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The High Cost of Low Educational Performance THELONG-RUNECONOMICIMPACT OFIMPROVINGPISAOUTCOMES OECD The High Cost of Low Educational Performance THELONG-RUNECONOMICIMPACT OFIMPROVINGPISAOUTCOMES ProgrammeforInternationalStudentAssessment «• OECD Copyrightedr ORGANISATIONFORECONOMICCO-OPERATION ANDDEVELOPMENT TheOECDisauniqueforumwherethegovernmentsof30democraciesworktogetherto addresstheeconomic,socialandenvironmentalchallengesofglobalisation.TheOECDisalso attheforefrontofeffortstounderstandandtohelpgovernmentsrespondtonewdevelopments andconcerns,suchascorporategovernance,theinformationeconomyandthechallengesofan ageingpopulation.TheOrganisationprovidesasettingwheregovernmentscancomparepolicy experiences,seekanswerstocommonproblems,identifygoodpracticeandworktoco-ordinate domesticandinternationalpolicies. TheOECDmembercountriesare:Australia,Austria,Belgium,Canada,theCzechRepublic, Denmark,Finland,France,Germany,Greece,Hungary,Iceland,Ireland,Italy,Japan,Korea, Luxembourg,Mexico,theNetherlands,NewZealand,Norway,Poland,Portugal,theSlovak Republic,Spain,Sweden,Switzerland,Turkey,theUnitedKingdomandtheUnitedStates.The CommissionoftheEuropeanCommunitiestakespartintheworkoftheOECD. OECDPublishingdisseminateswidelytheresultsoftheOrganisation’sstatisticsgathering andresearchoneconomic,socialandenvironmentalissues,aswellastheconventions,guidelines andstandardsagreedbyitsmembers. ThisworkispublishedontheresponsibilityoftheSecretary-GeneraloftheOECD.The opinionsexpressedandargumentsemployedhereindonotnecessarilyreflecttheofficial viewsoftheOrganisationorofthegovernmentsofitsmembercountries. ISBN978-92-64-07748-5(PDF) Photocredits:Cover©JackHollingsworth/Photodisc/GettyImages. CorrigendatoOECDpublicationsmaybefoundonlineat:www.oecd.org/publishing/corrigenda. APlIlSAus™e,oOfEOCEDC/DPItSrAa™deamnadrktsheisPpIrSoAhilboigtoedarweitthroaudtempaerrkmsisosfiothnefOrrogmantihseaOtEioCnD.forEconomicCo-operationandDevelopment(OECD). ©OECD2010 Yprooudcuactnscionpyy,oudrowonwlnoaddocourmpernitnts,OpErCeDsecnotnattieonntsf,obrlyoogsu,rwoewbsnitueses,aannddtyeoauchcianngimnatcelruidaelse,xcperropvtisdfedrotmhaOtEsCuiDtapbulbeliaccaktinoonwsl,eddagtmaebnasteosfaOnEdCmDulastismoeudricae paenrdmicospsyiroingthotpohwonteorcoispygipvoern.tiAolnlsroefqutehisstsmaftoerrpiuabllifocroprucbloimcmoerrccioamlmeursceiaanldusterasnhsallaltiboenardidgrhtessssehdoudlidrebcetlsyutbomtihtetCeodptyorirgighhttsC@loeeacrd.aonrcge.CReenqtueerst(sCCfCo)r atin/[email protected]’exploitationdudroitdecopie(CFC)[email protected]. Foreword fIonrreEscpoonnosmeitcotChoe-onpeeerdatfioroncraosnsd-nDaetivoenlaolplymeconmtp(aOraEbClDe)elvaiudnecnhceedonthsetuOdEenCtDpePrrfoorgmraanmcmee,tfhoerOIrngtaernniastaitoinoanl StudentAssessment(PISA)in1997.PISArepresentsacommitmentbygovernmentstomonitortheoutcomes ofeducationsystemsintermsofstudentachievementonaregularbasisandwithinaninternationally agreedcommonframework.Itaimstoprovideanewbasisforpolicydialogueandforcollaborationin definingandimplementingeducationalgoals,ininnovativewaysthatreflectjudgementsabouttheskills thatarerelevanttoadultlife. Resultsofthethree-yearlyPISAsurveysrevealwidedifferencesintheperformanceofeducation systemsintermsofthelearningoutcomesachievedbystudents.Forsomecountries,theresultsfrom PISAaredisappointing,showingthattheir15-year-olds'performancelagsconsiderablybehindthatof othercountries,sometimesbytheequivalentofseveralyearsofschoolingandsometimesdespitehigh investmentsineducation.However,PISAalsoshowsthatothercountriesareverysuccessfulinachieving strongandequitablelearningoutcomes.Moreover,somecountrieshavebeenabletosignificantly improvetheirlearningoutcomes,inthecaseofPolandbyalmostthree-quartersofaschoolyearbetween 2000and2006alone. Thisreportusesrecenteconomicmodellingtorelatecognitiveskills-asmeasuredbyPISAandother internationalinstruments-toeconomicgrowth.Therelationshipindicatesthatrelativelysmallimprovements intheskillsofanation'slabourforcecanhaveverylargeimpactsonfuturewell-being.Moreover,thegains, putintermsofcurrentGrossDomesticProduct(GDP),faroutstripthevalueoftheshort-runbusiness-cycle management.Thisisnottosaythateffortsshouldnotbedirectedatissuesofeconomicrecession,butitis tosaythatthelong-runissuesshouldnotbeneglected. ThereportwaswrittenbyProf.Eric.A.HanushekfromtheHooverInstitutionatStanfordUniversityand CESifoandbyProf.LudgerWoessmannfromtheIfoInstituteforEconomicResearch,CESifo,andthe UniversityofMunich,inconsultationwithmembersofthePISAGoverningBoardaswellasAndreas Schleicher,RomainDuvalandMaciejJakubowskifromtheOECDSecretariat.Thereportwasproduced bytheIndicatorsandAnalysisDivisionoftheOECDDirectorateforEducationandispublishedonthe responsibilityoftheSecretary-GeneraloftheOECD. TheHighCostofLowEducationalPerformance©OECP2010 4671 Table ofcontents Foreword 3 Executivesummary 5 Introduction 6 Theeffectofeducationoneconomicgrowth 1 Empiricalgrowthanalysesusingschoolattainmentdata 13 Empiricalgrowthanalysesconsideringcognitiveskills 13 Measuringcognitiveskills 1 Basicfactsofcognitiveskillsandeconomicgrowth 1 Evidenceoncausality 1 Theeconomiccostsofloweducationalachievement 20 Simulationapproach 20 ScenarioI:Increaseaverageperformanceby25PISApoints 22 ScenarioII:BringeachcountrytotheaveragelevelofFinland 24 ScenarioIII:Bringeveryoneuptoaminimumskilllevelof400PISApoints 25 Policyconclusions 27 References 29 Notes 31 AnnexA:Derivingacombinedhistoricalmeasureofcognitiveskills 35 AnnexB:l/nderlyingcross-countrygrowthregressions 45 AnnexGProjectionoftheeconomicvalueofeducationreforms 49 NotestoAnnexes 52 TheHighCostofLowEducationalPerformance©OECP2010 Executive summary Whilemanynationsexpressacommitmenttoimprovededucationalquality,educationoftenslipsdownon thepolicyagenda.Becausethebenefitsofeducationalinvestmentsareseenonlyinthefuture,itispossible tounderestimatethevalueandtheimportanceofimprovements. Thisreportusesrecenteconomicmodellingtorelatecognitiveskills-asmeasuredbyPISAandother internationalinstruments-toeconomicgrowth.Thisrelationshipindicatesthatrelativelysmallimprovements intheskillsofanation'slabourforcecanhaveverylargeimpactsonfuturewell-being.Moreover,thegains, putintermsofcurrentGDP,faroutstriptoday'svalueoftheshort-runbusiness-cyclemanagement.Thisis nottosaythateffortsshouldnotbedirectedatissuesofeconomicrecession,butitistosaythatthelong-run issuesshouldnotbeneglected. AmodestgoalofhavingallOECDcountriesboosttheiraveragePISAscoresby25pointsoverthenext 20years-whichislessthanthemostrapidlyimprovingeducationsystemintheOECD,Poland,achieved between2000and2006alone impliesanaggregategainofOECDGDPofUSD115trillionoverthe lifetimeofthegenerationbornin2010(asevaluatedatthestartofreformintermsofrealpresentvalueof futureimprovementsinGDP)(Figure1).BringingallcountriesuptotheaverageperformanceofFinland, OECD'sbestperformingeducationsysteminPISA,wouldresultingainsintheorderofUSD260trillion (Figure4).Thereportalsoshowsthatitisthequalityoflearningoutcomes,notthelengthofschooling, whichmakesthedifference.Otheraggressivegoals,suchasbringingallstudentstoalevelofminimal proficiencyfortheOECD(i.e.reachingaPISAscoreof400),wouldimplyaggregateGDPincreasesofclose toUSD200trillionaccordingtohistoricalgrowthrelationships(Figure2). Figure1 ineaPcrhesceonutntvraylubeyo2f5SpcoeinnatrsioonI(tihmeprPoIvSeAssctauldee)nitnpbeilrlfioonrmUaSnDce(PPP) cNooutnet:ryDbiysc2o5unptoeidntsvaolnuePIoSfA,fuotrurbeyiVnacrsetaasnedsaridndGevDiPatiuonnt,ilex2p0r9e0ssdeudeintobirlleifoonrmUsStDha(tseiemaplrsoovTeabslteud1e)n.tperformanceineach ©OECP2010TheHighCostofLowEducationalPerformance EXECUTIVESUMMARY Figure2 ParcehsieenvtevdablyueFionflSancde,natrhieocIIou(nitmrpyrowviethsttuhdeenhtigpheersftopremrafnocremiannceeacihncPoIuSnA)triyntboilrlieoanchUSthDe(lPePvPe)l Note:DiscountedvalueoffutureincreasesinGDPuntil2090duetoreformsthatimprovestudentperformanceineachcountryto 2r0e0a6c)h,tehxeplreevsesleadchiniebvileldiobnyUFSinDla(nsde,eaatls5o4T6abploein2t)s.onthePISA2000scale(averageofmathematicsandsciencein2000,2003and Figure3 achPireevseedntbvyaFliunelaonfd,SctehnearcioounIIt(riymwpirtohvethsetuhdiegnhtespterpfeorrfmoarnmcaencienienacPhIScAo)uinntrpeyrtcoenrteaocfhctuhrerelnetveGlDP UQ £o1000 IIII Inn llllllllllllll lllllllllI1 I £P.E 4 i I E3 1 I Note:DiscountedvalueoffutureincreasesinGDPuntil2090duetoareformthatimprovesstudentperformanceineachcountry taondre2a0c0h6)t,heexlpevreelssaecdhiaesvpeedrbcyenFtiangleanodf,cautrr5e4n6tGpoDinPts(soenetalhseoPTIaSbAle202)0.0scale(averageofmathematicsandsciencein2000,2003 7 TheHighCostofLowEducationalPerformance©OECP2010 EXCECUTIVESUMMARY Figure4 atParmesiennitmvualmueofo4f0S0cepnoairnitosIoIIn(etnhseuPrIeStAhasctaallel)sitnubdielnltiosnpUeSrDfo(rPmPP) oNfot4e0:0DpiosicnotusnotnedthvealPuIeSoAfsfcuatluer,eeixnpcrreesasseedsiinnGbiDllPiounntUilS2D0(9s0eedaulesotoTaabrleef3o)r.mthatensuresthatallstudentsperformataminimum Figure5 mPirneisemnutmvaolfu4e0o0fpSocienntasroionItIIh(eePnIsSuAresctahlaet)ailnlspetrucdeennttsofpecrufrroernmtaGtDaP oNfot4e0:0DpiosicnotusnotnedthvealPuIeSoAfsfcuatlue)r,eeixncprreeassseesdiansGpDePrceunnttialg2e0o9f0cudrureenttoGaDrePfo(rsmeethaaltsoenTsaubrlees3t).hatallstudentsperformataminimum 8 ©OECP2010TheHighCostofLowEducationalPerformance

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