Private vs. public expenditure

by Dirk Van Damme
Division Head, Innovation and Measuring Progress (IMEP) and Head of Centre for Educational Research and Innovation (CERI)

Tertiary education institutions such as colleges and universities raise an increasing share of their funding from private sources. As the latest issue of the OECD’s Education Indicators in Focus details, the major part comes from households via tuition fees and other forms of household expenditure, but institutions also raise more contributions from private companies. Private expenditure now accounts for 30% of expenditure in tertiary education. As the latest issue of the OECD brief series Education Indicators in Focus details, the increase in private expenditure between 2000 and 2009 in OECD countries is remarkable. On average across OECD countries it more than doubled, but countries like Austria, Portugal and the Slovak Republic had growth indexes exceeding 500 points. In 2000, the United Kingdom already drew 32.3% of its expenditure on tertiary education from private sources and further increased it to 70.4% in 2009. The United States, usually seen as a country with the highest level of private expenditure, has seen a decrease from 68.9% in 2000 to 61.9% in 2009.

A simplistic interpretation might suggest that countries have substituted public funding with private resources. On the contrary the evidence shows that the increase in private expenditure did not occur at the expense of public funding. In addition, public funding for tertiary education increased in the same period from an index of 100 in 2000 to an index of 138 points in 2009 across the OECD. Countries such as the Czech Republic, Korea and Poland have seen increases for public funding to more than 180 index points.

The growth rates of public and private expenditure to tertiary education institutions are quite different across countries. Some countries combine high growth rates for both public and private expenditure, such as Austria, the Czech Republic, Mexico and the Slovak Republic. In other countries public and private expenditure have dissimilar growth patterns: Denmark, Portugal and the United Kingdom combined a higher than average growth index for private expenditure with a lower than average growth index for public expenditure for tertiary education.

With different growth rates, both public and private expenditure on tertiary education institutions increased between 2000 and 2009. However, the variation between countries in the relative proportion of private expenditure remains very high, from the Nordic countries with 10% or less private expenditure, to the United States and the United Kingdom with around 60% and 70%, respectively. Private resources have added to public expenditure, and at the country level, a higher level of private expenditure in tertiary education is not associated with lower chances for students from disadvantaged backgrounds to access tertiary education.

For more information
On this topic, visit:
Education Indicators in Focus: www.oecd.org/education/indicators 
On the OECD’s education indicators, visit:
Education at a Glance 2012: OECD Indicators: www.oecd.org/edu/eag2012 
On the OECD’s Indicators of Education Systems (INES) programme, visit:
INES Programme overview brochure
Chart source: Education at a Glance 2012: Indicator B3 (www.oecd/edu/eag2012)

Are countries educating to protect against unemployment?

by Dirk Van Damme
Division Head, Innovation and Measuring Progress (IMEP) and Head of Centre for Educational Research and Innovation (CERI)

More people than ever before now reach a level of educational attainment equivalent to upper secondary education. The available evidence is very conclusive: this level of education can be considered a minimum level to ensure a job and a living wage. As the latest issue of the OECD’s Education Indicators in Focus details, the difference in unemployment risks in OECD countries between individuals with and without an upper secondary qualification is significant. In 2010, across OECD countries, 19.1% of 25-34 year-olds without an upper secondary qualification were unemployed, compared with 9.8% of young adults of the same age who had an upper secondary qualification. And without an upper secondary qualification, the risk of poverty is looming: some 27% of people without an upper secondary education earn less than half the median income – around 10 percentage points more than the proportion of people who do have that level of education.

The negative effects of lacking an upper secondary qualification are excacerbated during the crucial phase of transition from education to work. Among NEETs  (not employed nor in education and training) in 2010, there were 8 percentage points more 20-24 year-olds without an upper secondary education than 20-24 year-olds with that level of education. In 2010, in Estonia, France, Ireland, the Slovak Republic and Spain, at least 25% of the 20-24 year‑olds who had not attained an upper secondary education were neither in school nor employed.

So, countries have very good reasons to ensure that as many young people as possible graduate from upper secondary education. Over the past decades almost all OECD countries have seen dramatic increases in educational attainment from one generation to the next. The average difference between the 25-34 and 55‑64 year‑old generations in OECD countries was 20 percentage points, but in Chile, Greece, Ireland, Italy, Korea, Portugal and Spain the difference was 30 percentage points or more.

Most OECD countries – especially European ones – have increased their upper secondary graduation rates over the past ten years. As the graph above indicates, this trend coincided with declining numbers of 20-24 year-olds who were neither in education nor employed. But the start of the economic crisis in 2008 was a turning point: the size of the NEET population started to swell again. The wage gap between people with an upper secondary qualification and individuals with a tertiary level qualification increased. The evidence suggests that the crisis has accelerated job polarisation based on skills levels. People without an upper secondary qualification are highly vulnerable to unemployment, while those who have an upper secondary education are working for less money. In today’s unstable economy, an  upper secondary qualification no longer provides sufficient insurance against unemployment and low income.

For more information
On this topic, visit:
Education Indicators in Focus: www.oecd.org/education/indicators 
On the OECD’s education indicators, visit:
Education at a Glance 2012: OECD Indicators: www.oecd.org/edu/eag2012 
On the OECD’s Indicators of Education Systems (INES) programme, visit:
INES Programme overview brochure
Chart source: Education at a Glance 2012: OECD Indicators, Indicators A1 (www.oecd.org/edu/eag2012).

What will the global talent pool look like in 2020?

by Pedro Garcia de León, Corinne Heckmann, and Gara Rojas González 
Innovation and Measuring Progress Division, Directorate for Education

The “global talent pool” can be described in a lot of different ways.  But in an era in which having a higher (tertiary) education is increasingly a minimum requirement for successful entry into the labour force, one way to quantify it is to look at the number of people around the world who are obtaining a higher education degree.

As the latest issue of the OECD’s series Education Indicators in Focus details, by that measure, the global talent pool is exploding across OECD and G20 countries. What’s more, it’s likely to grow far larger by the year 2020.

In the last decade alone, the number of younger adults with higher education degrees has grown at a remarkably fast clip. This is particularly true for non-OECD G20 countries like Argentina, Brazil, China, India, Indonesia, the Russian Federation, Saudi Arabia and South Africa, where the number of 25-34 year-olds with a higher education degree increased from 39 million in 2000 to an estimated 64 million in 2010. By contrast, the number of younger adults with higher education degrees in OECD countries increased from 51 million to an estimated 66 million during the same period.

In addition, the rapid expansion of higher education in non-OECD G20 countries has significantly altered the distribution of the talent pool among countries. A decade ago, one in six 25-34 year-olds with a higher education degree was from the United States, and a similar proportion was from China. Twelve percent came from the Russian Federation, and about 10% each were from Japan and India. But by 2010, China was at the head of the pack, according to OECD estimates, accounting for 18% of 25-34 year-olds with a tertiary education.  The United States followed with 14%, the Russian Federation and India each had 11%, and Japan had 7%. 

These trends are likely to intensify further in the years ahead. According to OECD projections, there will be more than 200 million 25-34 year-olds with higher education degrees across all OECD and G20 countries by the year 2020 – and 40% of them will be from China and India alone. By contrast, the United States and the European Union countries are expected to account for just over a quarter of young people with tertiary degrees in OECD and G20 countries. 

In fact, these figures may underestimate the future growth of the global talent pool, because a number of countries – notably China, the European Union countries, and the U.S. – are pursuing initiatives to increase higher education attainment rates even further. 

The explosive growth of the  talent pool raises a key question: With all of these highly-educated people emerging around the world, will the global labour market be able to absorb the increased supply?  
Evidence from science and technology occupations – key “knowledge economy” jobs – suggests that it can. Between 1998 and 2008, employment in science and technology occupations increased at a faster rate than total employment in all OECD and G20 countries with available data. The average annual growth rate was uniformly positive, ranging from 0.3% in China to 5.9% in Iceland. 

This consistently upward trend signals that the demand for employees in this knowledge economy sector hasn’t reached its ceiling. Applied to the overall labour market, the implication is that individuals from increasingly better-educated populations will continue to have good employment outcomes, as long as national economies continue to become more knowledge-based.  

As such, countries may be well-advised to pursue efforts to build their knowledge economies, in order to avoid skills mismatches and lower returns on education among their higher-educated populations in the future.

For more information
On this topic, visit:
Education Indicators in Focus: www.oecd.org/education/indicators 
On the OECD’s education indicators, visit:
Education at a Glance 2011: OECD Indicators: www.oecd.org/edu/eag2011 
On the OECD’s Indicators of Education Systems (INES) programme, visit:
INES Programme overview brochure (link)
See also: IMHE General Conference 2012 "Attaining and Sustaining Mass Higher Education", Paris, 17-19 September 2012
Chart source: OECD Database, UNESCO and National Statistics websites for Argentina,
China, India, Indonesia, Saudi Arabia and South Africa.

Higher education: an insurance policy against global downturns

by J.D. LaRock
Senior Analyst, Innovation and Measuring Progress Division, Directorate for Education

During the first two years of the economic crisis, unemployment
was higher among adults with less education, on average across the OECD zone.

With all the economic turmoil of the past several years, have you ever wished you could buy an insurance policy to protect against the effects of a global recession?  Well, such a insurance policy already exists – and it’s called higher education.  During the first two years of the global economic crisis, in country after country, people with a tertiary (higher) education were much less likely to be unemployed, much more likely to be participating in the labour force, and more likely to have higher earnings, compared to their less-educated counterparts.

These and other findings are discussed in the first issue of the OECD’s new education brief series, Education Indicators in Focus.

As the crisis ramped up in 2008 and continued in 2009, unemployment rates increased across the board in OECD countries. However, the impact was much greater for adults without an upper secondary education. Among this group, unemployment rates rose from an already high 8.7% to 11.5%, and jumped five percentage points or more in Estonia, Ireland, Spain and the United States.  Adults with an upper secondary or equivalent level of education fared somewhat better: among this group, unemployment rates rose from 4.9% to 6.8% between 2008 and 2009 across the OECD zone.  However, in Estonia, Ireland, Spain and Turkey, jobless rates reached 10% or more for this group of people – a mark generally regarded as troublingly high territory for unemployment.

By contrast, people with a tertiary education were the best protected against unemployment during the thick of the global recession. Overall, unemployment rates in OECD countries ticked up just 1.1 percentage points for this group between 2008 and 2009, from 3.3% to 4.4%.  Moreover, 2009 unemployment rates remained at 5% or less for tertiary-educated people in 24 out of 34 OECD countries, and surpassed 8% in only two – Spain and Turkey.

Employment figures tell a similar story: during the crisis year of 2009, people with higher education not only had less trouble finding a job, but also had an easier time keeping the job they had.  Across all OECD countries, 83.6% of adults with a tertiary education were employed in 2009, compared to 74.2% of adults with an upper secondary or equivalent education, and just 56.0% of adults without an upper secondary education.  While a number of factors contribute to the level of adults’ participation in the labour force, higher employment rates for people with more education point to a better match between the skills these individuals possess and the skills the labour market demands, even during periods of economic crisis.

What’s more, the sizeable earnings premium that university-educated people typically enjoy in the labour market held strong during the crisis years of 2008 and 2009.  In 2008, among 14 OECD countries with comparable data, the typical employee with higher education earned 56% more than the typical employee with an upper secondary or equivalent education.  Even in the face of the economic crisis, this premium increased slightly to 57% in 2009. By contrast, the typical employee without an upper secondary education earned 23% less than a corresponding worker with an upper secondary education in 2008 – and this earnings penalty remained the same in 2009.

Having a higher education isn’t fail-safe protection from the consequences of a global economic downturn.  But like any good insurance policy, it can help people recover when bad things happen to them.  And with the economic outlook for 2012 looking as uncertain as it does, that’s no small comfort.

For more information
Education Indicators in Focus
Education at a Glance 2011: OECD Indicators www.oecd.org/edu/eag2011
OECD’s Indicators of Education Systems (INES) programme (Brochure PDF 2.3 KB)

Chart source: Education at a Glance 2011: OECD Indicators, Indicator A7.