Opinionista Jesse Harber 12 November 2013

Voucher-based school privatisation: Perhaps the worst idea ever?

At the moment, most South African news sites are displaying two stories in fateful proximity: first, the South African Institute of Race Relations’ John Kane-Berman has said that South Africa should privatise its health and education systems. Second is a piece quoting Correctional Services Minister Sibusiso Ndebele on the abject failure of experiments in privatising the prison services. The contrast is striking.

There is no denying that we have a crisis in the public provision of education and healthcare. There are problems with the capacity of the state to deliver, with funding, and most importantly with severe inequality. The middle classes have access to excellent education and healthcare, and the majority of the country is severely underserved. This is not only a moral problem, but a developmental one: quality and equality in these areas are both a means and end to the development of South Africa.

Let’s talk about education. Kane-Berman’s plan – to auction off government schools and fund the resulting private schools with government vouchers – is no solution. Not only does it not address the actual problems with education provision in South Africa, but it would actively make things worse.

The main problems with South African state education are to do with inadequacy of provision: an undersupply of teachers and teaching skills; poor school infrastructure; poor provision of learning materials; and extreme inequality of access and outcomes. Another major problem, on the demand-side, is that the marginal benefit of each year of education is low: unemployment is so high for non-professionals that for most learners the marginal benefit of another year of education approaches zero. Unfortunately any young South African who does not anticipate eventually getting a degree (which is almost everyone from a poor household) might reasonably decide that they’re better off avoiding the direct, indirect and opportunity costs of staying in school.

Kane-Berman’s proposal fails to address these issues. It does not solve the demand-side problem: there will be no more reasons to stay in school under his system. Nor does it address any of the supply-side problems. It will not encourage more skilled graduates to go into teaching, and nor will it improve the skills of existing teachers: similar voucher-based programmes in Chile (since the 1980s), Sweden, and Milwaukee, USA (both since the 1990s) resulted in private school teachers who were paid less than their state school equivalents. Not only will the unions not be happy about this, but it decreases incentives for our teachers to become more skilled. The reason voucher-funded private schools pay their teachers less than state schools is that they need extra room in their budget for profit, which represents the extraction of value from the education system, and for marketing, which is often a more reliable way to attract pupils than educational outcomes. Quality of education is a difficult good for “customers” (parents) to evaluate, and study after study has shown that few parents are able to do so reliably. Those that are able to evaluate educational quality do so by mobilising their social capital – middle-class networks of parents with enough time and education and contacts to find the right schools. Poor parents, the cross-national evidence shows, simply don’t have the resources to compete, and depend on unreliable indicators such as marketing. One study in Chile found that simply changing the name of the school from Spanish to English was enough to increase enrollment.

In case one is tempted to argue that this outcome would be acceptable, because nonetheless everyone would be at private schools and those are consistently better than state schools… one would be wrong. Not in Chile, Sweden or the USA have voucher-funded private schools been found to increase educational attainment or outcomes for poor students. Even the most carefully designed voucher-funding system leads to students clustering together by socioeconomic background, and poor students being just as let down, or more so, than they had been by the state schools they left behind.

It is possible that newly-privatised schools would enjoy private investment in infrastructure, but it’s not clear why that would be the case: the private sector is likely to prefer to buy schools with existing infrastructure – if a building is inadequate to run a school out of, what’ll make it attractive to an investor? – and any money available in the charitable sector for investment in schools is likely already being invested in schools. If privatisation in other sectors is anything to go by, the government will have to pour money into failing schools in an attempt to turn them into going concerns – and if it can turn a failing school into a going concern, why does it need to privatise it? Value would be added by the reforms, and transferred to the private sector in the guise of an education policy.

In fact, that is all this proposal amounts to: an enormous transfer of value from taxpayers to businesses, at the educational expense of students. Privatisation has its place. Market-based mechanisms (such as vouchers) have their place. But that place is not in essential services such as education, healthcare, and correctional services. These sectors provide public goods that are too important to be left to the indifference of the market, goods in which the incentives for the private sector are (both economically and literally) perverse.

A basic measure of a society is the degree to which it takes responsibility for those who cannot take care of themselves – such as the sick, the old, and the young. School privatisation is society washing its hands of the young: abdicating responsibility and throwing money at the problem instead. Our education system needs an overhaul, yes – but not like this. DM