Chapter C – Indicator C3: How much public and private investment in educational institutions is there?

Education at a Glance 2021

OECD INDICATORS

Chapter C. Financial resources invested in education

 

Indicator C3. How much public and private investment in educational institutions is there?

The balance between public and private education funding differs significantly between OECD countries. At the pre-primary and tertiary levels of education, total or nearly total public funding is less prevalent. At these levels, private funding is mostly provided by households, raising questions about equality in educational access.

Some stakeholders are concerned that the balance between public and private education funding would prevent aspiring students from enrolling in tertiary education. Others consider that governments should greatly increase public assistance for students, such as student loans or grants. Student loans can reduce the load of private spending and reduce the cost to taxpayers of direct government funding by moving the education costs to a period when students often start earning more.

 

Share of public and private expenditure on educational institutions:

Most of the fundings on primary to tertiary educational institutions in OECD countries comes from public sources, with private funding being an essential part of tertiary education. However, private and international funding differs from one country to another.

Based on analyzing figure C3.1, we can conclude the following:

  • In 2018, the average funding across OECD countries for primary to tertiary educational institutions that came directly from public sources was 82%, and 16% from private sources.
  • In Finland, Iceland, Luxembourg, Norway, and Sweden, private funds constitute 5% or less of expenditure on educational institutions.
  • In Australia, Chile, the United Kingdom, and the United States, private funds make up around one-third of educational expenditure.
  • International sources contribute 1% of total expenditure, reaching 4% or more in Estonia, Latvia, and Portugal.

 

Non-tertiary educational institutions:

Figure C3.2 indicates that in all countries, public funding dominates non-tertiary education. In 2018, on average across OECD countries, private funding reached 10% of expenditure at non-tertiary levels of education, while this number exceeds by 20% in Chile, Colombia, and Turkey. In most of the countries, most of the private expenditure on non-tertiary education comes from households and is mostly used for tuition fees (Table C3.1 and Figure C3.2).

The share of private expenditure on educational institutions differs per country and education level. Primary educational institutes in Norway and Sweden are totally funded by the government. Private funding accounts for more than 15% of Chile’s, Colombia’s, Mexico’s, Spain’s, and Turkey’s education budgets. The share of private funding at the lower secondary level is close the share of primary level. Across the OECD countries, around 9% of educational expenditure on lower secondary institutions is funded privately. Private expenditure makes for less than 10% of overall expenditure at this level, but it accounts for more than 20% in Australia, Chile, Colombia, and Turkey.

Upper secondary education is more reliant on private funding than primary and lower secondary education, which reaches to an average of 14% in OECD countries. Private funding provides a similar proportion to spending on vocational and general programmes, accounting for nearly 12% of spending on upper secondary institutions in OECD countries. Meanwhile, in Germany, the Netherlands, and New Zealand, the share of private funding in vocational upper secondary education is at least 20% higher than

in general education. The percentage of public funds currently committed to vocational programmes in different countries is the result of multiple national policy developments on vocational education aimed at improving the transition from school to work.

According to current statistics, the average amount of public funding in post-secondary non-tertiary education among OECD nations stands on 72%. Unlike the three lower levels discussed above, post-secondary non-tertiary education in Germany, Ireland, Israel, and the United States are mainly reliant on private rather than governmental finance.

 

Tertiary educational institutions:

The share of private expenditure on education following public-to-private transfers is much higher at the tertiary level than at other levels of education. When private payments are required, several countries have implemented financial support measures to lessen the burden on people. After transfers, the private sector accounted for 30% of total tertiary institution expenditure in 2018. (See Figure C3.2 and Table C3.1.)

In Australia, Chile, Japan, Korea, the United Kingdom, and the United States, private funding accounts for 60% or more of tertiary institution funding. In countries where tuition costs are minimal or non-existent, such as Finland, Iceland, Luxembourg, and Norway, the private sector accounts for less than 10% of total expenditure.

Households contribute 72% of private expenditure on tertiary institutions in OECD countries on average. While household expenditure is the major source of private funds in the most OECD countries, in Denmark and Finland nearly all private funding comes from other private entities (mostly for research and development) (Figure C3.2).

Trends in the share of public and private expenditure on educational institutions:

Educational institutions’ reliance on private funding is moderately growing (Table C3.3). Increases in the share of private funding have been reported in about half of the OECD and partner countries, with the United Kingdom showing the largest increases (12 percentage points).  Colombia, on the other hand, experienced the largest fall in the share of private spending (11 percentage points), which was balanced by an equal increase from public sources (Table C3.3).

Chile, Estonia, Italy, and Latvia saw the greatest increases in the share of private funding for non-tertiary education by approximately 3 percentage points or more between 2012 and 2018, while Portugal and the Slovak Republic saw a decrease in the share of private spending by approximately 3 percentage points (Table C3.3 and Figure C3.3).

At tertiary level, in the United Kingdom, the share of public spending decreased by 30 percentage points in 2018 compared to 2012 levels. On the other hand, the share of public spending increased by at least 10 percentage points in Chile, Colombia, Hungary, and Portugal (Table C3.3 and Figure C3.3).

 

Public transfers to the private sector:

Although a substantial portion of government funding goes directly to educational institutions, funds are also transferred through several other allocation mechanisms. Channeling funds for institutions through students increases competition among institutions and results in more efficient education funding. Governments use transfers to provide institutions with incentives to better organize their education programmes and teaching in order to better fulfill the needs of students.

At the non-tertiary educational level, public transfers to the private sector are not a significant feature. Public-private transfers are more prevalent in upper secondary education, accounting for 2% of total expenditure across OECD countries. While public transfers cover most of the private spending in some countries, government and international assistance cover just a tiny portion of private spending in others. This complicates access and learning since increased private spending may discourage students from enrolling in tertiary education, particularly in countries with high tuition fees.

In 2018, public-to-private transfers accounted for 8% of the total funds allocated to tertiary institutions across OECD countries. Countries with the highest transfer rates also have the highest tuition fees. In countries with no or low fees, such as Austria, the Czech Republic, Denmark, Estonia, Finland, Greece, and Sweden, the percentage of public transfers was less than 1%. Despite high levels of private spending, public transfers to the private sector are minimal in certain countries, such as France, Lithuania, Portugal, the Slovak Republic, Spain, and Turkey.

 

Original text written by: Education at a Glance 2021 OECD (Organization for Economic Co-operation and Development) INDICATORS

Summarized by Zinat Asadova

Edited by Olga Ruiz Pilato

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