Does more money always buy better education?

Dr David Law
NZ Herald
2 March, 2021

A well-functioning education system that delivers good outcomes for all is essential to New Zealand’s future prosperity and its people's wellbeing. However, there have been a growing number of stories about New Zealand’s educational decline over recent months.

The fact that our students’ performance in reading, maths and science, relative to their peers internationally, has been slipping for decades is profoundly concerning. What exactly is going on, and could something obvious, such as a lack of funding or poor value for money from education spending, be blamed?

Since its introduction in New Zealand in the early 2000’s National Certificate in Educational Achievement (NCEA) pass rates have been steadily increasing. In 2005, the proportion of school leavers with NCEA level 2 or above was 58%. By 2019 this proportion had risen to 79%.

That sounds fantastic, and it would be great if this were purely because our education system had become much more adept at teaching our kids over that time. However, it seems as though something else may be going on. 

My colleague Joel Hernandez and I have taken a close look at results from three well regarded international surveys over the last two decades. In particular, the Progress in International Reading Literacy Study (PIRLS), the Trends in Mathematics and Science Study (TIMSS), and the Programme for International Student Assessment (PISA).

It is these surveys upon which reports of falling educational achievement in the media have been based. They are run out of prestigious international institutions; for example, PISA is administered by the Organisation for Economic Cooperation and Development (OECD). The New Zealand Ministry of Education does not set the criteria for achievement in PIRLS, TIMSS or PISA. Kids of various ages in all participating countries are assessed similarly across subjects.

Increased NCEA pass rates aren’t translating into better achievement in PIRLS, TIMSS, or PISA. In fact, the opposite is true.

Consequently, our international rankings in reading, maths, and science have slipped markedly in some cases. For instance, between 2000 and 2018 our ranking in maths deteriorated significantly, from 4 out of 41 to 27 out of 78 participating countries in PISA (the OECD’s survey of Year 11 students). In the latest PIRLS survey in 2016, New Zealand only ranked 26th out of 29 OECD observations. In the latest TIMSS survey in 2019, New Zealand secondary school students ranked 19 out of 20 OECD observations for maths and 17 out of 20 for science.

Arresting this alarming trend requires a better understanding of the problem and potential causes. To that end, we’ve also taken a look at what’s been happening with education funding in New Zealand and overseas over a similar period, hopeful that something simple like a chronic lack of funding might be to blame.

Education spending on primary and secondary students increased substantially in New Zealand between 2006 and 2019. In particular, per-pupil spending increased by approximately $2,100 for primary students and $2,700 for secondary students. That equates to real increases of approximately 16% and 15%, respectively.

Nevertheless, the education achievement scores in PIRLS, TIMSS and PISA are relative, so if other countries increased their education spending faster than New Zealand this could potentially help to explain our relative decline. But, this doesn’t appear to be the case either.

New Zealand has increased its per-pupil education spending over recent years at a faster rate than many of its OECD peers. On this measure, primary students in New Zealand ranked 21 in the OECD in 2006 and 2017 (out of 28 and 36 countries, respectively), but spending was much closer to the OECD average by 2017.

Relative growth in per-pupil education spending for secondary students in New Zealand was stronger. In 2006, our spending ranked 24 out of 33 OECD countries for which data was available. By 2017, New Zealand’s spending was above the OECD average and ranked 16 out of 36 countries.

Put another way, spending on primary students increased from 76.9% to 93.9% of the OECD average between 2006 and 2017. For secondary students, spending increased from 75.5% to 105.4% of the OECD average over the same period.

The observation that New Zealand students’ educational achievement has been in decline at the same time as per-pupil education expenditure has been growing, both in absolute terms and relative to other countries, was a surprise to me. But, perhaps it should not have been.

Very simple models suggest that there is a strong positive association between per-pupil education spending and achievement. That is, as per-pupil spending on education increases, so too does student achievement, on average. However, more careful analysis from the OECD suggests that this positive relationship is by no means universal across countries.

The OECD split countries into two groups, high and low education spenders. For countries that cumulatively spend less than $US 50,000 on the education of 6- to 15- year-olds, the positive relationship between spending and achievement holds. While other factors besides spending are important, spending alone can explain about 40% of educational achievement differences for these countries. That’s a lot.

On the other hand, for countries that cumulatively spent over $US 50,000, a group to which New Zealand belongs, increases in spending were associated with very little increase in educational achievement. In fact, spending explains virtually none of the variation in educational outcomes across countries (1%). For this group of countries, using information about how much they spend to try and predict how well their students do is more or less useless.

To make this point a little more concrete consider two countries, Hungary and Luxembourg.  Fifteen-year-old students in Hungary, which spends USD 47 000 per student between the ages of 6 and 15, perform at the same level as students in Luxembourg, which spends more than USD 187 000 per student. This is even after accounting for differences in purchasing power parities. In other words, despite spending four times as much as Hungary, Luxembourg does not gain any advantage. Spending isn’t everything.

Unfortunately, not only does it appear that our additional investment in education has not borne fruit, but it also seems as though we should not necessarily expect that it will in the future. Don’t get me wrong; I’m certainly not advocating that we cheap out on education. But, based on recent trends, it seems clear that if we want to get our children’s education back on track, we may need more creative solutions than reaching for the cheque book.

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