Indicator C6. On what resources and services is education funding spent?

Expenditure on education is composed of current and capital expenditure. Current expenditure includes staff compensation and spending on the goods and services needed each year to operate schools and universities, while capital expenditure refers to spending on the acquisition or maintenance of assets which last longer than one year (see Definitions section). Differences in current and capital expenditure allocation across countries reflect the degree to which countries have invested in the construction of new buildings – for example as a response to increases in enrolment rates – or in the restoration of existing school premises, due to obsolescence and ageing of existing structure, or the need to adapt to new educational, societal or safety needs. Unlike current expenditure, capital expenditure can show large fluctuations over time, with peaks in years when investment plans are implemented, followed by years of lows.

Given the labour-intensive nature of education, current expenditure represents the largest proportion of total expenditure on education in OECD countries. In 2017, current expenditure accounted for 92% of total expenditure on primary to tertiary educational institutions in OECD countries, with the remainder devoted to capital expenditure. On average, the overall share of current expenditure does not differ by more than 3 percentage points across education levels but there are larger differences across countries. The share of current expenditure on institutions from primary to tertiary level ranges from 87% in Turkey, Norway and Korea to 98% in Italy (Table C6.1). Broken down by educational level, the share ranges from 85% in Korea to 99% in Italy at primary, secondary and post-secondary non-tertiary level, and from 57% in Greece to 98% in Chile and Iceland at the tertiary level (Table C6.1).

Capital expenditure represents 8% of expenditure on primary to tertiary educational institutions on average across OECD countries, but reaches 10% or more in Australia, Japan, Korea, Latvia, Netherlands, Norway, and Turkey (Table C6.1). The share of capital expenditure is higher at tertiary level (10%) than at non-tertiary – i.e. primary, secondary and post-secondary non-tertiary – level (7%). Some OECD and partner countries have massively invested in infrastructure at the tertiary level: in 2017, capital expenditure on tertiary education reached 20% in Turkey and 43% in Greece. At non-tertiary level, Korea allocates 15% of its education budget to capital expenditure, the highest share across countries with available data (Table C6.1 and Figure C6.1).

In 2017, the average current expenditure per full-time equivalent student across OECD countries was almost USD 11 000, with higher values at tertiary level (USD 16 000) than at non-tertiary level (USD 9 300). Across all education level, current expenditure per student varies widely across OECD countries, ranging from about USD 4 600 in Turkey to about USD 22 000 in Luxembourg. The average capital expenditure is less than USD 1 000 per student; the countries that invested more in long-term assets in 2017 were Korea, Luxembourg, Norway and the United States (over USD 1 500 per student), while Chile, Colombia, Italy, Lithuania and the Russian Federation invested the least (below or around USD 500) (Table C6.1).

Current expenditure by educational institutions can be further subdivided into three broad functional categories: 1) compensation of teachers; 2) compensation of other staff; and 3) other current expenditure (including teaching materials and supplies, ordinary maintenance of school buildings, provision of meals and dormitories to students, and rental of school facilities). Current and projected changes in enrolment, changes to the salaries of education personnel, and the different costs of maintaining education facilities over time and across education levels can affect not only the amounts, but also the shares allocated to each category.

In 2017, compensation of teachers and other staff employed in educational institutions comprised the largest share of current expenditure from primary to tertiary education (74% on average across OECD countries) but this varies significantly across countries and within education levels (Table C6.2 and Figure C6.2). On average across OECD countries, the share of staff compensation on total current expenditure is higher in non-tertiary education (77%) than in tertiary education (67%), due to the higher costs of facilities and equipment in tertiary education. Belgium, France, Greece and Poland report the greatest share of current expenditure allocated to staff compensation at tertiary level (above or around 75%). At non-tertiary levels, Belgium, Colombia and Portugal devoted 85% or more of educational expenditure on staff compensation, the highest across OECD and partner countries, meaning they devoted less to other contracted and purchased services, such as support services (e.g. building maintenance), ancillary services (e.g. meal programmes) and rent for school buildings and other facilities (Table C6.2 and Figure C6.2).

In countries with available data, compensation of teachers represents a higher share of current expenditure than other non-teaching staff, especially in non-tertiary education. The difference in spending between teaching and non-teaching staff reflects the degree to which educational institutions count non-teaching personnel (such as principals, guidance counsellors, bus drivers, school nurses, janitors and maintenance workers) among their staff members. At tertiary level, compensation of staff involved in research and development may also explain some of the differences between the share of expenditure allocated to teaching and non-teaching staff across countries and different levels of education (see Indicator C1).

In 2017, OECD countries spent on average about USD 7 900 per full-time equivalent student on staff compensation from primary to tertiary levels, with higher values at tertiary level (USD 10 100 per student) than at non-tertiary level (USD 7 100). However, there were substantial variations across countries and educational levels. At primary, secondary and post-secondary non-tertiary level, expenditure per student on staff compensation ranges from less than USD 3 000 in Chile, Colombia, Costa Rica and Turkey to more than USD 10 000 in Austria, Belgium, Luxembourg and Norway. At tertiary level, spending on staff compensation per student exceeds USD 15 000 in Canada, Luxembourg, Sweden and the United States (Table C6.2).

Variations in the share of current expenditure for expenses other than staff compensation (such as equipment available to staff, contracted services and rent) reflects the different cost structures of educational institutions across countries. Facilities and equipment costs are generally higher in tertiary education than at other levels. In addition, in some countries, tertiary institutions may be more likely to rent their premises, which can account for a substantial share of current expenditure. Chile devotes the largest share to other current expenditure at both tertiary (52% of total current expenditure), and non-tertiary level (43%) (Table C6.2 and Figure C6.2).

On average across OECD countries, public and private institutions divide their spending between current and capital expenditure in a similar way. There is wide variation across countries, however. The share of current expenditure is at least 10 percentage points higher in public institutions than in private ones at non-tertiary level in Poland, and Portugal, and at tertiary level in Australia. Capital expenditure accounts for 10% among public institutions and 9% among private ones at tertiary level, while at non-tertiary level accounts for 7% among public institutions and 6% among private ones. However, the proportions vary across countries (Table C6.3). At non-tertiary level, capital expenditure accounts for more than 15% of total expenditure in public institutions in Korea, while the share is over 15% in private institutions in Poland. Costa Rica and Italy record the lowest share of capital expenditure in public institutions at this level (1%), while in the Czech Republic, Norway and Slovenia, private institutions recorded no capital expenditure in 2017. At tertiary level, public institutions in Greece, Hungary and Turkey have the highest shares of capital expenditure, at over 15%, while the highest shares for private institutions are observed in Australia, Hungary and Turkey, also over 15% (Table C6.3 and Figure C6.1).

Public and private institutions differ in how current expenditure is distributed. Staff compensation accounts for a larger share of current expenditure in public institutions across OECD countries: 79% compared to 72% in private ones at non-tertiary level, and 67% compared to 63% at tertiary level. Private institutions may be more likely to contract services from external providers, or to rent school buildings and other facilities (as opposed to public institutions operating in state-owned properties), or to be at a disadvantage when purchasing teaching materials, as they cannot benefit from the same economies of scale in procurement as the public sector. In a number of countries, however, the share of current expenditure allocated to staff compensation is higher in private institutions, with differences of over 5 percentage points in the Netherlands and Norway at non-tertiary level, and Finland, Israel, Japan, Korea and the Netherlands at tertiary level (Table C6.3).

Expenditure per student on compensation of teachers in non-tertiary public institutions is generally higher than in private institutions for countries with available data, and amounts to USD 5 900 on average. The biggest differences (over USD 3 000) are found in Canada, Italy and Luxembourg. In contrast, in Colombia, Estonia, Korea, Lithuania, the Slovak Republic and the United Kingdom, expenditure on staff compensation per student is higher in private institutions. At tertiary level, the largest difference between staff compensation per student in public and private institutions among countries with available data is observed in Austria and Finland (above USD 4 000). However, France, the Slovak Republic and the United States spend more on staff compensation per student in private tertiary institutions than in public ones (Table C6.3).

The share of resources devoted to a given category of expenditure highlights how they are allocated compared to other costs, but provides no information about whether that funding is sufficient to cover students’ educational needs or the teaching requirements of teachers. Although the shares devoted to current and capital expenditure do not show much variation on average over time – with current expenditure at about 90% of total expenditure – the amount of current and capital expenditure per full-time equivalent student shows greater variability across countries and over time. These changes are due to the combination of changes in the resources devoted to education and in the student population.

In the five-year period between 2012 and 2017, the average annual growth rate of current expenditure per student in public institutions from primary to tertiary education has been higher than 1% across OECD countries. The greatest increase (over 4%) has been observed in Hungary, Iceland, the Slovak Republic and Turkey, with Iceland and the Slovak Republic also experiencing the biggest increases in staff compensation per student. In Finland, Greece, Mexico and Slovenia, on the other hand, current expenditure per student decreased, driven by a reduction in staff compensation per student. Among private institutions, current expenditure per student at primary to tertiary level remained generally stable between 2012 and 2017 in countries with available data, although there were increases of over 1% per year in Hungary, Iceland, Norway, Sweden and the United States (Table C6.4, available on line).

Teachers’ compensation per student in public institutions slightly increased between 2012 and 2017 in countries with available data, with larger increases at tertiary level than at lower levels of education. At tertiary level it increased the most in the Czech Republic, Iceland and the Slovak Republic (between 7% and 11% on average per year), while the biggest annual decreases have been recorded in Greece and Mexico (around or greater than 5%). At non-tertiary level, Colombia, Iceland, Portugal and the Slovak Republic experienced the biggest increases (greater than 4%), while the biggest fall was observed in Finland (2%) (Table C6.4, available on line).

The average annual growth rate in expenditure on research and development (R&D) per student in public tertiary institutions between 2012 and 2017 shows wide variation across countries. Average increases exceeded 5% per year in Brazil, Finland and Luxembourg. The latter two are also, along with Denmark, Germany, Norway and Sweden, the OECD countries with the highest expenditure on R&D as a share of total tertiary expenditure (see Table C1.2). While in Luxembourg and Norway the expenditure on R&D increased in parallel with increases in total expenditure on tertiary education, in Finland total expenditure on tertiary education was falling over the same period. In contrast, spending on R&D per student in public institutions fell by more than 1% in France, Greece, Lithuania, Mexico, Portugal and Turkey, with the largest fall observed in Portugal and Turkey. While in most of these countries the negative trend is partly explained by an increase in the number of students without any proportional increase in funds devoted to R&D, in Portugal the number of students in public universities actually decreased over the reference period, meaning that expenditure on R&D fell faster than the number of students (Table C6.4, available on line).

Comparing trends in R&D spending per student in public and private institutions in countries with available data, the picture is somewhat mixed. In Belgium, both trends are positive, but R&D in public institutions grew faster than in private ones; in Chile, Hungary, Norway and the United States both trends are also positive, but R&D in private institutions grew faster, while in Finland, and Sweden spending on R&D rose in public institutions but fell in private institutions. In Italy, Lithuania, Spain and Turkey, spending on R&D fell in both public and private institutions, but more in private institutions. Finally, in the Czech Republic and Portugal, spending on R&D decreased in public institutions while it increased in private institutions (Table C6.4, available on line).

Capital expenditure refers to spending on assets that last longer than one year, including construction, renovation or major repair of buildings, and new or replacement equipment. The capital expenditure reported here represents the value of educational capital acquired or created during the year in question (i.e. the amount of capital formation), regardless of whether the capital expenditure was financed from current revenue or through borrowing. Neither capital nor current expenditure includes debt servicing.

Current expenditure refers to spending on staff compensation and on “Other current expenditure”, i.e. on goods and services consumed within the current year, which require recurrent production in order to sustain educational services (expenditure on support services, ancillary services like preparation of meals for students, rental of school buildings and other facilities, etc.). These services are obtained from outside providers, unlike the services provided by education authorities or by educational institutions using their own personnel.

Research and development includes research performed at universities and other tertiary educational institutions, regardless of whether the research is financed from general institutional funds or through separate grants or contracts from public or private sponsors.

Staff compensation (including teachers and non-teaching staff, see below) includes: 1) salaries (i.e. gross salaries of educational personnel, before deduction of taxes, contributions for retirement or healthcare plans, and other contributions or premiums for social insurance or other purposes); 2) expenditure on retirement (actual or imputed expenditure by employers or third parties to finance retirement benefits for current educational personnel); and 3) expenditure on other non-salary compensation (healthcare or health insurance, disability insurance, unemployment compensation, maternity and childcare benefits and other forms of social insurance). The “teachers” category includes only personnel who participate directly in the instruction of students. The “non-teaching staff” category includes other pedagogical, administrative and professional personnel as well as support personnel (e.g. head teachers, other school administrators, supervisors, counsellors, school psychologists and health personnel, librarians, and building operations and maintenance staff). At tertiary levels, "teaching staff" includes personnel whose primary assignment is instruction or research. This cathegory excludes student teachers, teachers’ aides and paraprofessionals.

The annual average growth rate is calculated using the compound annual growth rate, which is the “common ratio” of a geometric progression over the time period under analysis. A geometric progression, in turn, is a sequence of numbers where each term after the first one is obtained by multiplying the previous one by a fixed, non-zero number (the common ratio). Assuming a linear trend, the compound growth rate hence represents the constant percentage change between one year’s value and the previous year’s.

Expenditure per student on educational institutions at a particular level of education is calculated by dividing total expenditure on educational institutions at that level by the corresponding full-time equivalent enrolment. Only educational institutions and programmes for which both enrolment and expenditure data are available are taken into account. Expenditure in national currencies is converted into equivalent USD by dividing the national currency figure by the purchasing power parity (PPP) index for GDP. The PPP conversion factor is used because the market exchange rate is affected by many factors (interest rates, trade policies, expectations of economic growth, etc.) that have little to do with current relative domestic purchasing power in different OECD countries (see Annex 2 for further details).

The ranking of OECD countries by annual expenditure on educational services per student is affected by differences in how countries define full-time, part-time and full-time equivalent enrolment. Some OECD countries count every participant at the tertiary level as a full-time student, while others determine students’ intensity of participation by the credits that they obtain for the successful completion of specific course units during a specified reference period. OECD countries that can accurately account for part-time enrolment have higher apparent expenditure per full-time equivalent student on educational institutions than those that cannot differentiate between the different types of attendance.

For more information please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[1]) and Annex 3 for country-specific notes (https://doi.org/10.1787/69096873-en ).

Data refer to the financial year 2017 (unless otherwise specified) and are based on the UNESCO, the OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2019 (for details see Annex 3 at https://doi.org/10.1787/69096873-en ). Data from Argentina, the People’s Republic of China, India, Indonesia, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).

The data on expenditure for 2012 to 2017 were updated based on a survey in 2019-20, and expenditure figures for 2012 to 2017 were adjusted to the methods and definitions used in the current UOE data collection.

References

[2] OECD (2019), Education at a Glance 2019: OECD indicators, OECD Publishing, Paris, https://dx.doi.org/10.1787/eag-2019-en.

[1] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classificatons, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en (accessed on 16 April 2020).

Table C6.1 Share of current and capital expenditure, by education level (2017)

Table C6.2 Current expenditure, by resource category (2017)

Table C6.3 Share of current expenditure, by resource category and type of institution (2017)

WEB Table C6.4 Average annual growth rate of current and R&D expenditure per full-time equivalent student, by type of institution (2012-17)

StatLink: https://doi.org/10.1787/888934165035

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