Why markets in school education don’t work

by Ben Jensen

Published in the Weekend Australian, page 19, 13 July 2013

Twenty years ago Victoria introduced a policy that has resonated globally. Government schools would get more control over their destiny. As they came to differ from each other in their practices and in their quality, parents would have more school choice. Good information was vital, which the federal government acknowledged when it introduced My School in 2010.

The intention was to introduce market principles, successful in so many other areas of the economy, into school education. It was a bold experiment that has produced good results, especially in giving schools more autonomy. But in terms of lifting student performance, its express goal, it has not had the impact once hoped. Victoria still performs at about the same level as NSW, which remained highly centralised until recently.

In the early 1990s the Kennett government began substantially increasing school autonomy. Schools would have more control over how they spent their budget and teachers they could hire. Principals, freed from the shackles of a centralised bureaucracy, would lift the performance of students by implementing policies they knew were best for their school.

The My School website was launched in 2010 when Julia Gilllard was education minister. School performance, as measured by a school’s National Assessment Program – Literacy and Numeracy scores, was made publicly available for the first time. My School was designed, among other goals, to encourage families to vote with their feet and move from low to high-performing schools.

Theories of competition and autonomy are intuitively appealing. They have worked in other industries. But Grattan Institute’s new report, The myth of markets in school education, shows that the reality is different in schools. Policies to increase competition have not improved the performance of our students. And too often we are increasing school autonomy without the other policies required to improve our schools.

To assess whether a market exists in school education, Grattan Institute analysed the markets for more than 230 secondary schools in southeast Queensland. We found almost no connection between a school’s performance and its appeal. A school that performs 37 NAPLAN points above the average of other schools in its local area is likely to grow only less than 1 per cent more than a school that performs 37 points below the average of other schools in its local area. As a guide, 37 points is about the same as the difference between the average score of Year 7 students and the average score of Year 9 students in NAPLAN.

Why does this happen? By their nature, schools are not easily suited to competition. First, they compete only in their local area. For all but 5 per cent of families in southeast Queensland, schools compete with other schools only in a 20km area. In bigger cities, we assume the area would be smaller.

Second, while schools compete in many areas, we are interested only in competition that improves performance, so only local schools that are at least as high performing should be considered. Third, as many parents know, many schools are full – high-performing ones above all. Fourth, some of these schools are private schools that not all families can afford.

At each of these steps, the number of families that can choose other schools substantially falls. Taking all these steps into account, our conservative estimates show that 40 per cent to 60 per cent of schools face no or very limited competition of the kind that would improve performance.

A host of market failures further reduces competition. Changing schools is often very expensive. Second, the information about which schools are strong in teaching and learning remains poor. Third, there are substantial barriers to new schools being establlished and poor schools closing down. Fourth, because govern- ment schools are essentially free, there is no price signal that indicates quality.

Finally, families choose schools for many reasons other than per- formance. They include school culture and discipline, religious affiliation, reputation (based on sev- eral real and perceived qualities), the state of buildings and school grounds, and visible classroom characteristics such as class size.

With all these factors informing families’ choices, the difficulties for My School and similar reforms become clearer. The website is an important reform. It, along with NAPLAN, has made school education much more transparent.

But the fact My School is a gov- ernment website limits its effectiveness. Basic marketing tells you that effective advertising is much more than simply presenting information. But this is all a govern- ment website can do. My School cannot launch a campaign to get families to leave particular schools. It is designed as a compro- mise that ensures information is presented impartially.

When private-sector companies spend millions of dollars on marketing and advertising cam- paigns to influence people to change their behaviour, it is naive to think that people will make radically different decisions about schools because some numbers are placed, in a neutral context, on a website.

On school autonomy, we are often getting the strategy wrong. The world’s best systems have varying levels of autonomy. Even those with high levels of auton- omy do not make it central to their reforms. Instead, they articulate the best ways to teach and learn, then implement reform through high-quality systems of teacher development, appraisal and feed- back, among other policies.

Our report shows that highly autonomous private schools in Australia implement these programs no better than do centralised government schools. Our schools and school systems are poor at these things.

The rhetoric of school auton- omy often dominates education policy debates, unbalancing effective education reform strategy. As a result, schools are not using their autonomy to develop teachers, ap- praise their quality and give them feedback.

School leaders need to be empowered to make these changes. While autonomy gives them the authority to decide how their schools operate, empowerment goes much further. I t also gives leaders direction on how to intro- duce these important reforms, how to train and develop teachers and how to support a teaching and learning strategy for the whole school. These are the reforms that will make a difference where it matters, in the classroom.

Some systems in Australia are making good progress in these reforms. Others are too wedded to the market rhetoric of autonomy and competition.