A Finland Rule in the Education Market: Funding Per Student

In Education on December 8, 2014 at 1:42 AM

For economists, “automatic stabilizers” are often referred to in percentage terms. The income tax is considered a primary example. If you lose your job, then you pay nothing—a beneficial arrangement. Alternatives to percentages exist however. In the funding of American education, nonetheless, a peculiar percentage is central and destabilizing at second glance. That is the American local government property tax percentage or millage rate, which funds the public school systems. In short, the American funding approach for education should be replaced by Finland’s approach, i.e., funding per student.

The 2008 PBS report by Judy Woodruff, “Where We Stand: America’s Schools in the 21st Century,” offers a nice introductory primer on the state of the American education system. “Depending on the property wealth of a community, its schools might boast gleaming buildings and equipment, or they might be dilapidated – struggling with the burden of outdated equipment and unpaid bills,” according to the report. Bad urban schools are presented as being abandoned and “funding gaps” are illustrated between different areas of the country, i.e., cases where schools with the highest need are receiving the lowest realized funding. One quote in the article seems to sum up the EVIL and the REMEDY, so to speak. The commentary comes from Jonathan Kozol, a teacher and author, who explains, “We need to have urban schools that are so good that they will not be abandoned by white people, and this is impossible without equitable funding. Until we have equitable funding for our urban schools, there’s no chance in the world that white people in large numbers are going to return.” In 2012, Nevada, Oregon, Alaska, Georgia and New Mexico have the lowest high-school graduation rates nationally, measuring at 70% or less, according to one estimate. Chris Rock, the American Aristophanes, seems to best grasp this sense of a Gresham’s dynamic at play. That is, bad schools driving good schools out of circulation in poor school districts.

Many American professionals appear to have only merely glanced at the issue and instead concentrated their focus on documenting the link between education and higher-pay. One anthropologist, David Graeber, has reminded us that some make money in order to obtain an education and receive culture, and not the reverse. Like Lysias reassured his Greek client, we are told, “Calm down my friend, the jury will only hear the speech once.”

Finland, thankfully, has drifted in a different direction and, as a result, managed to have uniquely pinpointed how best exactly to progress from point A to point B and accomplish the end preferred by many. In Finland, education funding is provided equitably across all schools, specifically, “based on the number of students reported by the school.” Education is not a function of money or property values as a result. Additionally, more teachers are highly educated with master’s degrees, and hence well-paid, as another key characteristic. Less reliance on rote testing and memorization is a natural by-product of the approach. Fewer Georgia Bureau of Investigation and Washington, D.C. school board inquiries over erasure mark and teacher cheating scandals might be expected in such a style system. As a result, Finland is known for outperforming other industrialized nations on the OECD’s standardized Programme for International Student Assessment (or “PISA”).

A National Education Association article explains, “Finnish schools are generally small (fewer than 300 pupils) with relatively small class sizes (in the 20s), and are uniformly well equipped. The notion of caring for students educationally and personally is a central principle in the schools. All students receive a free meal daily, as well as free health care, transportation, learning materials, and counseling in their schools, so that the foundations for learning are in place. Beyond that, access to quality curriculum and teachers has become a central aspect of Finnish educational policy.” Pasi Sahlberg, a Finnish education leader, has written a complete book on the subject, “Finnish Lessons.” He has pointed out that indeed “there are no private schools in Finland.”

Meanwhile, back in America Ken Arrow has emphasized that general intervention by the state is needed. Jeffrey Sachs has written, “A country’s economic success depends on the education, skills, and health of its population. When its young people are healthy and well educated, they can find gainful employment, achieve dignity, and succeed in adjusting to the fluctuations of the global labor market.” He explains that the U.S. has the highest incarceration rate of any nation at 743 per 100,000, or 2.3 million people. Gary Becker has also documented the benefits of education. “Education and training are the most important investments in human capital,” he says. “High school and college education in the United States greatly raise a person’s income, even after netting out direct and indirect costs of schooling, and after adjusting for the better family backgrounds and greater abilities of more educated people. Similar evidence is now available for many points in time from over one hundred countries with different cultures and economic systems. The earnings of more educated people are almost always well above average, although the gains are generally larger in less-developed countries.” Mr. Becker has advocated student loans as a solution. Rucker Johnson and al more recently in a 2014 NBER working paper “reveal that a 20 percent increase in per-pupil spending each year for all 12 years of public school for children from poor families leads to about 0.9 more completed years of education, 25 percent higher earnings, and a 20 percentage-point reduction in the annual incidence of adult poverty.”

Abroad, France’s Thomas Piketty writes that “capital is back.” Britain’s John Kay reminds us, that capital has changed. While this may be the case at higher levels of income, in the lower ranks a much different story is now better documented. In America and elsewhere accordingly, “education is back” should be the headline that is front and center in conversation, as the Chopra immigrants remind us. Deepak Chopra and his brother Sanjiv Chopra, both India-born immigrant doctors, directly cite upward mobility as waning in the U.S. in a recent USA Today article, “Rags-to-riches stories are becoming the exception. A Pew Charitable Trust report on upward mobility shows that few poor people rise into the upper middle class. A lot of factors are responsible, including education, the neighborhood you live in, and the stability of your family structure.” Another Somali immigrant story by the USA Today also well-documents the challenge of education equity in the context of redistricting efforts. Namely, greater economic mobility, lower incarceration rates and fewer Michael Brown and Eric Garner stories occupying American and world headlines is not an improbable result should America move in the direction of Finland on education.

Finland’s wheat has grown up with America’s tares long enough, a dear-bought children’s experiment. We know that “NEIGHBORING NATIONS are naturally enemies of each other.” And the same could be said of actual neighborhoods, with homes, kids and parents included. An “oikos” in Greece, France and Britain should be considered no different from the American version in this respect. A one-handed and two-handed economist, therefore, ought to be in agreement with a Finland rule in the education market, i.e., a prudent “nomos” aimed at preserving and improving education and prosperity.

“He who has ears to hear, let him hear.”


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