Choosers and losers: the impact of government subsidies on Australian secondary schools.
Watson, Louise ; Ryan, Chris
Introduction
This paper reveals what parents do and what schools do when private
schools are provided with recurrent funding from government to subsidise
their operating costs. In Australia, since 1974, every student who has
enrolled in an approved private school has attracted a government
subsidy worth between 15% and 70% of average estimated student operating
costs, determined on a needs basis (Watson, 2003). Described as
'unhelpfully complex and exceedingly opaque' (Dowling, 2008),
the Australian schools funding system effectively creates a school
education market where private schools in receipt of government funding
compete with public schools for students.
This article examines trends in school enrolment and participation
data, changes in tuition fees and trends in student: teacher ratios in
private and public schools since the introduction of government
operating subsidies for private schools. We reveal how private schools
have used the additional resources provided by government and how the
average socio-economic composition of schools in both the private and
public sectors has changed. Finally, we discuss the impact of these
changed enrolment patterns on schools and students, and the policy
implications.
The Australian school funding system
In Australia, the federal government provides a subsidy to assist
students to attend the school of their choice in the private sector.
Federal grants to private schools are supplemented by state government
grants to a proportionate value of less than half the federal grant
(Ministerial Council on Education, Employment, Training and Youth
Affairs, 2004). Between 1974 and 1999, the Australian government's
private school funding scheme allocated a government subsidy per student
to each private school or system on the basis of the financial
'need' of the school or system, measured by its declared total
level of private income. As most private school income was sourced from
tuition fees, schools that charged high fees (mostly independent
schools) received a lower per student grant than schools charging low
tuition fees, most of which were Catholic schools. Since 2000, the level
of federal funding has been linked more directly to the financial means
of individual students' families (Watson, 2003).
Today, schools in the Catholic system receive combined (that is,
federal and state) recurrent grants per student that are worth
approximately 72% of their total income and source the remaining income
from tuition fees and donations. Students attending independent schools
attract total federal and state grants of varying proportions according
to a measure of the socio-economic status (SES) of their students which
amount to, on average, 40% of their total income (Ministerial Council on
Education, Employment, Training and Youth Affairs, 2004).While some
independent schools receive grants at the same level as schools in the
Catholic system, the majority receive less than Catholic schools. The
differentiated subsidies are paid in a lump sum to the school and all
students attending a particular school are charged a common fee,
regardless of their socio-economic status. There are both high-fee and
low-fee schools in the independent sector. Public schools are, in
theory, fully government funded, although many public schools receive
'voluntary' financial contributions from parents. In 2008,
public schools enrolled 60% of all students at the secondary level (that
is, Years 7 to 12), Catholic schools enrolled 22% and the independent
sector catered for 18% (Australian Bureau of Statistics, 2008; Dowling,
2008; Watson, 2003, 2004).
The size of the private school sector in Australia has always been
relatively large due to the high proportion of schools--traditionally at
the primary level--supported by the Catholic church. In 1965, 24% of
Australian school students were enrolled in the (then unfunded) private
sector, of which 82% were in Catholic schools (Australian Bureau of
Statistics, 1970).The private school sector's enrolment share
declined steadily during the 1960s, precipitating demands for state aid
to private schools (Albinski, 1966; Smart, 1978). The Catholic
system's share of total enrolments fell from 19.5% in 1965 to 17%
in 1973. State government funding for private schools' operating
costs was introduced in 1967, followed by federal funding in 1969 and
then a major injection of federal funding in 1974. In the wake of the
introduction of federal government funding, the decline in private
school enrolment share was arrested, reaching a trough of 21.1% in 1977
and then beginning to climb thereafter as shown in Figure 1.
[FIGURE 1 OMITTED]
By 2008 the proportion of students in private schools was about 12
percentage points higher than the trough of the late 1970s. The increase
in the private sector's enrolment share over this period was higher
at the secondary level--closer to 15 percentage points. The private
sector's enrolment increase over the period was not uniform, and
growth in its share of secondary enrolments stagnated twice, during the
recessions of the early 1980s and 1990s--both periods associated with
strong increases generally in secondary school retention in Australia,
which was concentrated in public schools. The growth in the private
share of primary enrolments also slowed in the late 1980s, which
suggests some other factor may have been at work, such as the impact of
a federal policy that restricted the growth of new private schools--the
New Schools Policy--between 1985 and 1996 (see Ryan & Watson, 2004).
The federal government recurrent funding scheme introduced in 1974
remains the centrepiece of federal funding for private schools today.
The recurrent funding scheme accounts for 94% of total federal outlays
on private schools (Department of Education, Employment and Workplace
Relations, 2009) and the real value of federal subsidies for students in
private schools has increased steadily since the 1970s, as shown in
Figure 2. This study focuses on secondary (high) schools because the
successful completion of secondary school is a critical point for access
to university. Entrance to most university courses, particularly those
leading to prestigious professions such as law and medicine, are offered
on the basis of a student's school achievement in Year 12. Thus the
successful completion of secondary school is the principal means for
determining the initial career outcomes of a large proportion of
secondary students. This may contribute to the traditionally higher
levels of private school enrolment at the secondary level in Australia.
The following section reveals how private schools have used the
subsidies they have received from government through an examination of
the relationship between tuition fees, student: teacher ratios and
student enrolments.
[FIGURE 2 OMITTED]
Trends in enrolments, tuition fees and student: teacher ratios
When the private sector's enrolment data are disaggregated by
subsector, it would appear that charging relatively high tuition fees is
not a barrier to growth. In 2002, average fees in the Catholic school
system were almost $2500 per annum, compared with more than $6000 in the
independent sector. Fees in the Catholic system have more than doubled
from the early 1970s in real terms, with smaller growth evident in
tuition fees in the independent sector: 160% increase in Catholic
tuition fees compared with 70% in independent tuition fees. (These
increases in real fees exceed increases in real incomes over the same
period: per capita real household disposable income increased by 46%
between 1972 and 2002, while real male average weekly earnings increased
by 26%.) There has been substantial growth in real fees in both the
Catholic and independent sectors from the mid-1980s. While Williams
(1985) found that aggregate private sector fees fell initially after the
increase in operating grants to the early 1980s, estimates attributed to
him in Ruby, Wells and Wildermuth (1995) include the same increase in
fees from the mid-1980s as found here: around 5% per annum in real terms
in the Catholic sector and over 2% in the independent sector. The growth
in real fees paused during the early 1990s, before returning to the
previous rates after 1995 (Ryan & Watson, 2004). As indicated in
Figure 3, enrolments in independent schools, which generally charge
higher fees, have grown at a faster rate than enrolments in Catholic
schools since 1977. Thus while private tuition fees have increased since
1972, in both Catholic and independent schools, this has not affected
demand for private schools, except during the economic recession of the
early 1990s. (It should be noted that these changes occurred in the
context of a general increase in the real value of household incomes as
well as an increase in two-income households, particularly at the upper
end of the socio-economic distribution.)
[FIGURE 3 OMITTED]
[FIGURE 4 OMITTED]
Increases in school tuition fees did not have a negative impact on
private school enrolments, particularly in the independent sector. This
is illustrated in Figure 4, which depicts trends in private school
enrolment shares and real fees jointly through time. In the independent
sector, both fee increases and enrolment share increases were modest
until the mid-1980s, but increased consistently thereafter. In the
Catholic sector, enrolment shares increased most during the period of
fee stability in the early 1980s, but slowed once fees in that sector
began to rise.
In the Australian schools funding system, grants are provided to
private schools to meet operating expenses under the recurrent grants
scheme. A separate capital grants scheme assists private schools with
building new facilities. The federal government's guidelines for
the recurrent grants scheme specify that recurrent funding must be spent
for operational purposes in the calendar year in which it is allocated.
The main operating expense for all schools is the salaries and on-costs
of teaching staff. Some 78% of private school total operating
expenditure (excluding capital expenditure and debt servicing) is spent
on teachers' salaries and related staff expenses (Ministerial
Council on Education, Employment, Training and Youth Affairs, 2004).Thus
if a private school decides not to reduce its tuition fees, the
additional resources from federal grants are most likely to be spent on
employing more teachers. Our data suggest that the additional resources
available to private schools from steady increases in government funding
and rising tuition fees since the 1970s have contributed to improvements
in student: teacher ratios in both Catholic and independent schools. As
the Catholic school system charges lower fees on average than
independent schools, student: teacher ratios still remain higher in
Catholic schools than in independent schools, as shown in Figure 5.
[FIGURE 5 OMITTED]
Any discussion of the relationship between improved student:
teacher ratios and shifts in student enrolments to the private sector
must take into account the relative student: teacher ratios in public
schools. Student: teacher ratios in public schools also improved during
the 1970s, but then remained constant over the 1980s and deteriorated
slightly during the 1990s. As a result of the strong improvement in
student: teacher ratios in the public schools in the 1970s, the private
sector's student: teacher ratios did not improve relative to public
schools until the early 1980s, but demonstrated a steady relative
improvement thereafter. The relationship between changes in student:
teacher ratios in private schools relative to student: teacher ratios in
public schools is illustrated in Figure 6. The purpose of the
illustration is to see if the improvement in the student: teacher ratios
for the Catholic and independent sectors from the late 1970s and early
1980s relative to public schools had any apparent impact on the
enrolment shift from public to private schools over this period. As
shown in Figure 6, improvements in private school student: teacher
ratios relative to public schools after 1979, were associated with
steady improvements in the enrolment share of both Catholic and
independent schools.
A study by Williams (1985) suggested that the balance between fee
reduction and quality improvement strategies adopted in private schools
has influenced the type of student who has transferred from the public
to private school sector since the 1970s. Williams's analysis of
the determinants of the private school enrolment share from 1963 to 1983
in Australia found that student: teacher ratios in the private sector
had a positive effect on private schools' enrolment share, while
increases in the public sector's student: teacher ratios had a
negative impact on the private enrolment share. The private school
enrolment share also rose with increased levels of government grants and
contributed services. Williams found that improved student: teacher
ratios in the private sector (funded by government grants) had a more
positive impact on the private sector's enrolment share than
increases in school tuition fees (Williams, 1985).
[FIGURE 6 OMITTED]
The evidence presented above suggests that income from government
subsidies and rising tuition fees has enabled private schools to improve
their student: teacher ratios substantially, to a position where the
student: teacher ratios in Catholic schools are almost equal to public
schools and the ratio in independent schools is better than in public
schools. As the student: teacher ratio in public schools also improved
between 1972 and 1980, the private sector's ratio improved relative
to public schools only since the early 1980s. And this period marks the
beginning of an increase in the enrolment share of private schools,
implying that the improvement in the student: teacher ratios of private
schools (relative to public schools) since the 1970s is associated with
an increase in their enrolment share.
Responsibility for this outcome does not rest entirely with private
schools. In providing subsidies to private schools, the federal
government stated that its intention was to improve the student: teacher
ratios relative to public schools, particularly in the Catholic school
sector (Karmel, 1973). Throughout the 1980s, the federal government
argued that private schools should not use subsidies to replace fee
income and encouraged them to increase their tuition fees annually to
reflect general price movements (Department of Employment, Education and
Training, 1989). By the mid-1990s, after two decades of increases in
both subsidies and tuition fees coupled with continuing strong demand
for private schools, such exhortations were no longer necessary.
In summary, strong real increases in private school tuition fees
since 1972 have had no apparent negative impact on the enrolment share
of either Catholic or independent schools, except during the few years
of the economic recession in the 1980s and early 1990s. In stable
economic conditions, improvements in student: teacher ratios in private
schools relative to public schools appear to have had a positive impact
on demand for private schooling irrespective of increases in the cost of
tuition.
Changes in the social background of students in public and private
schools
In this section we examine changes in the social background of
students who attend private schools using data from three cohorts of
students. The cohorts were in school in 1975,1995 and 2006,
respectively. The data are drawn from the Youth in Transition 1961 birth
cohort (the 1975 school cohort) and the Longitudinal Surveys of
Australian Youth cohorts of 1995 and 2006 (the 1995 and 2006 cohorts,
respectively).The 1975 cohort involved 6260 students from 264 schools;
the 1995 cohort 13,613 students from 286 schools; the 2006 cohort 14 170
students from 356 schools. These sample sizes represented about 2.5% of
14-year-olds at secondary school in Australia in 1975, 5.5% of Year 9
students in 1995 and 6% of 15-year-olds at school in 2006. In the first
two cohorts, approximately 12% of schools with secondary school students
were surveyed, and a somewhat higher proportion in the third cohort. The
1975 and 2006 cohorts obviously allow us to draw out long-term trends in
student enrolment patterns between government and private schools, while
the 1995 cohort allows us to see whether the strong growth in government
funding since 1996 (Figure 2) affected enrolment shares across the
social background distribution.
The socio-economic (SES) score of an individual was calculated as a
weighted average of the education levels and occupations of their
parents. The weights were based on the parameters of a regression
equation where the dependent variable was the individual's desired
or anticipated future occupation, identified when they were still
teenagers. SES scores derived in alternative ways showed qualitatively
similar changes between the two cohorts. The average SES scores of
individuals who attended different school types in the three cohorts are
presented in the lower half of Table 1.
The upper half of Table 1 shows the enrolment shares of the
different school types and the way they changed between the cohorts. The
enrolment share of private secondary schools increased by 16 percentage
points between the first and last cohorts, with independent schools
picking up a little more than half of that increase and Catholic schools
a little less than half. While the average socio-economic status of
independent and Catholic schools declined, this should be interpreted in
light of their increased enrolment share. As the independent sector
received the largest increase in enrolment share, its average
socio-economic status, while still the highest of all sectors, declined,
yet it remains substantially higher than the SES of the public school
population.
The average SES of students is highest in all cohorts for those who
attend independent schools, followed by Catholic schools and public
schools. The interpretation of these SES scores is as follows: in 1975,
the average student at an independent school had an SES background that
was higher than 73% of students. The pattern of school-type enrolment
share by SES is similar for the 1995 data as confirmed by other studies,
such as the analysis of enrolment shares by SES using the 1996
Australian Census in Mukerjee (1999) and by family income using the 2001
Census in Preston (2003).
In Preston's analysis of secondary enrolments in low, middle
and high family income groups (categories that split secondary school
students into groups of roughly equal size), the proportion attending
government schools in these income groups were 76, 67 and 48%. The
proportions in the other sectors were as follows: Catholic: 15, 22 and
27; independent: 9, 12 and 25. Splitting Mukerjee's analysis into
three groups (lowest three SES quartiles, middle four quartiles, top
three quartiles) provided the following enrolment shares: government:
78, 67 and 50; Catholic: 17, 22 and 24; independent: 5, 11 and 27. If we
split the 1995 data into three groups of equal size, consisting of low,
middle and high SES groups, we obtain the following enrolment shares:
government: 77, 68 and 50; Catholic: 15, 22 and 27; independent: 8, 10
and 23. The enrolment share patterns across the three different data
sets using three different SES or income measures are similar at this
level of aggregation, other than for the highest SES group.
We have not found any directly comparable analyses for the patterns
in the 1975 data but re-analysis of data contained in Radford and Wilkes
(1975: 60) of the fathers' occupations of school leavers by
school-type suggests a similar pattern of school type enrolment share by
SES in their data to the data we use here. Specifically, the Catholic
enrolment share did not vary much across the SES distribution; the
government school share was similar in the low and middle SES groups,
but substantially lower in the high SES group, where the independent
school share was greater.
As indicated in Table 1, the average SES of students at public
schools fell between 1975 and 2006 by 1.5 percentage points, while the
average SES of students at private schools decreased by 4.4 percentage
points. The private decrease was composed of similar decreases in the
average SES of students at both Catholic schools and independent
schools. (All of these changes were significant at the 5% level.) These
changes suggest that the students who transferred from public schools
were above average-SES students for the public system (and hence tended
to be from the top half of the SES distribution, given its 1975 average
student SES of 0.463). At the same time, those who entered private
schools tended to have lower SES backgrounds than the typical private
school student in the 1975 cohort.
To help identify where in the SES distribution the transfer of
students from the public to the private sectors took place, Table 2
shows the change in enrolment shares of the three sectors between the
two cohorts by SES decile. The drift away from public schools to both
the Catholic and independent sectors is somewhat more pronounced in
deciles 5 to 10 than in the first four deciles. That is, the change in
enrolment shares was larger in the top half of the SES distribution.
This concentration was more pronounced between 1975 and 1995 than over
the whole period. Between 1995 and 2006, the loss in enrolment share was
similar in the top and bottom halves of the distribution, though the
sectors that gained share differed: the lost public school share went
predominantly to Catholic schools in the bottom half of the distribution
and independent schools in the top half.
To illustrate what these changes have meant for public school
enrolments across the SES distribution, we present the figures in Table
2 in graphic form in Figure 7. It shows the change in the enrolment
share between the cohorts by individual SES ranking. Between 1975 and
1998, the enrolment share of public schools fell by 16 percentage points
in the (smoothed) data. Almost 60% of that decline took place in the top
half of the distribution in the smoothed data in Figure 7 and in the
actual data in Table 2. The public school enrolment share fell in excess
of 20 percentage points between the 50th and 70th percentiles and in
excess of 10 percentage points between the 70th and 90th percentiles.
These estimates highlight the point made already in Table 2: that the
students who were lost from public schools tended to come from the
middle to top sections of the SES distribution.
To summarise, the average SES of students in public secondary
schools fell by 1.5 percentage points between 1975 and 2006 while the
average SES of students in private schools decreased by 4.4 percentage
points. Thus although the estimated secondary enrolment share of private
schools increased by 16 percentage points over the period, the relative
SES of private school students compared to public school students
changed little over the period. The average SES of private school
students was about 17 percentage points higher than public school
students in 1975 and 15 points in 2006. These figures mask important
shifts in the compositions of the student populations in each sector.
The students who transferred from public schools to private schools over
the period tended to be from the middle to top sections of the SES
distribution. They were from above average-SES backgrounds relative to
the 1975 public school population but below the average SES of the 1975
private school population. Almost 60% of the decline in public school
enrolments between 1975 and 2006 occurred in the top half of the SES
distribution.
[FIGURE 7 OMITTED]
Changes in the average socio-economic status of public and private
schools
As we noted in the previous section, the public school sector lost
students from the middle to top end of its SES distribution to private
schools between 1975 and 2006, but these students were generally of a
lower SES than the private school students of 1975. Thus the drift of
students from public to private schools also had the effect of lowering
the average SES of the private school sector, from 0.630 in 1975 to
0.579 in 2006 (compared to 0.463 in 1975 and 0.449 in 2006 for public
schools). This section examines how the drift of students from public to
private schools has influenced the average SES of schools in each
sector, in relation to the SES of individual students. We are interested
in two questions:
* how much has the average SES of the schools in each sector
changed and how much has it varied with an individual's own SES
level?
* has the relationship between an individual's SES and average
school SES changed over time in the sectors?
The first two questions are answered in Figure 8, which shows the
(smoothed) average SES of the school that students from each level of
the SES distribution attended in each sector in 2006. In other words, it
shows that a student from a family at the 75th percentile of the SES
distribution in the independent sector is most likely to attend a school
with an average SES of 0.65. In comparison, a student from a family at
the 75th percentile of the SES distribution in the public school sector
is most likely to attend a school with an average SES of about 0.50.
Figure 8 also illustrates that, generally, there is a positive
relationship in all three sectors--in 2006 students tended to go to
schools with other individuals from similar social backgrounds, a
relationship that appears to be broadly similar across the sectors. In
all sectors, an individual at the top of the SES distribution attends a
school with an average SES level at least 30 percentage points higher
than an individual at the bottom of the SES distribution. But only
individuals at the very top of the SES distribution in the public system
tended to go to schools whose average SES was greater than 0.5 in 2006.
That is, all but individuals from the top SES quartile in the public
system tend to go to schools with students predominantly from below
average SES backgrounds whereas this is less pronounced in the Catholic
and independent sector.
[FIGURE 8 OMITTED]
[FIGURE 9 OMITTED]
The final question was whether the relationships in the sectors
between individual SES and average school SES have changed over time. We
have examined this in all three sectors and found that the changes in
the position of the average school SES curves between 1975 and 2006 in
the Catholic and independent sectors are similar across the SES
distribution. In other words, the curves in both sectors in 1975 are
similar to those shown for 2006 in Figure 8, except that they moved down
between 1975 and 2006. The change in the relationship between individual
SES and average school SES in the public sector followed a different
pattern, which is shown in Figure 9. In the public sector, as shown in
Figure 9, the average school SES of those at the very top of the SES
distribution changed very little between 1995 and 2006. For most public
school students in the lower half of the individual SES distribution,
their average school SES increased between 1975 and 2006 but, for public
school students between the 40th and the 80th percentiles, the average
SES of their school fell by up to 15 percentage points between 1975 and
2006. In 1975, students from the 60th percentile in the public system
tended to go to schools with students with similar average SES
backgrounds to other students in the top half of the distribution, other
than those at the very top of the SES distribution. From 1995 through to
2006, that was no longer the case.
An explanation of this shift is apparent from Figure 10, which
shows the distributions of public schools in 1975,1995 and 2006 in terms
of average student SES backgrounds. The 1975 distribution is clearly
bimodal (has two peaks). There were two common 'types' of
public schools in 1975: one with students with average SES backgrounds
substantially below the average in the community and one just above the
average. By 1995, a shift had taken place in the distribution of schools
by their average SES background. The type of public schools with
students with above average SES backgrounds had become less common and
the once common 'high' SES public school was now only (just
above) an average SES school. Consequently, students from the top half
of the SES distribution, if they remained within the public sector,
tended to go to schools with students who were predominantly from the
lower half of the SES distribution. This has had the effect of
increasing the average SES of the now more common 'low' SES
type of public school. This 'trend' continued after 1995, with
the higher peak shifting still further to the left in 2006, so that the
peak of the 'high' SES public schools was now below the
average SES.
[FIGURE 10 OMITTED]
In summary, the transfer of high SES students from public to
private schools in Australia since 1975 has changed the average
socio-economic composition of public secondary schools. The majority of
students in public secondary schools now attend schools where the
average socio-economic status of students is below average. The
proportion of public secondary schools with concentrations of low-SES
students (between the 20th and 40th SES percentiles) increased between
1975 and 2006.
Discussion
The causal determinants of the shift in enrolments to the private
sector are complex and we do not claim to offer a complete explanation
of the dynamics of the Australian market for public and private schools.
It is important to acknowledge the role of non-market factors that
affect public and private schooling choices, such as parents
'ideological (including religious) preferences, levels of household
disposable income and the capacity of schools to meet individual student
needs. While these factors may contribute to the drift from public to
private schools, their impact can be overstated compared to the impact
of government funding for both private and public schools. Official data
demonstrate that private school enrolments were in steady decline in
Australia during the 1960s before government subsidies were introduced
and then increased steadily as subsidies from both federal and state
governments flowed to private schools.
Researchers analysing the impact of private school funding schemes
on student outcomes often refer to two factors that confound the stated
intentions of such policy reforms: the strategies of private schools to
select more desirable students, 'cream-skimming'; and
different levels of motivation among parents to choose a school for
their child (Levin, 1998). Thus, when governments create a market
environment with the intention that schools will become more productive,
both schools and parents are empowered to be 'choosers'. Some
schools choose by selecting students from higher SES backgrounds while
higher SES parents are also more likely to be choosers of schools that
enrol such students. Evidence from Chile suggests that this has happened
under its nationwide school voucher scheme (Hsieh & Urquiola, 2003).
The evidence from Australia presented in this paper suggests that
when operating subsidies are provided to private schools, parents from
higher socioeconomic groups are more likely to choose private education
than parents from lower socio-economic groups. This may be a result of
higher SES families being less price-sensitive than lower SES families
but could also be related to the perceived quality of private schools in
terms of student: teacher ratios. The observation that families from
higher SES backgrounds are more likely to be choosers is borne out by
studies in other countries. Reviewing the empirical literature on school
choice in England, Scotland, Belgium, and the USA, Levin concluded,
'those who exercise the choice option are more likely to be of
higher SES and to have higher school achievement scores than those who
continue to attend their assigned schools' (Levin, 1998, p. 379).
Even when subsidies are restricted to families of low socioeconomic
status, the families who exercise choice are more likely to be of higher
SES than those who do not choose. Thus the activities of schools and the
inactivity of some parents contribute to the apparent increase in
socio-economic segregation between schools in an environment of market
choice (Levin, 1998). It has been suggested that if targeted grant
programs are to achieve their stated objectives of improving educational
outcomes for disadvantaged students, they would have to randomly assign
students to over-subscribed schools and deal with obstacles to choice
such as transport costs and tuition fees (Ladd, 2002).
We should not assume that all parents from all socio-economic
backgrounds weigh up the costs and benefits of private schooling in the
same way. To suggest that the act of choosing a child's school is
purely an economic decision (that is, everyone buys the best that they
can afford and those who can't afford anything simply choose the
public system) is too simplistic. Obviously families take many factors
into consideration when they choose a school and many parents prefer
characteristics such as cultural diversity, secular values and
community-based education in choosing their child's school. But the
trends reported in this paper suggest that families from higher
socio-economic groups have gained more benefit from Australia's
funding scheme, in terms of expanded private school choice, than low-SES
families.
This paper sheds light on how private schools choose to behave when
they receive government subsidies. In receipt of increasing levels of
government grants from the late 1960s and especially after 1974, private
schools faced choices about how to use those funds, choices that would
have quite different effects on the social composition of their student
populations. For example, private schools could have either reduced fees
while maintaining their existing level of school quality or maintained
their fees at existing levels while using the increased funding to
improve school quality. The first strategy--to reduce fees and maintain
quality--would be the one most likely to have opened up participation in
private schools to students from lower socio-economic backgrounds. As we
have demonstrated, this is not how private schools in Australia
responded to the introduction of student subsidies. Instead, they
improved student: teacher ratios, which increased the quality of their
schools. While this strategy meant that private schools could not reduce
their tuition fees, it did not reduce demand for private schooling. To
the contrary, it ensured that parents from higher socio-economic groups
were the most likely to choose private schools over public schools. The
clear 'losers' from the government funding scheme over the
past four decades are the public school systems which now have schools
with higher concentrations of lower SES students.
Implications for policy
The trends reported in this paper have implications for education
policy and particularly for schools funding policies. The first
implication is that we can expect to see a wide student achievement gap
between public and private schools due to the lower average SES of
students in the public school sector. It is well established that
individual students' socio-economic backgrounds have a significant
impact on their educational attainment (Rothman & McMillan, 2003).
As low-SES students now make up a higher proportion of public school
populations, observed educational attainment levels in public schools
can be expected to be lower--all else being equal--than observed levels
of educational attainment in private schools. Governments will need to
develop policies and programs for public schools to compensate for this
gap, and should take these differences into account in publishing any
public reports of student achievement that enables comparisons to be
made between public and private schools.
Governments should also be prepared for the impact of peer effects
on students in public schools. Adverse peer effects generated by high
concentrations of low-SES students in public schools can be expected to
place further downward pressure on student performance in the public
school system. Schools with low average-SES student populations are now
more common in the public sector than they were in 1975 (Figure 10).
Research suggests that the aggregate of student characteristics such as
ability, motivation and aspirations represented by a school's
average SES score produces a dominant ethos that influences individual
student achievement in a variety of ways (Fuchs, Fuchs, Hamlett &
Karns, 1998; Hanushek, Kain, Markman & Rivkin, 2001).We acknowledge
that peer group characteristics do not offer a complete explanation of
differences in school quality (see Lamb, Hogan & Johnson, 2001) and
that in-school programs and policies can have a positive effect on
student learning outcomes. But, in the absence of targeted policy
interventions to redress student composition effects, we would expect
the rising number of public schools serving below-average SES student
populations to have a compounding negative impact on individual student
attainment levels in the public school sector.
Finally, the impact of high concentrations of low-SES students on
public schools suggests that the cost of educating a student in a public
school to an agreed standard will always be higher than in a private
school. Public school systems also bear the additional costs of
supporting small schools in rural areas and of accepting all students
regardless of their attributes or residential location. The clear policy
implication is that public school systems should be funded at a higher
level per student than private schools. In other words, when governments
set funding benchmarks for all schools, they should expect private
schools to operate effectively at a lower level of resources per student
than public schools. This is a reasonable assumption as long as private
schools enrol a smaller proportion of low-SES students than public
schools and are free of any expectations regarding universal provision.
Conclusion
The Australian experience offers sober lessons to policymakers in
other countries contemplating the introduction of subsidies for private
schools (for example, Gonzalez, Mizala & Romaguera, 2004). Of
particular note is our observation that private schools in Australia
used increased government funding primarily to improve the quality of
the learning experiences of students (measured here through improved
student: teacher ratios), instead of reducing tuition fees. Not
surprisingly, we found that the middle to top regions of the SES
distribution was where most of the shift in students from the public to
the private sector had taken place.
The loss of higher SES students has affected public schools
substantially, with a relative fall in the number of public secondary
schools enrolling students from above-average socio-economic
backgrounds. To the extent that the peers of students have affected
individual student achievement and other outcomes, this trend will
contribute to rising costs per student in the public school sector. If
the current funding system continues, Australia can expect to see a
continuing drift of above-average SES students into the private school
sector--a policy that will intensify the problems posed for public
secondary schools of catering predominantly for students from lower SES
backgrounds.
Proponents of greater school choice often advocate the explicit use
of vouchers to facilitate the participation in private schools of
students from low-SES backgrounds and argue that the value of these
subsidies should be set at the level of resources per student provided
to public schools (Buckingham, 2000; Neal, 2002). Our analysis suggests
that private schools will not respond to the provision of even higher
government subsidies any differently from the way in which they have for
the past 40 years--they will leave their fees relatively unchanged and
move to improve further the quality of their schooling, thus continuing
to attract students from higher-SES backgrounds. The Australian
experience illustrates how difficult it is to protect equity of access
for students from lower socio-economic backgrounds under any grant
scheme for funding private schools. Strong government regulation in
respect of tuition fees and an independent mechanism governing the
selection of students who receive government subsidies would be the
minimum regulatory requirement for any funding system aiming to expand
educational opportunities through supporting private school choice.
Acknowledgements
We are grateful to the Commonwealth Department of Education,
Employment and Workplace Relations for the provision of unpublished
aggregate school fee data and the Australian Council for Educational
Research for the student-based data used in the paper. Chris Ryan
acknowledges support for a project associated with this work from a
research grant provided by the Australian Research Council (LX0883152).
None of these bodies bears any responsibility for the manner in which we
have interpreted the data or results.
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Louise Watson is Associate Professor in the Faculty of Education,
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Table 1 Secondary school enrolment shares and average SES
scores by school type in 1975, 1995 and 2006
Change
1975 to
School type 1975 1995 2006 2006
Enrolment share (%)
Public 77.7 67.2 61.7 -16.0
Private 22.3 32.8 38.3 16.0
Catholic 15.1 20.2 22.1 7.0
Independent 7.2 12.7 16.2 9.0
Average socio-economic
status (SES)
Public 0.463 0.447 0.447 -0.015
Private 0.630 0.599 0.586 -0.044
Catholic 0.583 0.568 0.524 -0.058
Independent 0.729 0.648 0.670 -0.058
Note: Individual elements may not sum to totals due to rounding.
Sources: Youth in Transition 1961 birth cohort; Longitudinal Surveys
of Australian Youth 1995, Year 9, Australian Council of Educational
Research and National Centre for Vocational Education Research,
unpublished.
Table 2 Changes in high (secondary) school enrolment shares by
sector and SES decile between 1975 and 2006
SES decile Public Catholic
1 -0.091 ([double dagger]) 0.067 ([double dagger])
2 -0.168 ([double dagger]) 0.110 ([double dagger])
3 -0.125 ([double dagger]) 0.096 ([double dagger])
4 -0.114 ([double dagger]) 0.057 ([double dagger])
5 -0.227 ([double dagger]) 0.117 ([double dagger])
6 -0.236 ([double dagger]) 0.120 ([double dagger])
7 -0.212 ([double dagger]) 0.069 ([double dagger])
8 -0.133 ([double dagger]) 0.027
9 -0.188 ([double dagger]) 0.062 ([double dagger])
10 -0.086 ([double dagger]) -0.038 *
Total -0.160 ([double dagger]) 0.070 ([double dagger])
SES decile Independent
1 0.024 ([double dagger])
2 0.058 ([double dagger])
3 0.029 ([double dagger])
4 0.057 ([double dagger])
5 0.110 ([double dagger])
6 0.116 ([double dagger])
7 0.142 ([double dagger])
8 0.106 ([double dagger])
9 0.126 ([double dagger])
10 0.124 ([double dagger])
Total 0.090 ([double dagger])
*, ([dagger]) and ([double dagger]) indicate significance at the 1,
5 and 10% levels respectively
Sources: Youth in Transition 1961 birth cohort and the Longitudinal
Surveys of Australian Youth 2006, cohort, Australian Council for
Educational Research and National Centre for Vocational Education
Research, unpublished.
