Choosing Vouchers—or Regulation?

Before accepting government funds in the form of vouchers, American private schools would do well to examine the effects of subsidies on schools in other countries, suggests economist Estelle James.

Dr. James, a visiting fellow at the Urban Institute, has done extensive research on education programs worldwide, giving special attention to the differences between public and private schools and the effects of public subsidies on the latter.

One of her conclusions is that government money is inevitably followed by government regulations, although these vary according to the size of the subsidy. In countries (such as Japan) where private schools are partially subsidized, those schools are subject to relatively minor regulations relating to health and safety standards, degree requirements, and the like, Dr. James said at a conference hosted by the Cato Institute last week.

In nations where private schools are heavily subsidized by the government, regulations are “much more comprehensive,” reported Dr. James, a consultant for the World Bank. Private schools that receive taxpayer money give up much of their autonomy in terms of how they select teachers, how much they pay them, and how they may fire them.

In their selection of students, too, these schools face significant restrictions. In Germany, for instance, subsidized private schools are prohibited from taking religion into account in their selection of students (in India, however, religion is permitted as a factor). In Sweden and the United Kingdom, private schools receiving government funds may not even take academic ability into account in their admissions decisions.

Moreover, the fees these schools may charge students are usually limited by law, making it more difficult for them to raise revenue independently. Consequently, the percentage of a school’s funding that is provided by the government tends to increase gradually, often surpassing 90%.

Regulations are not imposed on private schools all at once, Dr. James pointed out. They usually begin small and then gradually increase as the schools become reliant on government funds. Once a school has grown dependent on public subsidies, it has little choice but to obey the government’s dictates.

Dr. James suggests that this phenomenon helps to explain why voucher-like programs have received support from several socialist governments in Europe. Teacher unions, too, have often supported such programs, largely because subsidized schools are usually required to pay the same salaries as their public counterparts.

This regulation of teachers’ salaries helps account for the fact that private schools’ operating costs per student tend to increase dramatically after they accept government money. Privately funded schools generally spend much less per student, Dr. James found.

As a result of state-imposed regulations, Dr. James said, private schools that receive public funds generally lose many of the distinctive qualities that made them attractive alternatives in the first place: autonomy, flexibility, efficiency, and pedagogical and philosophical distinctiveness.

“Publicly financed private schools do provide greater variety and choice to students, and many students use them,” Dr. James concluded. “But they are not the same animal as privately financed private schools.”

Dr. James’ research included ten-year studies on education in Holland, Australia, Japan, Sweden, the UK, India, Kenya, the Philippines, and Indonesia, as well as an examination of education data from 20 additional countries.

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