Competition in Education
Kyle Kinneberg
Last Updated: 12/6/08 Section: Opinion
[Editor's Note: In light of the recent debate between the College Democrats and College Republicans on school vouchers, the Claremont Independent has decided to reprint this article on public education, which appeared in three parts in the Fall 2006 issues of the CI. All statistics in the article reflect data from 2006 or before. ]
The Current State of U.S. Schools
In 1962, Milton Friedman wrote, "Our present school system, far from equalizing opportunity, very likely does the opposite. It makes it all the harder for the exceptional few - and it is they who are the hope of the future - to rise above the poverty of their initial state." Over four decades later, Friedman's observation still rings true. Our nation's education system is inefficient, outdated, and deleterious, and it particularly fails our impoverished children.
The primary source of our educational failings is the structure of the education market - a market dominated by government-run schools. Although private and charter schools do serve thousands of students, they comprise a mere 10.9 percent of the entire school system and thus have only a minor effect on the market's organization. Consequently, the government maintains an inefficient monopoly over the education of our nation's children.
A lack of substantial competition has allowed two trends to occur that have stifled efficiency in the U.S. public school market. First, the school system has become increasingly centralized as government officials have transferred authority - particularly budgetary authority - away from individual schools. When lawmakers in Sacramento or Washington, D.C. impose mandates on the funds they grant to schools in Los Angeles, they force schools to allocate their limited resources in ways that often have little to do with the schools' individual needs. In addition, centralization restricts the amount of attention educators can give to students because it forces teachers and administrators to spend valuable time dealing with the government bureaucracy.
The second trend we notice is that teacher benefits such as tenure and pay raises have become structured uniformly, determined only by the number of years they have taught and the quantity of academic credentials they have earned. Because of the seniority-based compensation system, poor educators receive the same pay and benefits as good educators of equal age and credentials. Not only does such unmerited parity of benefits encourage poor teachers to remain in the education profession, it also provides a strong disincentive for capable college graduates to become teachers. Schools must therefore pay higher costs for lower-quality instructors.
These two trends associated with an uncompetitive education market stunt the quality of learning in our schools. Although student performance in some areas has slightly improved over the past 25 years, results from the 2005 National Assessment of Educational Progress (NAEP) subject exams illustrate that public school achievement remains deplorable despite significant increases in spending. In reading, only 31 percent of fourth grade students scored at or above the "proficient" level while 36 percent performed below "basic." Eighth grade students achieved slightly better scores with 31 percent at or above "proficient" and 27 percent below "basic." Since 2000, public schools have administered similar NAEP exams in mathematics, science, writing, U.S. history, and geography. As with the reading tests, the results across the board have been dismal.
The nation's weak public education system especially fails students from low-income households. Families with higher incomes have two ways to exercise choice over their child's education: They can move to a neighborhood that feeds into a reputable public school or they can send their child to a private school. Because people of similar socio-economic class tend to live in the same area, public schools in high-income neighborhoods face more competition due to these modes of choice. Caroline Hoxby, a Harvard professor, has found that competition improves the performance of public school students and decreases per-pupil expenditures. Low-income neighborhoods do not have this option, and there is no economic incentive for inadequate schools to reform themselves.
Not surprisingly, public school students from low-income households perform far worse, on average, than other public school students. For each subject and grade level, students eligible for the federal reduced-price lunch program, a common indicator of low socio-economic status, fail to achieve "basic" test scores at a rate nearly two or three times that of students who are ineligible.
The public school system must undergo comprehensive reform in order to improve educational opportunities for all students, especially the underprivileged. Introducing true competition into the market for schools must serve as the foundation for changes if they are to be effective. The formation of a competitive education market, however, requires that students have the means to attend schools outside of the government monopoly, such as charter schools, private schools, or home schools, if they desire to do so.
The Reforms Necessary to Improve the U.S. School System
The following reforms would provide all students with the ability to exercise educational choice while allowing government schools to remain in the market.
The first reform is the development and expansion of charter schools, which are public schools sponsored by a state governing body but operated by parents, teachers, other individuals, or private organizations. Although charter schools receive most of their funds from the government, they have significant freedom regarding resource allocation and curriculum. Currently, 40 states and the District of Columbia allow charter schools to exist. Some, including Arizona and Michigan, grant their schools a significant degree of autonomy while others, such as Mississippi and Iowa, impose upon them many restrictions.
An April 2002 study by Harvard Professor of Economics Caroline Hoxby compared the academic achievement of 99 percent of all elementary charter school students with students at traditional public schools. To control for race and income factors, she matched charter school students to the public school they most likely would have attended. The study found that charter school students, on average, are 5.2 percent more likely to be proficient in reading and 3.2 percent more likely to be proficient in mathematics on state exams. This advantage increases for students at older charter schools, for students at charter schools with more autonomy, for poor students, and for Hispanic students.
In order to make these educational opportunities available to more students, states must pass strong charter school laws that provide school operators the independence they need to effectively teach their students. At the same time that charter school student attainment rises, more competition in the education market would cause traditional public school attainment to increase as well. As more public schools would have to compete for a limited number of consumers, they would begin to make internal reforms, thus enhancing efficiency and effectiveness.
The second reform is the establishment of a universal voucher program available to all citizens and children of legal residents who attend elementary or secondary school. This reform would provide all children with the means to attend a non-public school, thereby making the U.S. education market more competitive than ever before. Taxpayer money would finance the vouchers which parents could redeem at a school of their choice. Such a program would eliminate the double tuition that families currently pay for non-public schooling - one direct tuition to the private school and a second tuition to public schools through taxes.
Six states and the District of Columbia currently offer certain students vouchers to attend a private school. These programs limit availability to students from low-income families, students from failing public schools, students with special education needs, or students in areas that lack a public elementary or secondary school. No state or locality, however, offers vouchers to all students. Even so, the states that have adopted voucher programs have seen significant achievements in student performance. Only one year after this program began in Cleveland, students receiving vouchers performed better on language, math, reading, and social studies exams than similar public school students. Likewise, after four years in Milwaukee's voucher program, students scored 11 percentile points higher in math and six points higher in reading than similar students attending public schools. Other random-assignment studies have found similar results for students enrolled in Charlotte, N.C. and Washington, D.C. voucher programs.
The third reform advocates state deregulation of home schooling. Currently, all 50 states and the District of Columbia allow parents to home school their children, but restrictions vary across the country. Some states heavily regulate home schooling by requiring parents to notify the state regarding their children's achievement scores or to undergo a professional evaluation. They also impose additional restrictions such as state approval of the parent's curriculum, teacher qualification of parents, or mandatory home visits by government officials. These regulations cost the government - and taxpayers - millions of dollars and reduce the number of families who choose home schooling. Other states have much less stringent home schooling laws; many simply require parents to notify the state about their individual approaches, and 10 states do not require parents to initiate any contact at all with officials.
Standardized test results show that home schooled students continually outperform students at both public and private schools. A 1997 study by the president of the National Home Education Research Institute, Brian D. Ray, found that home-schooled students scored 30 to 37 percentile points higher than comparable public school students. He also found that achievement significantly increased for students who had been home schooled for two or more years and that race and extent of government regulation had negligible effects.
A year later, Lawrence Rudner, former senior associate at the U.S. Department of Education's Office of Educational Research and Improvement, released a study indicating that nearly 25 percent of home schooled students were enrolled in a higher grade level than public and private school students of the same age. According to his study, home school students in first through fourth grade, on average, perform one grade level higher on achievement tests than their peers at public and private schools, a gap that grows wider above grade four. Several government organizations throughout the country, including state education departments and local school districts, have obtained similar results when analyzing the successes of home schooling.
Similar to parents of private school students, parents who home school their children must pay double tuition. To remedy this disparity, state governments should provide them with a tax credit equal to the amount of a school voucher. Parents could use this money to compensate for the costs of educational supplies and materials, as well as recover some of the opportunity costs associated with home schooling, namely, the inability to hold a full-time job.
The fourth reform advocates the use of tax credits and tax deductions to enhance the incentives for individuals and organizations to donate funds to student scholarships and schools. Currently, only three states offer credits for contributions to tuition scholarship organizations and grants to public or private schools. Yet even these states place restrictions on who can receive credits and on the amount that may be claimed as a tax credit. Arizona offers credits to individuals and married couples for contributions to scholarship programs and public schools. Alternatively, Florida and Pennsylvania offer credits only to corporations, not individuals. Instead of restricting incentives, states should loosen their tax laws by establishing high limits on credits (perhaps equal to the amount of a school voucher) and no limits on deductions.
On its own, this reform would not increase competition within the education market. Rather, it would supplement the three other reforms by increasing private aid to schools and providing financial scholarships to more students. With higher tax-credit limits on donations (and thus, more contributions flowing into all types of schools), the government could decrease the amount of money it grants to traditional public and charter schools. Consequently, a reduction in government spending on public education would give officials the ability to lighten the tax burden on all citizens. The higher tax-credit limits would also stimulate contributions to private scholarship programs. Although a universal voucher program would enable students to attend a private school, some, especially the underprivileged, might not be able to afford a more expensive school. By using the scholarship as a supplement to his or her voucher, a student would have the funds necessary to enroll in a more selective private school.
A government-dominated education system is not one that will keep America internationally competitive over the next century, nor is it one that will narrow the gap in either educational or professional attainment between people of different socio-economic classes. The current approach of simply throwing more money at the problems facing our schools has proven to be ineffective and in many cases, detrimental to those it is trying to help. Possibilities for improvement lie in cultivating a market that embraces competition. If legislators have the courage to deviate from the status quo, they will provide America's underprivileged children with the means, as Milton Friedman said, "to rise above the poverty of their initial state."
Kyle Kinneberg is a senior at CMC and the Publisher Emeritus of the CI. This article is adapted from his research for Americans for Tax Reform in the summer of 2006.
The Current State of U.S. Schools
In 1962, Milton Friedman wrote, "Our present school system, far from equalizing opportunity, very likely does the opposite. It makes it all the harder for the exceptional few - and it is they who are the hope of the future - to rise above the poverty of their initial state." Over four decades later, Friedman's observation still rings true. Our nation's education system is inefficient, outdated, and deleterious, and it particularly fails our impoverished children.
The primary source of our educational failings is the structure of the education market - a market dominated by government-run schools. Although private and charter schools do serve thousands of students, they comprise a mere 10.9 percent of the entire school system and thus have only a minor effect on the market's organization. Consequently, the government maintains an inefficient monopoly over the education of our nation's children.
A lack of substantial competition has allowed two trends to occur that have stifled efficiency in the U.S. public school market. First, the school system has become increasingly centralized as government officials have transferred authority - particularly budgetary authority - away from individual schools. When lawmakers in Sacramento or Washington, D.C. impose mandates on the funds they grant to schools in Los Angeles, they force schools to allocate their limited resources in ways that often have little to do with the schools' individual needs. In addition, centralization restricts the amount of attention educators can give to students because it forces teachers and administrators to spend valuable time dealing with the government bureaucracy.
The second trend we notice is that teacher benefits such as tenure and pay raises have become structured uniformly, determined only by the number of years they have taught and the quantity of academic credentials they have earned. Because of the seniority-based compensation system, poor educators receive the same pay and benefits as good educators of equal age and credentials. Not only does such unmerited parity of benefits encourage poor teachers to remain in the education profession, it also provides a strong disincentive for capable college graduates to become teachers. Schools must therefore pay higher costs for lower-quality instructors.
These two trends associated with an uncompetitive education market stunt the quality of learning in our schools. Although student performance in some areas has slightly improved over the past 25 years, results from the 2005 National Assessment of Educational Progress (NAEP) subject exams illustrate that public school achievement remains deplorable despite significant increases in spending. In reading, only 31 percent of fourth grade students scored at or above the "proficient" level while 36 percent performed below "basic." Eighth grade students achieved slightly better scores with 31 percent at or above "proficient" and 27 percent below "basic." Since 2000, public schools have administered similar NAEP exams in mathematics, science, writing, U.S. history, and geography. As with the reading tests, the results across the board have been dismal.
The nation's weak public education system especially fails students from low-income households. Families with higher incomes have two ways to exercise choice over their child's education: They can move to a neighborhood that feeds into a reputable public school or they can send their child to a private school. Because people of similar socio-economic class tend to live in the same area, public schools in high-income neighborhoods face more competition due to these modes of choice. Caroline Hoxby, a Harvard professor, has found that competition improves the performance of public school students and decreases per-pupil expenditures. Low-income neighborhoods do not have this option, and there is no economic incentive for inadequate schools to reform themselves.
Not surprisingly, public school students from low-income households perform far worse, on average, than other public school students. For each subject and grade level, students eligible for the federal reduced-price lunch program, a common indicator of low socio-economic status, fail to achieve "basic" test scores at a rate nearly two or three times that of students who are ineligible.
The public school system must undergo comprehensive reform in order to improve educational opportunities for all students, especially the underprivileged. Introducing true competition into the market for schools must serve as the foundation for changes if they are to be effective. The formation of a competitive education market, however, requires that students have the means to attend schools outside of the government monopoly, such as charter schools, private schools, or home schools, if they desire to do so.
The Reforms Necessary to Improve the U.S. School System
The following reforms would provide all students with the ability to exercise educational choice while allowing government schools to remain in the market.
The first reform is the development and expansion of charter schools, which are public schools sponsored by a state governing body but operated by parents, teachers, other individuals, or private organizations. Although charter schools receive most of their funds from the government, they have significant freedom regarding resource allocation and curriculum. Currently, 40 states and the District of Columbia allow charter schools to exist. Some, including Arizona and Michigan, grant their schools a significant degree of autonomy while others, such as Mississippi and Iowa, impose upon them many restrictions.
An April 2002 study by Harvard Professor of Economics Caroline Hoxby compared the academic achievement of 99 percent of all elementary charter school students with students at traditional public schools. To control for race and income factors, she matched charter school students to the public school they most likely would have attended. The study found that charter school students, on average, are 5.2 percent more likely to be proficient in reading and 3.2 percent more likely to be proficient in mathematics on state exams. This advantage increases for students at older charter schools, for students at charter schools with more autonomy, for poor students, and for Hispanic students.
In order to make these educational opportunities available to more students, states must pass strong charter school laws that provide school operators the independence they need to effectively teach their students. At the same time that charter school student attainment rises, more competition in the education market would cause traditional public school attainment to increase as well. As more public schools would have to compete for a limited number of consumers, they would begin to make internal reforms, thus enhancing efficiency and effectiveness.
The second reform is the establishment of a universal voucher program available to all citizens and children of legal residents who attend elementary or secondary school. This reform would provide all children with the means to attend a non-public school, thereby making the U.S. education market more competitive than ever before. Taxpayer money would finance the vouchers which parents could redeem at a school of their choice. Such a program would eliminate the double tuition that families currently pay for non-public schooling - one direct tuition to the private school and a second tuition to public schools through taxes.
Six states and the District of Columbia currently offer certain students vouchers to attend a private school. These programs limit availability to students from low-income families, students from failing public schools, students with special education needs, or students in areas that lack a public elementary or secondary school. No state or locality, however, offers vouchers to all students. Even so, the states that have adopted voucher programs have seen significant achievements in student performance. Only one year after this program began in Cleveland, students receiving vouchers performed better on language, math, reading, and social studies exams than similar public school students. Likewise, after four years in Milwaukee's voucher program, students scored 11 percentile points higher in math and six points higher in reading than similar students attending public schools. Other random-assignment studies have found similar results for students enrolled in Charlotte, N.C. and Washington, D.C. voucher programs.
The third reform advocates state deregulation of home schooling. Currently, all 50 states and the District of Columbia allow parents to home school their children, but restrictions vary across the country. Some states heavily regulate home schooling by requiring parents to notify the state regarding their children's achievement scores or to undergo a professional evaluation. They also impose additional restrictions such as state approval of the parent's curriculum, teacher qualification of parents, or mandatory home visits by government officials. These regulations cost the government - and taxpayers - millions of dollars and reduce the number of families who choose home schooling. Other states have much less stringent home schooling laws; many simply require parents to notify the state about their individual approaches, and 10 states do not require parents to initiate any contact at all with officials.
Standardized test results show that home schooled students continually outperform students at both public and private schools. A 1997 study by the president of the National Home Education Research Institute, Brian D. Ray, found that home-schooled students scored 30 to 37 percentile points higher than comparable public school students. He also found that achievement significantly increased for students who had been home schooled for two or more years and that race and extent of government regulation had negligible effects.
A year later, Lawrence Rudner, former senior associate at the U.S. Department of Education's Office of Educational Research and Improvement, released a study indicating that nearly 25 percent of home schooled students were enrolled in a higher grade level than public and private school students of the same age. According to his study, home school students in first through fourth grade, on average, perform one grade level higher on achievement tests than their peers at public and private schools, a gap that grows wider above grade four. Several government organizations throughout the country, including state education departments and local school districts, have obtained similar results when analyzing the successes of home schooling.
Similar to parents of private school students, parents who home school their children must pay double tuition. To remedy this disparity, state governments should provide them with a tax credit equal to the amount of a school voucher. Parents could use this money to compensate for the costs of educational supplies and materials, as well as recover some of the opportunity costs associated with home schooling, namely, the inability to hold a full-time job.
The fourth reform advocates the use of tax credits and tax deductions to enhance the incentives for individuals and organizations to donate funds to student scholarships and schools. Currently, only three states offer credits for contributions to tuition scholarship organizations and grants to public or private schools. Yet even these states place restrictions on who can receive credits and on the amount that may be claimed as a tax credit. Arizona offers credits to individuals and married couples for contributions to scholarship programs and public schools. Alternatively, Florida and Pennsylvania offer credits only to corporations, not individuals. Instead of restricting incentives, states should loosen their tax laws by establishing high limits on credits (perhaps equal to the amount of a school voucher) and no limits on deductions.
On its own, this reform would not increase competition within the education market. Rather, it would supplement the three other reforms by increasing private aid to schools and providing financial scholarships to more students. With higher tax-credit limits on donations (and thus, more contributions flowing into all types of schools), the government could decrease the amount of money it grants to traditional public and charter schools. Consequently, a reduction in government spending on public education would give officials the ability to lighten the tax burden on all citizens. The higher tax-credit limits would also stimulate contributions to private scholarship programs. Although a universal voucher program would enable students to attend a private school, some, especially the underprivileged, might not be able to afford a more expensive school. By using the scholarship as a supplement to his or her voucher, a student would have the funds necessary to enroll in a more selective private school.
A government-dominated education system is not one that will keep America internationally competitive over the next century, nor is it one that will narrow the gap in either educational or professional attainment between people of different socio-economic classes. The current approach of simply throwing more money at the problems facing our schools has proven to be ineffective and in many cases, detrimental to those it is trying to help. Possibilities for improvement lie in cultivating a market that embraces competition. If legislators have the courage to deviate from the status quo, they will provide America's underprivileged children with the means, as Milton Friedman said, "to rise above the poverty of their initial state."
Kyle Kinneberg is a senior at CMC and the Publisher Emeritus of the CI. This article is adapted from his research for Americans for Tax Reform in the summer of 2006.
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