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– 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 troughs.

Given the labour-intensive nature of education, current expenditure represents the largest proportion of total expenditure on education in OECD and partner countries. In 2018, current expenditure accounted for 91% 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 83% in Latvia to 98% in Argentina across OECD and partner countries (Table C6.1). Broken down by educational level, the share ranges from 83% in Latvia to 99% in Italy at primary, secondary and post-secondary non-tertiary level, and from 56% in Greece to 99% in Argentina at tertiary level (Table C6.1). Larger differences across educational levels are observed when looking at the investment in current expenditure per student. In 2018, the average current expenditure per student across OECD countries was almost USD 11 000, with higher values at tertiary level (USD 16 400) than at non-tertiary level (USD 9 600). Across all education levels, current expenditure per student varies widely across OECD and partner countries, ranging from about USD 3 400 in Argentina to almost USD 23 000 in Luxembourg (Table C6.1).

Capital expenditure represents 9% of expenditure on primary to tertiary educational institutions on average across OECD countries, but reaches 12% or more in Australia, Estonia, Greece, Korea, Latvia, Norway and Turkey (Table C6.1). The share of capital expenditure is higher at tertiary level (11%) than at non-tertiary level (8%). Greece is by far the country that has invested more in infrastructure at tertiary level: in 2018, capital expenditure on tertiary education reached 44% of total expenditure. At non-tertiary level, Latvia allocates 17% of its education budget to capital expenditure, the highest share across countries with available data (Table C6.1). A similar pattern appears when looking at capital expenditure per student. Capital expenditure per student at tertiary education levels is almost double that at pre-tertiary levels (USD 1 600 and USD 900 respectively). The average capital expenditure from primary to tertiary education level across OECD countries is slightly over USD 1 000 per student. Australia, Korea, Luxembourg, Norway and the United States invested more per student in long-term assets in 2018 (over USD 1 500 per student), while Argentina, Colombia, Italy and Lithuania invested the least (less than USD 500) among OECD and partner countries (Table C6.1).

Current expenditure in 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 2018, 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), which is stable on average over time but 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 (68%), due to the higher costs of facilities and equipment in tertiary education. Argentina, Belgium, Denmark, France, Greece, Iceland and Poland report the greatest share of current expenditure allocated to staff compensation at tertiary level (75% or more) among OECD and partner countries. At non-tertiary levels, Belgium, Colombia and Greece devoted 85% or more of educational expenditure to staff compensation, 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).

The staff compensation measure relative to the number of students shows that remuneration of teachers and other staff is higher at tertiary education levels than at non-tertiary ones. In 2018, OECD countries spent on average about USD 8 100 per full-time equivalent student on staff compensation from primary to tertiary levels, ranging from USD 10 600 per student at tertiary level to USD 7 400 at non-tertiary ones. However, there were substantial variations across OECD and partner countries and levels of education. At primary, secondary and post-secondary non-tertiary level, expenditure per student on staff compensation ranges from less than USD 3 000 in Argentina, Chile, Colombia and Turkey to more than USD 10 000 in Austria, Belgium, Iceland, Luxembourg, Norway and the United States. At tertiary level, spending on staff compensation per student exceeds USD 15 000 in Belgium, Luxembourg, Sweden, the United Kingdom and the United States (Table C6.2).

In countries with available data, compensation of teachers represents a higher share of current expenditure than that of other non-teaching staff, especially in non-tertiary education (Table C6.2 and Figure C6.2). 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 R&D 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).

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 and Italy devote the largest share to other current expenditure at tertiary level (48% of total current expenditure), while at non-tertiary level the share reaches 75% in Chile (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 Colombia and Portugal, and at tertiary level in Australia (Table C6.3). Similarly, at non-tertiary level, capital expenditure accounts for more than 15% of total expenditure in public institutions in Korea and Latvia, while the share is over 15% in private institutions in Latvia and Poland. Italy records the lowest share of capital expenditure in public institutions at this level (1%). At tertiary level, public institutions in the Czech Republic, Estonia, Greece, Hungary, Latvia and Turkey have the highest shares of capital expenditure, at over 15%, while the highest shares for private institutions are observed in Australia, Hungary, Latvia and Turkey, also over 15% (Table C6.3).

Slightly bigger differences are observed when looking at investments in capital expenditure per student, which was about USD 1 000 across OECD countries in 2018 (Figure C6.3), with values slightly higher in public than in private educational institutions on average. Capital expenditure per student in public institutions is about twice as high at tertiary level as at non-tertiary level in OECD countries (USD 1 600 and USD 900, respectively). Similarly in private institutions, capital expenditure per student is also much higher at tertiary (USD 1 500) than non-tertiary (USD 700) level. At non-tertiary level, the highest capital expenditure per student is observed in private institutions in Luxembourg (USD 2 200), although in about 60% of countries, capital expenditure per student is higher in public than in private institutions. At tertiary level, the highest capital expenditure per student is observed for private institutions in Australia (USD 6 900), but in about two-thirds of countries, capital expenditure is higher in public institutions. Luxembourg is the country with the highest capital expenditure per student in public institutions at both tertiary and non-tertiary education levels. From primary to tertiary education, the lowest values of capital expenditure per student in public institutions (less than USD 400) are observed in Brazil, Colombia, Costa Rica, Italy, Mexico, Portugal, the Slovak Republic, and the United Kingdom.

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: 78% compared to 71% in private ones at non-tertiary level, and 68% compared to 64% 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). They may also be more likely 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 Chile, the Czech Republic, the Netherlands and Norway at non-tertiary level, and Finland, Israel, Japan, Korea, the Netherlands and the Slovak Republic 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 almost USD 6 100 on average across OECD countries. The biggest differences (over USD 3 000) are found in Canada, Italy and Luxembourg. In contrast, Estonia and the United Kingdom are the countries where not only expenditure on staff compensation per student is higher in private institutions, but the difference with the compensation in public institutions also exceeds USD 1 000. At tertiary level, the largest difference between staff compensation per student in public and private institutions among countries with available data is observed in Australia, Austria and Finland (above USD 4 000). However, France, Latvia, 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 debate on the benefits and disadvantages of public and private education systems is long-standing and focuses on two main points: the concept of education as a public common good on the one side (see, for example, Reid and Australian Council of Deans of Education (2003[1])), and a more innovative and performing educational environment provided by private educational institutions on the other (Alderman, Orazem and Paterno, 2001[2]), which might lead, however, to social segregation (Courtioux and Maury, 2020[3]).

Enrolment in private educational institutions, in fact, is driven by many factors, including family income (Curi and Aquino Menezes-Filho, 2007[4]; Murnane et al., 2018[5]). At the same time, enrolment in private educational institutions is associated with a significant and positive earning advantage compared to public institutions, even after controlling for school quality, family background and educational achievement (Sandy and Duncan, 1996[6]). The choice between investing in public or private educational institutions therefore has an important impact in terms of equity and inclusiveness.

Across OECD countries, from primary to tertiary level, around or above 80% of resources devoted to compensation of personnel, capital expenditure and expenditure on R&D are allocated to public educational institutions (Table C6.4, available on line). Such shares are higher at non-tertiary than at tertiary education level, where more than one quarter of total resources devoted to compensation of personnel and capital expenditure are invested in private educational institutions.

In Belgium, Chile, Colombia, Finland, Israel, Japan, Korea, Latvia, the United Kingdom and the United States, the share of staff compensation allocated to private institutions in tertiary education is higher than the OECD average, while the countries with the lowest percentages are Denmark, Estonia and Slovenia (Table C6.4, available on line, and Figure C6.1). As for capital expenditure, the countries where the share of investments in private institutions is greater than 50% are Colombia, Israel, Japan, Korea, Latvia and the United Kingdom at tertiary education level and Chile, Colombia, Portugal and the United Kingdom at non-tertiary level (Table C6.4, available on line). It is to be noted, however, that the allocation of resources between public and private institutions is heavily influenced by the number of students enrolled in the two types of institutions.

At tertiary level, the share of funds allocated to public institutions is largest for expenditure on research and development (R&D) (80%) than for any other expenditure category. In Belgium, Chile, Korea, Latvia and the United Kingdom, however, more than half of the resources devoted to R&D are spent in private educational institutions (Table C6.4, available on line, and Figure C6.1). Expenditure on R&D per student in public tertiary institutions (USD 6 000) is more than twice that in private ones (USD 2 500) on average across OECD countries. In Finland, Luxembourg, Norway, Sweden and Switzerland, expenditure on R&D per student in public educational institutions was above USD 10 000 whereas expenditure per student on R&D in private institutions exceeds USD 9 000 in Denmark and Sweden (Table C6.3).

The share of resources devoted to a given category of expenditure highlights how those resources 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 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 six-year period between 2012 and 2018, the average annual growth rate of current expenditure per student in public institutions from primary to tertiary education was slightly higher than 1% across OECD countries. The greatest increase (above 4%) was observed in Hungary, Iceland, the Slovak Republic and Turkey, driven by large increases in teachers’ compensation per student in Icleand and the Slovak Republic. In Finland, Greece, Mexico and Slovenia, on the other hand, current expenditure per student decreased, mostly driven by a reduction in staff compensation per student. In private institutions, current expenditure per student at primary to tertiary level remained generally stable on average between 2012 and 2018 in countries with available data, although it increased by at least 3% per year in Hungary, Iceland and the Slovak Republic, and decreased by more than 6% in Turkey (Table C6.5, available on line).

Teachers’ compensation per student in public institutions slightly increased between 2012 and 2018 in most countries with available data, with larger increases at tertiary level than at lower levels of education on average. At tertiary level, teachers’ compensation 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 were recorded in Luxembourg and Mexico (greater than 4%). At non-tertiary level, Colombia, Iceland, Portugal, the Slovak Republic and Switzerland experienced the largest increases (3% or more per year), while the largest annual decreases were observed in Argentina, Finland and Mexico (Table C6.5, available on line).

The average annual growth rate in expenditure on R&D per student in public tertiary institutions between 2012 and 2018 (below 1%) shows wide variation across countries. Average increases exceeded 5% per year in Brazil, Finland, Luxembourg and Poland. Finland and Luxembourg are also, along with Denmark, Germany, Greece and Sweden, the OECD countries with the highest expenditure on R&D as a share of total tertiary expenditure (see Indicator C1). While in Luxembourg expenditure on R&D increased in parallel with increases in total expenditure on tertiary education, in Finland, total expenditure on tertiary education fell over the same period. In contrast, spending on R&D per student in public institutions fell by more than 1% in Chile, France, Lithuania, Mexico, Portugal and Turkey, with the largest drops observed in Mexico and Portugal. 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 Lithuania and 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 C6.5, 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 and Finland, both trends are positive, but R&D in public institutions grew faster than in private ones; in the Czech Republic and the United States, both trends are also positive, but R&D in private institutions grew faster; in Germany, Hungary, Slovenia and Sweden, spending on R&D rose in public institutions but fell in private ones. In Italy, Lithuania, Spain and Turkey, spending on R&D fell in both public and private institutions, but more in private institutions while in Chile the reduction was greater in public institutions. In Portugal, spending on R&D fell in public institutions but rose in private ones (Table C6.5, 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 health-care 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 (health care 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 category 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 years.

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 gross domestic product. 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 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[7]) and Annex 3 for country-specific notes https://www.oecd.org/education/education-at-a-glance/EAG2021_Annex3_ChapterC.pdf).

Data refer to the financial year 2018 (unless otherwise specified) and are based on the UNESCO, OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2020 (for details see Annex 3 at: https://www.oecd.org/education/education-at-a-glance/EAG2021_Annex3_ChapterC.pdf). Data from Argentina, the People’s Republic of China, India, Indonesia, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).

Data on expenditure for 2012 to 2018 were updated based on a survey in 2020-21, and expenditure figures for 2012 to 2018 were adjusted to the methods and definitions used in the current UOE data collection.

References

[2] Alderman, H., P. Orazem and E. Paterno (2001), “School quality, school cost, and the public/private school choices of low-income households in Pakistan”, The Journal of Human Resources, Vol. 36/2, pp. 304-326, http://dx.doi.org/10.2307/3069661.

[3] Courtioux, P. and T. Maury (2020), “Private and public schools: A spatial analysis of social segregation in France”, Urban Studies, Vol. 57/4, pp. 865-882, http://dx.doi.org/10.1177/0042098019859508.

[4] Curi, A. and N. Aquino Menezes-Filho (2007), “Os determinantes dos gastos com educação no Brasil”, Pesquisa e Planejamento Econômico, Vol. 40/1, http://repositorio.ipea.gov.br/handle/11058/5102.

[5] Murnane, R. et al. (2018), “Who goes to private school?”, Education Next, Vol. 2, p. 21, https://www.educationnext.org/who-goes-private-school-long-term-enrollment-trends-family-income/.

[8] Murnane, R. et al. (2018), Who Goes to Private School? - Education Next, https://www.educationnext.org/who-goes-private-school-long-term-enrollment-trends-family-income/ (accessed on 14 May 2021).

[7] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classifications, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.

[1] Reid, A. and Australian Council of Deans of Education (2003), Public Education as an Education Commons, discussion paper, Australian Council of Deans of Education, Bundoora, Victoria, https://www.acde.edu.au/?wpdmact=process&did=MjEuaG90bGluaw==.

[6] Sandy, J. and K. Duncan (1996), “Does private education increase earnings?”, Eastern Economic Journal, Vol. 22/3, pp. 303-312, https://www.jstor.org/stable/pdf/40325720.pdf.

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