Friday, February 12, 2010

The high cost of low educational performance in Ireland

Recently Mark blogged here about a new OECD report with the above title (minus "in Ireland" of course, you can download the report from the link below). The report was written by Eric Hanushek and Ludger Woessmann. Hanushek gave a talk here this week (at U.Kentucky) which I attended and covered much of the territory from a US angle. I recommend the report to anyone interested in education: its short but there is a lot of important materiel in it.
It is largely concerned with the macroeconomics gains from improving our human capital. It evaluates a number of scenarios and uses increases in PISA scores as the potential reforms. PISA is a measure of learning outcomes, in several domains (reading, science, mathematics) for a large number of countries including the OECD but many others. Looking at measures of educational attainment scores, Ireland is generally pretty close to the OECD average.
I thought I would pluck out some of the Irish numbers i.e. the simulated impact of improving PISA scores. The different PISA test scores have an average of 500 and a standard deviation of 100. They use a discount rate of 3%.
Scenario 1:
Increase PISA scores by 25 points (0.25 of a std. dev.):
The discounted increase in GDP (until 2090) for Ireland is $514 bn
Scenario 2:
Bring each country up to the level of Finland:
The discounted increase in GDP is $870bn
This would require increasing our PISA scores by almost 41 points.
Scenario 3:
Bring everyone up to a minimum of 400 PISA points i.e. eliminate the lower tail of the distribution in each country.
The discounted increase in GDP is $530bn

Of course there is uncertainty around these projections but it is clear that these are vast amounts of money which dwarf the sort of sums that are talked about in policy contexts- in the context of NAMA, for example. Educational reform is never easy for all sorts of reasons so increasing PISA scores is not straightforward. Nonetheless the question we need to ask ourselves then is: can we afford not to do something about this?

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