5.9 Does Education Get Enough Money?

Debates about changes or improvements in education invariably turn to questions of money. Many people working in education feel that not enough money is spent on public education, and as a result, the quality of education is not good enough.

The question is, how does one determine how much money is enough? One of the first possible steps to take is to look at the total amount spent. We pointed out in Chapter Two that public education is a large enterprise. In 2017/18, some $65 billion was spent on elementary and secondary schools in Canada. An additional $38.5 billion was spent by the country’s colleges and universities, while the amount spent on education and training by private and public companies, non-profit organizations, and individuals, though it has not been estimated with any accuracy, may well be as large as the spending on schools (Statistics Canada, Table: 37-10-0064-01, Table: 37-10-0027-01). However, it is hard to judge what these numbers mean: Is $65 billion an appropriate amount to spend on schools or not?

One standard sometimes invoked is that of comparisons with other countries. Because countries use quite different methods of accounting for their spending on education, international comparisons of this kind are difficult to make with confidence. Moreover, differences in geographic conditions, such as population density or climate, can create significant variations in transportation, construction, and heating costs, to name a few. Nonetheless, international comparisons are frequently made. Canada is often said to be among the higher-spending countries in the world on education. However, this comparison includes postsecondary education, where Canada has a high participation rate and public funding. If the comparison is limited to public schools, Canada ranks in the bottom half of the industrialized countries. Tables 5.9.1 and 5.9.2 compare Canada with 38 other countries in the Organization for Economic Cooperation and Development (OECD) for 2017/2018.

Table 5.9.1

Public Expenditure on Education in Canada Compared to That in Other OECD Countries

Definitions. Public expenditures—Money spent by all levels of government. GDP—Gross domestic product; a measure of the overall size of the economy.

Table 5.9.2

Share of Public Expenditure on Educational Institutions

Source. OECD. (2020). Education at a glance.  OECD. https://doi.org/10.1787/69096873-en

Another standard is to compare past and present spending levels. This can be done in many different ways, and the results one gets depend in part on the indicator chosen. Table 5.9.3 compares several indicators of education spending in 1971, 1991 and 2010. On some of these indicators, spending appears to have increased substantially, while other indicators seem to show decreased spending. How can this be?

Table 5.9.3

Indicators of Education Spending over Time

Source.

• Adapted from François Gendron. (1994). Does Canada invest enough in education? Reproduced by authority of the Minister of Industry, 1997.
• Statistics Canada, Education Quarterly Review, CAT. NO. 81-003, Vol. 1, No. 4, April 1999 and vol. 7, no. 2, February 2001.
• 2008/9 data are from Brocklington (2010). Summary public school indicators for Canada, provinces and territories 2002/3 to 2008/9
• Statistics Canada (2010), Consolidated provincial and territorial government revenue and expenditure.
• Data on CPI from www.bankofcanada.ca/rates.
• Data on GDP from www.indexmundi.com.
• OECD 2020

The data in this table show how different statistics with different starting points can give very different pictures. For example, we often hear that education spending has risen very rapidly while student outcomes have not improved, suggesting that money is not being used well. But the Table above shows that spending on education has grown less quickly than has the economy as a whole.  When indicators are calculated on a per pupil basis, the picture over time is greatly affected by changes in the number of students. If the number of students decreases, costs will not necessarily decrease proportionately, in which case per-pupil spending would rise even though no change has been made in the level of service to students. Similarly, if enrolment rises, per-pupil spending may fall with no change in the level of service. If a school has, say, 25 teachers, 400 students, and a total budget of $4 million, the per-pupil cost would be $10,000. If the following year there were only 380 students, the per-pupil cost would rise significantly, to $10,526 per pupil, even though nothing had changed in the school’s operations. Similarly, if the enrolment rose to 420 and all the new students were accommodated in existing classes by making each class slightly larger, the per-pupil cost would fall to about $9,523, again with no real change in the school’s program. Thus, per-pupil costs are a reasonable measure of relative spending only when enrolment is stable. Economists would say that unit costs in education (with each pupil considered a unit) are inelastic with regard to enrolment, meaning that they do not change in either direction as rapidly as enrolment can change.

Similarly, changes in the number of students can affect other indicators. The pupil–teacher ratio fell quite sharply in the 1970s because enrolment fell (in total by about 25 percent), but instead of reducing the number of teachers in proportion, school systems kept their staff and launched new programs and services requiring more staff, such as librarians, guidance counsellors, and increased special education. However, the slower growth in education spending related to declining enrolments did lead to education dropping in terms of its share of total provincial spending.

Provincial governments face significant pressures to spend more in areas other than education. Health care in particular has taken an increasing share of provincial expenditures in recent years. Another factor to consider is that such comparisons depend a great deal on the year with which one starts. In this case, 1970 marked a high-water point for education expenditures in Canada: the baby boom was at its height, educational facilities were expanding rapidly, and teachers’ training, experience, and salaries were growing rapidly. It would be quite normal, as the system matured, for the rate of increase in spending to level off somewhat.

In looking at the data in Table 5.9.3, it is also important to understand the impact of changes in the economy. For example, a large part of the increase in overall spending on education is accounted for by inflation; that is, it costs more to do exactly the same things. To eliminate the impact of inflation, analysts use the concept of real dollars: converting the amounts from different years to reflect the same amount of actual purchasing power.

Another set of indicators compares spending on education to the size of the economy as a whole. This is typically measured in relation to gross domestic product, or GDP, which is essentially the total value of all the goods and services produced in the economy. Here problems arise when the economy shrinks, as it does in recessions. When this happens, spending on education accounts for a larger share of the total economy even if education spending remains constant.

Finally, it should be noted that using a forty-year comparison is potentially misleading because so many different elements will change over such a long time. The data in the table above include very rapid expansion of enrolments and services in the 1970s, a period of slower growth in the 1980s, actual cuts in spending in the 1990s, growth again in the early 2000s, but significant variations due to recessions from 2008 onwards. Averaging all of these over many years hide those important fluctuations that happen in the shorter term.

The comparative standard for government expenditure on education also depends on what is being compared. In one sense, $65 billion is a great deal of money. It is well over $10000 per student per year (or well over $1000 per year for every person in Canada). It is equal to about 4 percent of Canada’s gross domestic product, which is the measure of the total size of the Canadian economy. In other words, we spend 4 percent of our national wealth on elementary and secondary education.

In another sense, $65 billion is not all that much. It amounts to about $65 per student per school day, or about $13 per hour based on a five-hour day. This isn’t that much more than one would pay a baby-sitter.

Another common approach to judging the adequacy of education funding is to invoke standards of service. We might argue that education needs more money in order to provide better special education services, to hire more counsellors in elementary schools, or to buy more technology. Of course, this argument assumes that such services must be added on top of all the existing services and programs, and that nothing now in place can be changed or replaced. Similarly, one might say that more spending is needed in order to achieve such goals as increasing high school graduation rates or improving reading levels. This assumes that there is a direct correlation between the amount of money spent and educational outcomes, a point discussed a little later.

Finally, there is an economic approach to calculating whether we are spending enough on education. We can think of spending money on education as an investment that yields a return in the form of more educated people, higher earnings, more economic activity, and so on. In theory, one can calculate the return on this investment just as one knows that a bank deposit or a bond pays 2 or 3 percent interest each year. Economists have made just such calculations, with the most recent Canadian evidence indicating that a university graduate can expect significant return in earnings above what she or he would have earned with only a high school diploma. The estimated amounts in 2017/18 for Canadian men is 17% and for women is 22% (OECD, 2020). This return to education can be compared with the return on spending in other areas, such as health care or highways; then, if education is a better investment, we should spend more on it whereas if it is less rewarding, we should transfer spending to other areas.

This seems like a straightforward and eminently sensible approach. The difficulty is that return on investment requires the translation of all the outcomes of schools and the outcomes of whatever other service is used for comparison into monetary equivalents. The calculations involved require not only many assumptions but also information that is not readily available. Given that many of the goals of education are intangible and long term, how are the results to be calculated? For example, more education is correlated with longer life. How do we evaluate those additional years of life? Are they a benefit or a cost? And even if this could be measured, how much weight should be assigned to it in calculations of return on investment? Moreover, return on investment varies for different programs and for men and women. Does this mean that programs with lower returns ought to be reduced or eliminated? Or that people should be streamed into programs with higher returns?

In short, the debate about whether we spend enough money on education cannot be resolved through information alone, although information can certainly help us make better decisions. People’s beliefs about the value of education relative to other spending priorities will have a major share in determining their views on how much we should spend on schools.