The school productivity crisis


As the Kansas Legislature prepares to meet to consider school financing, it is a good time to reflect upon the state of our public schools.

This interview (How to Improve School Productivity? Caroline Minter Hoxby) with noted Harvard economist Caroline M. Hoxby teaches us that American public schools have poor and declining productivity. As she states:

The main symptom of the productivity crisis is the fact that productivity has fallen almost 50 percent in the past 30 years. We measure productivity by dividing a measure of student achievement by per-pupil spending in inflation-adjusted dollars. Regardless of which achievement measure we use, we find a decline in productivity of 40 to 50 percent. This is because achievement has been flat or slightly declining, while costs have been escalating rapidly.

When asked how schools are able to increase costs without increasing the quality of the product, she responds:

Schools don’t face enough competition. Just imagine competing grocery stores. If one of them decided to increase its prices but offer exactly the same products, people would go to the other grocery stores and the store would quickly go out of business. Unfortunately, parents do not have sufficient opportunity to change schools so that they can say, “My school is more expensive than before and it doesn’t seem to be doing better than other competing schools. Therefore I’m going to send my child to another school.” In other words, competition in the education industry is too weak to be an effective brake on costs.

Regarding teacher unions:

… the teacher unions can be very demanding for their members, who often want contracts that are not best for students. There’s no effective brake on the teacher unions because they are not forced to negotiate contracts that permit their schools to remain competitive. There is just not much of a competitive marketplace out there.

On class size:

The evidence suggests that class-size reduction has no effect on student achievement. There are literally hundreds of studies of class size, which have been very effectively reviewed by Eric Hanushek, that suggest that reducing class size does not raise achievement.

I have a study in which I examined every change in class size at every elementary school in Connecticut over a 20-year period. In schools, class size varies from year to year because enrollment varies. Therefore, with 20 years and 800-some schools, there is a tremendous amount of variation in class size to examine.

I found there was no effect of class size on achievement at all, even when children were in small classes for all six years of elementary school.

There really is only one study in which a class-size reduction improved student achievement: the Tennessee STAR experiment. But the effect on achievement was tiny–a 10 percent reduction in class size raised achievement by two one-hundredths of a standard deviation in achievement test scores.

More importantly, in the Tennessee STAR experiment, everyone involved knew that if the class-size reduction didn’t affect achievement, the experimental classes would return to their normal size and a general class-size reduction would not be funded by the legislature. In other words, principals and teachers had strong incentives to make the reduction work. Unfortunately, class-size reductions are never accompanied by such incentives when they are enacted as a policy.

Also, it is worth keeping in mind that class-size reduction is very expensive. A 10 percent reduction in class size typically costs about $850 per year per student. For such a large amount of money, we could fund programs that are much more likely to raise achievement.

Reducing class size is a perfect example of a policy that the teacher unions like, but that lowers school productivity. The unions like it because each teacher has less work and more teachers have to be hired.

On school choice and vouchers:

From 1998-1999 onwards, the schools that faced the most competition from the vouchers improved student achievement radically–by about 0.6 of a standard deviation each year. That is an enormous, almost unheard-of, improvement. Keep in mind the schools in question had had a long history of low achievement. Yet they were able to get their act together quickly. The most threatened schools improved the most, not only compared to other schools in Milwaukee but also compared to other schools in the state of Wisconsin that served poor, urban students.

Milwaukee shows what public school administrators can tell you: Schools can improve if they are under serious competition.

A theme that appears in Dr. Hoxby’s remarks is that competition is the way to improve schools. The way to create competition is to give parents real choice in where and how to educate their children. Providing substantial, meaningful vouchers is a way to do this.


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