder”) lamented the decrease in social mobility in the United States, and suggests that the solution is for the government to pour resources and legislative reforms into improving the public school system. This, the Economist argues, is the only chance for lower-income Americans to compete with wealthy children whose parents are willing to invest in fancy college degrees. The underlying assumption is that America’s growing class separation and decreasing social mobility are due to a market failure, to be compensated for by the government. But is that really the solution?

The greatest obstacle to social mobility is the gap between income growth rates among the various economic classes. The Economist author points out that over the last several decades “the real income of the poorest fifth of American households rose by 6.4%, while that of the top fifth rose by 70% (and of the top 1% by 184%).” The higher a person’s starting capital, the faster it will grow, enabling him or her to transition into higher-investment, higher-returns segments of the economy. In addition, the costs of entering a higher-grade business grow at a rate that follows income growth in the higher classes. Thus gaps in income growth rate generate bigger gaps in income growth rate--and the more difficult it is for those near the bottom of the ladder to catch up and move into the higher classes.

But although capitalism produces the income gaps that stifle social mobility, it also creates hope for those in the lower economic stratum. Financial capital is not the only way to produce more capital. The other way is entering--or creating--new industries, where competition is still low or non-existent. The diversification of industry constantly creates opportunities even for those who cannot grow their money fast.

Let us return momentarily to the issue of education. We often hear that, if only public schools were better and less corrupt, they would increase the earning potential, and hence the social mobility, of their students. However, the more qualified students come out of public schools, the more selective colleges become. For a quick example, as more students across the nation aspire to go to college, admissions rates at all the Ivy League universities keep dropping; they are significantly lower today than they were in the 1990s, and the trend is decidedly downward. Similarly, the more people go to college, the less rare, and hence less valuable, college degrees become, and the more employers discriminate based on the schools from which job applicants get their degrees.

This means that the market value of education is a function of its exclusivity more than its quality. A stint at Harvard or Yale brings credibility and connections to powerful alumni; but most importantly, it brings distinction. Such distinction is naturally costly, both in tuition payments and in the money and time that must be invested from early on to enable a student to compete for acceptance at a top school.

Thus the children of wealthy parents will always have an advantage in the competition for employment, correlated to the gap in income growth rates between economic classes. Free public education, which by its very nature is non-exclusive, will never bridge the gap between the poor and the increasingly rich--even assuming that inefficiency and corruption could be eliminated by a wave of the No Child Left Behind wand.

There is, however, a viable alternative to expensive education. In the same way that diversification of industry can open the door to social mobility for those with little starting capital, diversification of schools can help those who cannot afford to pay for educational prestige. But diversity in education is not merely analogous to diversity in employment options; it directly leads to it. Receiving a non-standard education can help one start a non-standard line of business, due to unique insights and experience gained.

In contrast to the public school system, with its relatively uniform educational methods and non-selective admission, private schools can expose students to a wide array of educational methods and resources. Lower-income students who attend private school will emerge better suited to seek out a unique economic niche, and thus to rise above their background.

Free public schools do not give value to education and do not allow the poor to adjust to a diverse economy; thus, even when functioning well, they cannot improve social mobility in the face of growing income gaps. At the same time, they force private schools to keep prices high by cornering the low-income student market, thus making diversity in education less available to those who need it the most. Instead of solving the problem of decreased mobility, as the Economist suggests, public education only exacerbates it.

If we are to live in a just and prosperous society where a hard-working person can carve out a better life than his or her parents, we must be freed from the yoke of the public education monopoly.


Pork Barrel Education

The biggest mistake an economist can make when analyzing U.S. public education is to presume that expenditures have anything to do with the necessary costs of educating students. Economists instinctively presume that costs are developed by cost minimizing producers weighing the productivity of various inputs and choosing an optimal mix. Total expenditures are then built from the bottom up.

In the U.S. public education system, this assumption is dead wrong. There total expenditures are allocated from the top down to mop up available revenues. How much any public school spends depends not on how much it "needs" for efficient operation but on how much it can extract from taxpayers. These revenues are then dissipated among various squabbling constituencies to feed their continuous demand for public funds.

In the topsy-turvy world of public education, the incentive is for efficient, low-cost schools to imitate the less efficient, high-cost schools by spending more. The result is that U.S. public education is greatly over-funded. Public school per-pupil costs are roughly 40 to 45 percent higher than those of private schools. When we take into account the larger number of private elementary schools and further adjust for special ed, the difference narrows to about 36 percent. Put another way, a minimum of 36 percent of public school expenditures is wasted.

These results are consistent with education in OECD countries where education costs are about 35 to 30 percent lower than those in the U.S. The greater competition between public and private schools abroad makes all schools almost as efficient as private schools in the U.S. Thus, U.S. public education wastes around $141 billion annually -- about 1.4 percent of 2000 gross domestic product, or about $501 per capita. Add in remedial education and the total comes to at least $157.6 billion annually -- about 1.58 percent of gross domestic product, or about $560 per capita.

The education establishment attributes increased costs to the onerous mandates of state legislatures and federal acts such as No Child Left Behind. To the extent that these mandates raise the cost of public education (and not all do), they simply represent some of the more visible mechanisms by which the waste is generated and dispersed among special interests.

Similarly, the requirement that public schools must admit any student is often cited as a reason for higher costs. But slower students are increasingly shoved into special education, and this program explains only about 10 percent of the cost differential between public and private education. Further, a shocking 25–30 percent of all students are drop-outs. Once dropped out, it is hard to see how non-students can impose increased costs on the public school system. If the diverse student body created by an open admissions policy really produces public school inefficiency, it is an argument for reducing the monopoly enjoyed by the public school system and allowing for smaller, more specialized schools.

Most of the waste in public education is excessive labor costs. Over the period 1980–2000, national student enrollment grew by 15.5 percent, but total school employment grew by 37.4 percent, and teachers grew by 35.2 percent. Public schools now have about one employee for every 6.5 students, and teachers make up only 40 percent of school employees. Our public schools have become vast jobs programs, reminiscent of the Depression era WPA, rather than educational institutions.

On average, individual public school teachers' pay is well above that of both their private school counterparts and those in comparable occupations. Also, public schools employ a more expensive mix of teachers and unions make it virtually impossible to fire even the most incompetent employees.

Wherever competition with or among U.S. public schools is found, the evidence shows better and cheaper public school performance. Abroad, both direct competition and the presence of surrogate competition in the form of curriculum-based external exit exams produce better, cheaper education.



For greatest efficiency, lowest cost and maximum choice, ALL schools should be privately owned and run -- with government-paid vouchers for the poor and minimal regulation.

The NEA and similar unions worldwide believe that children should be thoroughly indoctrinated with Green/Left, feminist/homosexual ideology but the "3 R's" are something that kids should just be allowed to "discover"

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