The Cost of School Failure in Estonia
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The Cost of School Failure in Estonia Technical report Sten Anspal, Janno Järve, Epp Kallaste, Liis Kraut, Mari-Liis Räis and Indrek Seppo 2011 Acknowledgements This report has benefited a lot from many individuals, who devoted their time to making it better. First of all we would like to thank George Psacharopoulos, the methodology advisor of the project team, who brought on board his long term experience in the field of studying school failure. We would also like to thank the project steering group (Katrin Höövelson, Urve Kask, Mario Lambing, Liina Malk, Kaire Tamm, Andra Reinomägi, Magnus Urb, Ene Raudsepp, Andres Koppel, Tiina Annus, Heli Aru, Katrin Jaaksoo) for insightful comments on draft versions of the report. The data used in this report comes from several sources. Many thanks to Andri Ahven from the Ministry of Justice, Heljo Jenk and Mart Reinhold from the Ministry of Education and Research, Aet Tummeleht from Tax and Customs Board as well as Mari Plakk and Helerin Rannala from Statistics Estonia, who were of great help in dealing with registry data. Jaanika Meriküll has mastered the art of using the panel features of Estonian Labour Force Survey – our gratitude goes to her for sharing this knowledge with us. Last but not least, we would like to thank Eve Tõnisson, the coordinator of this project, for her comments and organizational support. None of the above-mentioned people are responsible for any errors in the report. 2 Preface The catalytic role of education for economic and social development is very recent in the history of scientific thought. It was formalized in academia in the 1960s and slowly embraced by international organizations and governments to the present day. One basic metric of educational underdevelopment in a given country is the number of students who fail to complete studies beyond lower secondary education. The cost to society of such failure has been estimated to be huge in the United States where such cost was first estimated. The international research community should welcome Estonia’s effort to add new estimates of the cost of school failure. Utilizing a diversity of available data, if only one half of what is defined as school failure could be avoided, the country would gain about 0.7 percent of GDP. Consistent with the findings of other studies, this is a huge number calling for policies to reduce school failure. Two remarks are in order regarding the many policies that have been proposed in the literature to combat school failure. First, the roots of school failure are complex and are not limited to what is happening in schools. The family has a role to play, in the sense that an adverse socioeconomic background can have ill effects on a child’s educational development. Acting at the school level might be too late to reverse school failure. Thus, preschool programs that compensate for adverse family background might be the most promising policy. Second, having too many policy instruments to address a given problem, such as school failure, can dilute the implementation and monitoring capacity of any educational system. Based on the particular initial country conditions, only the most effective policy measures should be adopted, implemented and consistently monitored over time. Let me express the hope that this report will mark a new era of educational development in Estonia. George Psacharopoulos 3 Table of contents ACKNOWLEDGEMENTS .................................................................................................................................... 2 PREFACE ........................................................................................................................................................... 3 TABLE OF CONTENTS ........................................................................................................................................ 4 INTRODUCTION ................................................................................................................................................ 5 1. SCHOOL FAILURE – GENERAL METHODOLOGICAL ISSUES ........................................................................ 6 1.1. DEFINING SCHOOL FAILURE ........................................................................................................................... 6 1.2. COSTS OF SCHOOL FAILURE ........................................................................................................................... 7 1.3. PROBLEMS THAT ARE DIFFICULT TO ADDRESS .................................................................................................... 8 2. APPROACH OF THE CURRENT STUDY ....................................................................................................... 9 2.1. DEFINITION OF SCHOOL FAILURE .................................................................................................................... 9 2.2. NET PRESENT VALUE OF DIFFERENT LEVELS OF EDUCATION ................................................................................ 11 2.3. MONTE CARLO SIMULATIONS ...................................................................................................................... 13 3. EMPIRICAL ESTIMATES OF COSTS OF SCHOOL FAILURE .......................................................................... 14 3.1. EARNINGS, EMPLOYMENT AND PAYROLL TAXES ............................................................................................... 14 3.2. EFFECT OF EDUCATION ON HEALTH COSTS ...................................................................................................... 27 3.3. UNEMPLOYMENT AND SOCIAL ASSISTANCE BENEFITS ........................................................................................ 42 3.4. EFFECT OF EDUCATION ON COST OF CRIME ..................................................................................................... 65 3.5. TOTAL COSTS OF SCHOOL FAILURE ................................................................................................................ 75 4. ADDITIONAL TOPICS .............................................................................................................................. 77 4.1. THE CIVIC COSTS OF SCHOOL FAILURE ............................................................................................................ 77 4.2. SCHOOL FAILURE AND INEQUALITY................................................................................................................ 90 5. ESTONIAN MEASURES FOR COMBATING SCHOOL FAILURE .................................................................... 96 5.1. CURRENTLY USED MEASURES AIMED AT REDUCING SCHOOL FAILURE IN ESTONIA.................................................... 96 5.2. EFFICIENCY AND COST EFFECTIVENESS ......................................................................................................... 118 5.3. SUPPORT MEASURES IN INTERNATIONAL LITERATURE AND LESSONS FOR ESTONIA ................................................ 124 6. POLICY RECOMMENDATIONS .............................................................................................................. 128 REFERENCES ................................................................................................................................................. 131 APPENDIX ..................................................................................................................................................... 141 APPENDIX 1. EARNINGS FROM NATIONAL REGISTRIES .................................................................................................. 142 APPENDIX 2. EARNINGS FROM NATIONAL REGISTRIES – DESCRIPTIVE STATISTICS ............................................................... 150 APPENDIX 3. LIST OF ESTONIAN MEASURES WITH REFERENCES ...................................................................................... 157 APPENDIX 4. EXAMPLES OF ADDITIONAL MEASURES FROM KANEP (2008) ...................................................................... 163 APPENDIX 5. PER PERSON DIFFERENCES IN COMPONENTS OF SCHOOL FAILURE COSTS - HIGHER COMPARED TO UPPER SECONDARY EDUCATION ........................................................................................................................................................ 164 APPENDIX 6. SUGGESTIONS FOR IMPROVING THE METHODOLOGY AND IDEAS FOR FUTURE RESEARCH ................................... 165 APPENDIX 7. CASE STUDY ON THE PRE-PRIMARY VOCATIONAL EDUCATION PROGRAM IN PÕLTSAMAA VOCATIONAL SCHOOL ..... 170 4 Introduction The Estonian economic environment is rapidly changing, the same is happening all over the world. In order to be successful in the labour market, a person must be able to adapt. One of the major cornerstones of adaptability is solid educational background. Recent results of the PISA test have shown that the quality of education in Estonia is equal to or even better than the average of the European Union, in some subjects even amongst the top of the world.1 However, not all children use the benefits of this system as much as they could. In 2010, 11.6% of the Estonian population aged 18-24 with lower secondary education or less did not participate in education or training. They will, with high probability, continue through their working career without higher secondary education. While this estimate is better than European average, it still falls below the Lisbon target of 10%. Figure 1. Early leavers from education and training2 in 2009 and 2010 50% 45% 2009 40% 2010 35%