Dr. Faisal Bari

Author:Dr. Faisal Bari Posted On:Mon,Dec 26,2011

Some analysts keep arguing that since private sector schools compete with each other, the competitive pressure would start improving quality. But that is a misunderstanding of competition. Some eight million children now go to private schools, about 55,000 of them, across Pakistan. Where a few thousand of these schools are elite, high fee schools, and a few thousand more are run by NGOs, most are of the low fee for-profit type. They are now spread across the country and this has not been by accident the state has been encouraging them for more than two decades now. Examination results show that where private school children do better than public school children in standardised tests, children from both types of schools perform very poorly overall. The quality of education in Pakistan, overall, is quite poor. The question for us, as a society is, how do we improve the quality of education and ensure that as per our commitment in Article 25A of the constitution, every child has access to free and compulsory education of some minimum quality. It does not matter whether these children go to private schools or public, it is the responsibility of the state to ensure children are getting the kind of education society wants to impart to its children. We have discussed the issue of reforms in public schools a number of times. Here we want to talk of private schools. It should be mentioned, though, that we do think that improving quality of schooling in the public sector would be a very good way of putting competitive pressure for improvements in the private sector. One way of classifying private sector schools is by the tuition fee that they charge. This reflects the income group that the school is targeting and serving. Private schools tuitions range from less than Rs 100 per child per month to many thousands. But the bulk of the schools, called Low Fee Private Schools (LFPS) fall in the Rs 100-500 range. The lower end of spectrum clearly does not have a lot of revenues. If a school charges Rs 200 per child, and has 30 students to a class, it makes Rs 6,000 per class. The school has to pay the teacher, pay for all other expenses including utilities and rent, and then make some profit for the owner. Of course schools charging thousands make much bigger profits. There are a number of questions that arise here. There is a lot of pressure on the LFPS to keep expenses low. This makes them hire less qualified teachers, with less experience and less training as well. It is no surprise that quality gets compromised. That the LFPS do a slightly better job than the average government school is clearly no comfort. Some analysts keep arguing that since private sector schools compete with each other, the competitive pressure would start improving quality. But that is a misunderstanding of competition. If schools are serving markets where raising fees means losing students and so is not an option, the response to competition will show up in further cost cutting and this will be quality reducing. Competition does not always drive quality up, it can become cutthroat too, which might be good in cost terms but can be bad for students and society as we need a certain level of quality in education for our children. If competition is strong, and there is pressure to cut costs, where teacher salaries is one of the biggest costs for schools, there will be pressure to hire less qualified, less experienced, less trained teachers, and even more importantly, there will be no incentive, and no fiscal space, for either the school or the teacher, to pay for any training either. The owner will not pay for any training as he/she does not have any money or access to finance, and does not see any benefit from it either as he/she cannot raise fees for his/her students, and he/she would also be afraid that as soon as he/she has trained a teacher, the teacher will leave for a better paying job. The teachers in private schools are paid so little that it would be impossible for them to pay for their trainings themselves, and even if they could, it is not clear that they would get any salary hikes after the training so the incentive to pay for any investment in skills gets even more reduced. The same dynamic would apply for other interventions that improve quality. If the school owners cannot raise fees, why would they want to spend on quality, be it in the form of better infrastructure, better pedagogic tools, or extracurricular activities. As school fees go up, the situation changes. Profit levels go up, there is more slack in the system, fees can be raised a bit without a major impact on enrollment, and the bigger schools might be able to access other means of financing as well. Here the school could even get some premium for offering quality, but it is likely this only happens at the level where we have what are called ‘elite’ schools in Pakistan. The question, for us, as a society, is where we have encouraged and are encouraging opening of private schools, and now that millions of children are enrolled in them, and in mostly low fee low quality schools, should the state/society just let them be or should we insist that they improve quality to some minimum acceptable level? And how should this insistence be structured? Since the very low fee private school model does not have space for getting fees from parents, at least at the moment, can state grants, with conditions on delivery of quality, on what should be taught and how, and on other important outcomes be a way of reaching out? At one point we did have aided schools in India, and the current education foundations have some models too, but these have not been generalised and they have not been made a part of the education departments. Other private schools, especially with higher fees, might decide to not have as many conditionalities for the funds they need. They can go to commercial banks, micro-finance banks, SME specialised banks or even venture funds for their needs. But in these areas too the state might have a role in encouraging the development of relevant products and loan instruments. ‘Private’ schools have our children in them, and a lot of them. Most of them are run on profit basis, and where we might not like education to be run on a profit basis, it seems we have, as a society, decided to live with this. But if we have, rather than leave these schools to their own designs we should understand constraints these schools work under and see if the state has a role to play in these schools. The state has to ensure that every child is educated up to a minimum standard, and the society has an interest in knowing and monitoring what is being taught. This should be enough of a reason for structuring interventions for private schools, though some of the interventions will be more market based than others. The writer is an Associate Professor of Economics at LUMS (currently on leave) and a Senior Advisor at Open Society Foundation (OSF). He can be reached at fbari@sorosny.org