Guest commentary: Education as an investment strategy
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No comments [ Add Comment ]By Vijay K. Mathur
Guest commentary
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t is gratifying to note that Gov. Huntsman has shown the vision and leadership to vigorously promote education in the state by proposing a substantial increase (18.2 percent) in the state education budget. This increase attempts to address the problems of higher class size in public schools, low teacher salaries and lack of incentives for productive teachers.
The proposal also allocates money for all-day kindergarten in all school districts. This is a good start, especially when we recognize that in 2003 Utah was in the fourth quartile in expenditures on elementary and secondary public schools as a share of its gross state product (a measure of state's income).
The Annual Survey of Local Government Finances ranked Utah, during 2003-04, lowest in expenditures in the nation. It is not contended that public school expenditures will magically improve the performance of students.
Higher funding must accompany incentives for measurable quality performance by teachers and administrators within schools and across schools.
However, it must be recognized that school funding is a significant part of the strategy to improve educational quality in Utah.
One cannot expect good quality output without good quality inputs. Provision of good quality inputs is not only the responsibility of the state and public schools (controllable inputs), but also the responsibility of parents. Education is an investment, and like all other investments it takes time and money to build human capital. Investment in education not only brings private rate of return to the individual, but also rate of return to the society at large.
For the U.S., estimates generated by George Psacharopoulos for the World Bank on private rates of return for primary, secondary and higher education range between 15 percent to 18 percent per year. Social rates of return to education are also close to double digits; these rates of return are better than an average person would expect to earn in the stock market over the long run. Besides, education enriches personal lives and provides the lubricant for democracy.
Adequate funding enables schools to keep and attract quality teachers, and to provide other services which enhance learning, like all-day kindergarten, small class size, good libraries and educational trips. Studies show that controllable inputs like teacher quality, experience and smaller class size significantly affect student achievement. Higher teacher salaries attract higher-quality teachers, especially in subject areas where there are other high-paying employment opportunities. It also decreases the turnover rate of good-quality teachers, thereby increasing the stock of experienced and productive teachers, and hence decreasing the cost of recruitment.
Parents provide inputs which are outside the control of schools. Parents must take active interest in the education of their children by reinforcing love of learning and ascertaining that children fulfill academic obligations first before participating in extracurricular activities.
If parental efforts and time are lacking in the educational process of their children, all the efforts made by the schools will not succeed in producing quality education.
Nobel Laureate economist James Heckman, who has done some path-breaking work on the economics of education, effectively advances the argument that a family environment which cultivates cognitive and non-cognitive skills in children is a major contributor to success in formal education and in the world of work. When supportive family environment is missing, public funding on substitute preschool programs can provide significant benefits in the future.
Gov. Huntsman's proposal should have also included funding for preschool children at-risk and with poor educational prospects. A 40-year study at the High/Scope Perry Preschool Project in Ypsilanti, Mich., showed very high success rates of children from poor households as opposed to the control group as measured, for example, by performance in schools, lower criminal activity and higher earnings as adults. The project showed $17.07 worth of benefit per dollar of cost. The evidence is overwhelming that there is a large payoff resulting from early intervention programs in the lives of children from low-income families to later benefits as adults.
Gov. Huntsman and Utah legislators have the opportunity now to implement such programs, given the large revenue surplus in the budget. Giving back part of the revenue surplus to the taxpayers may be good only for the short term, and it's politically popular. However, most of the give-backs will end up in more current consumption of other goods and services, with the downside of more Chinese imports and trade deficit; it does not contribute to necessary investment we desperately need at all levels of the educational process to build human capital, to assure continuing prosperity in the state of Utah.
Once children have developed cognitive skills (affecting IQ) and noncognitive skills such as motivation, perseverance and self control, their chances of success in education at all levels improve significantly.
Self-motivated students will not have to be enticed by special incentives to go to college and/or choose majors in math, science and engineering.
Early investment in quality education in the present is a cost-saving strategy for building the knowledge base in the future, so that students are prepared to succeed in higher education and be part of the productive work force needed for the 21st century. As Benjamin Franklin aptly put it, "An investment in knowledge always pays the best interest."
Mathur is former chairman of the economics department and professor emeritus of economics at Cleveland State University, Cleveland, Ohio. At present he resides in Ogden.
