Executive summary
The fiscal response of OECD governments to the COVID-19 crisis has been swift, strong and decisive. Across the OECD, governments have committed billions of dollars to support public health systems, and protect their economies and populations from the economic impact of the crisis. While the impacts of the pandemic are still lingering, Russia’s war of aggression against Ukraine has been dragging down global growth and putting additional pressure on inflation. Global Gross Domestic Product (GDP) stagnated in the second quarter of 2022 and output declined in the G20 economies while high inflation is persisting longer than expected.
Against the backdrop of this dim economic outlook, finance ministries face complex choices and a growing number of competing budgetary priorities. While investment in education is a crucial element in the economic and social recovery from the pandemic and the consequences of the current geopolitical and economic turmoil, ensuring value for money in education investment will likely become more important in the future. Education ministries will need to make a good case for educational expenditure, demonstrate their efficient use of resources and search for ways to deliver greater value for money.
International evidence, including that of the OECD’s Programme for International Student Assessment (PISA), suggests that there is a lot that countries can learn from one another to make better spending choices in education. Indeed, some school systems are achieving excellent education results with modest levels of resources while others have increased spending without measurable improvements in student learning outcomes. Beyond a certain level of investment, enabling all students to succeed hinges on the ability to direct resources effectively to where they matter the most. Determining the optimal allocation of resources involves complex trade-offs, an ongoing reflection on education priorities and policies that are aligned with governance arrangements at different levels of the school system.
The successful implementation of such policies requires careful policy design, effective communication and inclusive stakeholder involvement. Education ministries are uniquely positioned to address these challenges, connect resourcing strategies to education priorities, and build strong partnerships to work towards them. Finance ministries, on the other hand, can play a key role in supporting education ministries with relevant expertise during the budgeting process, in identifying efficiency gains and working towards aggregate fiscal integrity. At times of increased fiscal scrutiny, strengthening the collaboration between ministries of finance and ministries of education is therefore crucial.
It is with this goal in mind that the OECD and the French authorities organised a High-Level Seminar on Value for Money in Post-COVID Education on 15 February 2022, bringing together representatives of Ministries of Finance and Education from across the OECD for an inter-sectoral dialogue to exchange perspectives and address common challenges. The event was organised by the OECD Directorate for Education and Skills and the OECD Economics Department in co-operation with the French Ministries in charge of Education and Finance. This report builds on the background materials prepared for the international seminar and the discussions it inspired on key issues in educational efficiency – what we know, what we do not know, and how we can use the tools at our disposal to move beyond the status quo.
Following an Overview laying out the context for this report, the following chapters take stock of the economic returns to education and its broader social outcomes for individuals and society, thereby making the case for continued public investment in education. The report then focuses on key policy levers that can help to bring about greater value for money invested in education, namely: governing and distributing school funding to make the most of education investments; achieving equity in education alongside greater efficiency; and planning, monitoring and evaluating the efficient use of school funding.
Chapter 1 takes a closer look at the Importance of Human Capital for Economic Outcomes. Boosting human capital through education features prominently among many countries’ structural policy priorities identified by the OECD. Sustained high-quality education constitutes a long-term investment in the knowledge, skills and competencies of people, leading to higher productivity, earnings and quality of life for individuals. At the macro level, a well-educated workforce is a key contributor to greater aggregate productivity, innovation and long-term economic growth. The chapter reviews the empirical evidence on the link between human capital and economic outcomes and presents an improved measure of human capital, which incorporates both quality and quantity dimensions drawing on data from PISA and the OECD Survey of Adult Skills (PIAAC). The analysis suggests that increasing human capital (and particularly its quality dimension) could yield substantial long-term productivity gains, although they may take longer to materialise than for other policies.
Chapter 2 goes beyond the economic benefits of education to consider the Broader Social Outcomes of Education for Individuals and Society. High-quality education pays off for individuals, communities and societies beyond economic outcomes. Better-educated individuals live longer and healthier lives. They become more engaged citizens and are more likely to take action for collective well-being. Sustained high-quality education also supports communities. It can make them more resilient to emergencies, such as the COVID-19 pandemic, and better at proactively addressing emerging challenges, such as climate change. Education can also help societies to adapt creatively to change and to make the most of new opportunities, such as the digital transformation. The broader social outcomes of education thus include both private benefits (e.g. better health, better opportunities for one’s children) and societal ones, as private benefits translate into positive externalities and collective benefits.
Chapter 3, Governing and Distributing School Funding, then turns to the examination of smart ways of investing in education. The chapter considers how governance arrangements and allocation mechanisms can help to ensure the efficient and equitable resourcing of schools. Once school systems have a sufficient overall level of funding available, it is critical to direct those resources to where they are needed the most. The chapter examines whole-system approaches to managing the complexity of school funding governance in the context of fiscal decentralisation and growing school autonomy. It also presents a series of questions that education systems need to address when designing school funding allocation mechanisms, highlighting the potential of needs-based funding formulas. Finally, the chapter underlines the importance of adequate regulatory frameworks for the public funding of private providers to mitigate unintended consequences and harmful effects on equity.
Chapter 4 addresses the challenge of Using School Funding to Achieve Both Efficiency and Equity in Education. Most countries strive to improve access, quality, equity and efficiency for their education systems. However, pursuing these objectives simultaneously is a challenge for policy makers. The pursuit of equity and efficiency in education has often been presented as a trade-off when it comes to the allocation of resources. Nevertheless, efficiency and equity in education can go hand in hand, and the chapter examines how to bring the two together through insights and promising policies from OECD countries in four areas: investing in high-quality early childhood education and care; investing in teacher quality; reducing educational failure; and adapting school networks to changing demand.
Chapter 5 focuses on Planning and Monitoring the Use of School Funding to Improve Equity and Performance. Planning, monitoring and evaluating education spending is essential to enhance value for money and develop financially sustainable budgets that support the provision of high-quality education and address policy priorities. The chapter discusses how education and finance authorities can work together to ensure the alignment of budget planning procedures with education strategic priorities. It also highlights case studies of OECD countries that have effectively used evaluations, spending reviews and monitoring processes to inform a more effective use of school funding.