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Competition among schools plays a small role in parental decisions about where to enroll their children.

The divisive debate on school competition rages on in the U.S. and many countries and is not helped by inconsistent research findings of the effect of competition on schools and students. A new report by the Grattan Institute, The Myth of Markets in School Education, takes a different tack by analyzing school education markets in Australia. The report shows that even in a country that has been a leader on many school competition policies, there is little competition among schools that will actually increase student performance. The reality is that competition does not drive enough parents to schools with higher levels of performance.

Evidence of the effect of school competition on performance is highly inconsistent. Most studies find that increasing school competition has a positive, but very small or statistically insignificant effect on school performance. A minority of studies finds much larger effects — positive and negative. Researchers who study the effect on competition in school choice group their research into three categories:

#1. How much choice do parents actually have to select a school and move freely from one to another?

Competition is often assessed indirectly by measuring school choice. However, this general picture lacks information about what students and their families do. For example, parents may be allowed to choose schools outside their local area but regulatory restrictions and practical constraints may prevent them from actually getting into the school of their choice.

#2. How many schools can parents actually choose from?

On average across OECD countries, 14% of schools are private, but in most OECD countries fewer than 10% of schools are private. In Australia, 36% are private, and more than half of schools are private in Belgium and Chile. Comparing these figures presents several problems. Differences in funding, governance, and management mean a private school in one country can look very different from private schools in other countries.

#3. What is the relationship between parents’ perception of choice and the competitive pressure felt by schools?

Perception does not always equal reality. Observers must be cautious in drawing definitive conclusions regarding the actual amount of choice and competition from surveys of students and educators in schools.

In short, school competition is difficult to measure. Many indicators have been used, but all have substantial failings. There is a gap in the evidence on how much school competition actually exists.

Choice in Australia

Australia has long pursued policies of school competition. The state of Victoria was a world leader in granting schools autonomy nearly two decades ago, and other states have followed suit to varying degrees. Over one-third of Australian schools are private schools, and current trends will have half of secondary students in private schools in less than a decade. Australian governments also provide considerable funding for parents to send their children to private schools. Given these policies and indicators, we would expect much greater school competition in Australia than, for example, the United States.

Interventions to increase school capacity or to cut fees through subsidies or vouchers are expensive and have limited effect on school competition.

To measure the number of schools that face competition from other schools, the report measured for each school:

#1. How many schools are in its local market?

Each local school market was set at just under a 14-mile radius; 95% of the population travels fewer than 14 miles to school. As an example, a randomly selected school in southeast Queensland that sits just outside of the main metropolitan areas has 25 other schools in its local market.

#2. How many of the other schools in the local market are performing at a level as high as or higher than the school being measured?

Standardized tests were used to measure performance. A school was considered a competitor if it performed at least as well as a given school over time. Fourteen of the 25 schools in the Queensland example were at least as high-performing according to national assessments.

#3. How many of them are already at their enrollment capacity?

Government and survey data was used to measure whether a school was full. Of the 14 remaining schools in the Queensland example, only four had room to enroll new students.

#4. How many of the schools charge fees, and what percentage of families in each school market can afford those fees?

School fee data was compared to household expenditure data to construct a measure of the willingness to pay for each household. This calculation showed that 12% of the Queensland school’s families would be willing to travel and pay the fees of the competitor school. Researchers concluded that this school faces competitive pressure to lift its performance.

Researchers analyzed every school in southeast Queensland in the same manner. On conservative estimates, at least 40% to 60% of schools face little or limited competition of the sort that would increase performance. When they looked only at  schools that are higher performing or when they reduced the size of the local school education market, then more than 80% of schools faced little or limited competition.

There are many reasons for this: Not enough schools have competitors that are as high-performing, have room for new students, are affordable for some families, or are geographically close enough to provide the kind of competition that increases performance across systems.

Governments can do little about this. The report shows that interventions to increase school capacity or to cut fees through subsidies or vouchers are expensive and have limited effect on school competition.

Increasing information also does little to increase competition. Australia’s My School web site (www.myschool.edu.au/) is world class for giving families data on how schools perform. It lists local schools, including their performance on standardized assessments compared to all schools and statistically similar schools. But for this information to improve school competition — locally and across the system — more students would need to choose higher-performing schools and leave lower-performing schools. But even with this information, families generally don’t move to high-performing schools nor leave low-performing ones. In general, good schools don’t grow, and bad schools don’t shrink, even at the local level.

The reality is that competition does not drive enough parents to schools with higher levels of performance.

What’s more, vouchers and subsidies to private schools won’t overcome the market failures inherent in school education. Neither will significant increases in the number of students who can be enrolled in each public school. Reducing capacity constraints will substantially increase expenditure, but have a limited effect on the competition that increases performance across systems.

Policy makers can pursue programs to expand enrollment of specific high-performing schools, but this will only improve some local markets. Encouraging greater collaboration between schools with varying levels of performance can also be important, but this is more a school improvement program than a reform to increase school competition.

By increasing competition, government policies have increased the effectiveness of many sectors of the economy. But school education is not one of them. The effect of interventions to increase school competition has been marginal at best. Even in Australian education markets with relatively high numbers of private schools, with government funding to private schools, and with public schools that have relatively high autonomy, most schools face limited competition based on their performance. This doesn’t mean school competition has a negative effect or does not have other benefits. Nor does it mean that some schools don’t face competitive pressures or that some students will choose schools because they are high-performing. It just means competition is not a viable way to improve the performance of school systems.

The Myth of Markets report is available at http://grattan.edu.au/publications/reports/post/the-myth-of-markets-in-school-education/

Citation: Jensen, B. (2013). Global voices | Australia: Can schools compete? Phi Delta Kappan, 95 (4), 76-77.

ABOUT THE AUTHOR

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Ben Jensen

BEN JENSEN is director of the school of education program at the Grattan Institute, Melbourne, Australia. He was the principal author of Catching Up: Lessons from High-Performing Systems in East Asia .

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