Investing in the future of the most vulnerable countries

Diverse school children smiling as they lean over their desks in the classroom

By Andreas Schleicher

Director, OECD Directorate for Education and Skills

History has shown how education is not just the key to better jobs and better lives for individuals, but also the driver of an important virtuous circle for the social and economic development of nations. Improved educational outcomes contribute to per capita income growth. That, in turn, increases the potential to raise tax revenues within an economy. With careful policy and administrative choices, this potential can be translated into real increases in tax revenues. Increased domestic revenues then provide governments with more resources, part of which can be allocated to education. Spent wisely and well, these resources can further improve education outcomes and complete the virtuous circle.

This virtuous circle has propelled countries like Korea and Singapore from poverty to advanced industrial nations in a single generation. For other countries, economic growth regressions highlight huge potential rewards from improved education: If Ghana would raise the learning outcomes of its lowest performing 15-year-olds to at least the PISA baseline level, it would see a gain over the lifetime of its children born today that, in present value terms, is 38 times its current GDP. This is equivalent to tripling Ghana’s discounted future GDP every four years during the working life of those students with improved skills. For lower-middle income countries, the discounted present value of future gains would still be 13 times current GDP and would average out to a 28% higher GDP over the next 80 years. In short, our schools today are our economy and society tomorrow.

But while the logic of this virtuous circle has held for many decades, the current pandemic risks disrupting this virtuous cycle, as policy-makers may prioritise the urgent over the important.

COVID risks disrupting the virtuous circle of education investment, as policy-makers may prioritise the urgent over the important

We see evidence of this already with, in response to the health and economic crisis caused by COVID-19, governments worldwide investing USD 11.8 trillion in stimulus packages to save lives and mitigate economic and social shocks. But only a mere 0.78% (or USD 91 billion) of these stimulus packages worldwide has been allocated to the education and training sector.

Despite the huge disruption caused to education by the crisis, and the increased recognition of the valuable role that schools play in modern society, education has been largely invisible in high-stakes decision making in respect of stimulus packages in many countries.

Most countries have excluded education and training altogether from their lists of stimulus priorities; the impact of this fiscal neglect is felt hardest in low- and middle-income countries which were already facing a learning crisis even before the coronavirus crisis. Before COVID-19 hit, annual global spending on education was approximately USD 4.7 trillion. But while USD 3 trillion (65%) of this was spent in high-income countries, it was just USD 22 billion (i.e. a mere 0.5% of the total) in low-income countries. This is despite the fact that the two groups of countries have roughly equal numbers of school-age children.

Pre-COVID, there was a USD 148 billion annual financing gap in low- and lower-middle-income countries to achieve the education Sustainable Development Goal (Goal 4) from now until 2030. Add to this the additional costs due to COVID-19 related school closures and that increases this financing gap by up to one-third, or USD 30 to 45 billion. The low- and middle-income countries especially will face the dual challenge of ensuring that all the previously enrolled children return to school when they re-open and to continue their efforts to bring the pre-existing out-of-school children and young people into the education system. The only way to meet these twin challenges is to invest now in remedial and re‑enrolment campaigns and programmes. Indeed, if such programmes were implemented successfully, they could reduce the additional cost of achieving Goal 4 by as much as 75%.

Globally, governments account for 79% of total spending on education, households for 20% and donors for only 0.3%. However, in low-income countries donors can account for 12% of education expenditures. Therefore, educational aid can make a crucial difference in these contexts.
As we are looking at a global economic downturn with growth projected at minus 4.9% and the GDP in advanced economies (the donors) projected to decline by 8% in 2020, all major sources of education financing – domestic education budgets, household contributions and remittance flows and international aid flows – are under severe threat.

The threat to education budgets in the medium term will affect all countries, of course, but we should be particularly concerned with those countries that are furthest away from achieving Goal 4 – the low- and lower-middle-income countries.

While domestic resources are the main source of education financing for developing countries, foreign aid plays a key role, especially in low-income countries. In 2016, aid to education reached its highest level since records began at USD 13.4 billion, but as a share of total official donor assistance (ODA) in 2018 it was only 7.2%, down from 15% in the early 2000s. With regard to future projections of aid, one or two large donors from the OECD’s Development Assistance Committee have already signalled that they may cut their aid in 2021; others have indicated they are maintaining their ODA as a share of gross national income (GNI) at pre-COVID levels. The most optimistic scenario for aid is that donor countries will maintain the current levels of ODA as a share of GNI, which is currently 0.3% against an international target of 0.7%. However, even if all donors maintain their ODA as a share of GNI at pre-COVID levels this will still mean a reduced total of ODA and, inevitably, reduced aid to education, as the GNIs of the donors shrink. The OECD is currently collating future aid commitments and will be releasing these in April 2021.

This decline in ODA may be compounded by donors prioritising health and social welfare over education. It is therefore likely that aid to education in 2021 and beyond will be much less than the 2016 peak and may not even be maintained at a share of 8% of declining ODA.

It is not just important to increase the volume of international aid to education, but also the predictability and effectiveness of such aid. Aid should target countries and populations most in need, including those who are not reached by government programmes.

Support for the most vulnerable, especially children, youth and the less-skilled, who have not been fully sheltered from the crisis, will have to intensify

Support for the most vulnerable, especially children, youth and the less-skilled, who have not been fully sheltered from the crisis, will have to intensify. While our primary concern is protecting and wherever possible increasing the volume of education financing, we should, of course, not lose sight of opportunities for increasing the quality of spend and the potential for greater efficiency in education as part of the solution to our enormous challenge.

Not least, fiscal policy should be better directed to vulnerable groups outside the usual welfare system who have not been eligible for the additional help provided so far, for their own benefit and the benefit of society as a whole. There are some examples of national fiscal measures that provide promising pointers, such as Korea that announced stimulus packages in several phases allocating around 5% of these supplementary funds to education in response to the evolving and emerging needs in education. Australia has taken a wide range of measures to address needs in the education and training sector, including tackling skills training and job market needs. There are other examples that demonstrate that education is being used as investment for recovery during the current crisis.

Mobilising resources for our future, and investing them wisely, is not easy, particularly at a time when there are so many demands on limited public resources. But striking the right balance between present demands and future needs remains the most important choice for any individual and the most consequential task for public policy.

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