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Increasing spending on education good for government budgets — OECD

Educated individuals less of a drain on social programs, pay more tax.

Gurría: Investment in education is an investment in people and an investment in the future.September 13, 2011: People with university degrees have suffered far fewer job losses during the global economic crisis than those who left school without qualifications, according to the latest edition of the Organisation for Economic Co-operation and Development's annual Education at a Glance. Good education and skills are crucial to improving a person's economic and social prospects.

Unemployment rates among university graduates stood at 4.4 percent on average across OECD countries in 2009. But people who did not complete high school faced unemployment rates of 11.5 percent, up from 8.7 percent the year before. This adds to the huge problem of youth unemployment that today exceeds 17 percent in the OECD area.

"The cost to individuals and society of young people leaving school without a qualification keeps rising," said OECD Secretary-General Angel Gurría. "We must avoid the risk of a lost generation by all means. Despite strained public budgets, governments must keep up their investment to maintain quality in education, especially for those most at risk."

  "In the long run, government budgets benefit from investment in education. The better educated are less likely to need unemployment benefits or welfare assistance, and more likely to pay more tax when they enter the job market."

"Investment in education is not only about money, it's also an investment in people and an investment in the future."

Based on current graduation trends, 82 percent of young people today will complete upper secondary education, but those who do not will face ever greater challenges in entering and staying in the job market.

Over fifty percent of 15- to 19-year-olds who are not in school are unemployed or out of the labour force. In most countries, youth not in employment, education, or training receive no welfare support. And compared with older age groups, they are twice as likely to give up looking for work and lose touch with the labour market entirely.

Governments therefore need to invest in education. In the long run, their budgets will benefit from investment in education. The better educated are less likely to need unemployment benefits or welfare assistance, and more likely to pay more tax when they enter the job market.

A man with a tertiary education will pay back an average USD 91,000 in income taxes and social contributions over his working life, over and above what the government pays for his degree.

Education pays for individuals, too: the gross earnings premium for an individual with a tertiary degree exceeds USD 300,000 for men and USD 200,000 for women across the OECD.

The OECD report also illustrates how the global talent pool is changing: the more educated workforces of Japan and the United States, which together have nearly half of all tertiary-educated adults in the OECD area (47 percent), have given them a head start in many high-skill areas.

But the picture is changing — at present, one in three university-educated retirees resides in the USA but only one in five university graduates entering the workforce does. Conversely, while only 5 percent of adults in China have a tertiary degree, because of its population size, the country now ranks second behind the USA and ahead of Japan in the percentage of the population with tertiary attainment among OECD and G20 countries.

Education at a Glance provides comparable national statistics measuring the state of education worldwide. This year's report includes indicators on the human and financial resources invested in education, on how education systems operate and evolve, and on the returns to educational investments.

For the first time, it includes analysis of education systems in Brazil, China, India, Indonesia, Russia, and South Africa.

Key findings

Education spending

•OECD countries spent 6.1 percent of their GDP on education in 2008. Between 2000 and 2008, expenditure increased at a faster rate than GDP in 25 of the 32 countries for which data is available.

•Expenditure per student by tertiary educational institutions increased fourteen percentage points on average in OECD countries from 2000 to 2008. Spending per tertiary student fell in seven of the thirty countries with available data as expenditure did not keep up with expanding enrolments.

•The share of private funding at tertiary level increased in twenty of the 26 countries for which comparable data is available between 2000 and 2008. The share increased by six percentage points, on average, and by more than fifteen percentage points in Portugal, the Slovak Republic, and the United Kingdom.

•Spending on teachers' salaries in 2009 accounted for an average 63 percent of current expenditure on primary, secondary and post-secondary non-tertiary education combined in OECD countries. Between 2000 and 2009, teachers' salaries increased in real terms in most countries. The largest increases — of well over 50 percent — were seen in the Czech Republic, Estonia, and Turkey. The only exceptions to this trend were Australia, France, Japan, and Switzerland, where salaries declined.

International students

•Over the past three decades, the number of international students has risen dramatically, from 800, 000 worldwide in 1975 to 3.7 million in 2009. Australia, the UK, Austria, Switzerland, and New Zealand have the highest percentage of international students at tertiary level.

•China contributes 18.2 percent of all international students from non-OECD countries enrolled in the OECD area (not including an additional 1.3 percent from Hong Kong, China).

Gender equality

•Young women are now more likely than men to finish upper secondary education in every OECD country except for Germany and Switzerland.

•Women make up the majority of students and graduates in almost all OECD countries and largely dominate in the fields of education, health and welfare, and humanities and arts. Men dominate in engineering, manufacturing, and construction.

Links and sources
  Education: crisis reinforces importance of a good education, says OECD

Posted: September 14, 2011

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