Post-communist trends in education: Eastern Europe and the Commonwealth of Independent States (EE/CIS)*
Carmen Vicol**
Department of Economics, University of Konstanz December 2005
Abstract
The education systems of EE/CIS countries have undergone negative changes during the past 16 years. My paper examines these changes, identifies their causes and proposes solutions for improvement. I find that improved educational quality is the key for raising students’
enrolment and achievement. A number of strategies are available to improve quality: at the higher education level, rely to a greater extent on student fees to finance educational costs, while reducing the amount of public support and allocating this support on the basis of academic merit, rather than based on the number of students; at the pre-tertiary level, increase public spending on education and create incentives to efficiency by transferring more decision-making responsibilities to local governments, parents and schools. All these strategies, however, should be implemented with care to protect the children at risk.
* Extended version of the paper presented at the Silvaplana Conference on Political Economy in July 2002.
**Corresponding author: Carmen.Vicol@uni-konstanz.de
Konstanzer Online-Publikations-System (KOPS) URL: http://www.ub.uni-konstanz.de/kops/volltexte/2007/3119/
URN: http://nbn-resolving.de/urn:nbn:de:bsz:352-opus-31198
Introduction
At the end of the communist era in 1989, countries in the EE/CIS region had reason to take pride in their education systems: adult literacy was generally universal; primary and secondary enrolment rates were relatively high; students from some of the countries that participated in international assessments of mathematics and science performed well; access to academic secondary schools and university education was unequal, but given the compressed wage structure in planned economies, unequal learning opportunities were not, as in the rest of the world, associated with higher levels of future income inequality.
These accomplishments have been deteriorating since the transition, mainly as a consequence of the economic decline experienced by EE/CIS countries during the past 16 years. The objective of my paper is to examine the negative trends in education, identify their causes and propose solutions for improvement. I build on previous World Bank and UNICEF studies1, but use more recent data and focus my analysis on investigating the causes, rather than describing the trends; unlike the previous studies, my paper pays greater attention to the higher education sector. The main findings and recommendations of the paper can be summarized as follows:
Since the transition, pre-tertiary enrolment rates and performance on standardized tests have dramatically declined, particularly in the poorer countries of the region. These declines are at least to some extent the result of poor quality in schooling.
With rapidly expanding university enrolments, the higher education budget is likely to absorb an increasing share of the total education budget, endangering public spending on other levels of education that should have a higher priority. Moreover, despite the fact that large amounts of public resources are currently devoted to finance the higher education sector, this sector provides education of a relatively poor quality.
In order to raise quality, EE/CIS countries should improve the funding and efficiency of educational provision. The following strategies could be used to achieve this objective:
• at the higher education level, rely to a greater extent on student fees to finance educational costs, while reducing the amount of public support and allocating this support on the basis of academic merit, rather than based on the number of students;
• at the pre-tertiary levels, increase public spending on education (by cutting down the state subsidy for higher education and reallocating this money towards lower levels) and create incentives to efficiency by transferring more decision-making responsibilities to local governments, parents and schools.
1 In particular UNICEF (1998) and WB (2000).
These strategies, however, should be implemented with care to protect the children at risk. Significant gaps in enrolment and achievement already exist between students from richer and those from poorer families, as also between urban and rural areas. The EE/CIS governments should exercise caution with future reforms in order to prevent these gaps to widen.
The 26 EE/CIS countries considered in this study can be clustered into sub-regions of countries that are more similar to one another in their historical, political, and economic contexts than they are to countries in other sub-regions. The 6 sub-regions are: 1. Central Eastern Europe (Czech Republic, Slovakia, Poland, Hungary, Slovenia, Romania, and Bulgaria), 2. the Baltic states (Estonia, Latvia, and Lithuania), 3. the Balkan sub-region (Croatia, Bosnia-Herzegovina, Serbia, Montenegro, Kosovo, Former Yugoslav Republic of Macedonia, and Albania), 4. the Western Commonwealth of Independent States (Belarus, Moldova, Russia, and Ukraine), 5. the Caucasus (Armenia, Azerbaijan, and Georgia), and 6.
Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan).
Economically, the 6 sub-regions differ from one another, and these differences have been increasing since 1989. For example, a significant gap is opening up between the Central European and Baltic countries and the countries of the other sub-regions, as the former surge economically and succeeded, or find themselves very close to obtaining the EU-membership.
Despite their economic differences, however, the 26 EE/CIS countries face similar education problems (most of which derive from difficulties associated with adjusting their educational systems to the new market conditions). It is exactly these problems that the present study wants to discuss.
The remainder of the paper is structured as follows. Section 1 stresses the importance of educational attainment in the newly emerging market economies of the region. Sections 2- to-4 outline the current problems of education finance. Sections 5-to-10 examine the trends in enrolment and achievement and identify their causes. Section 11 proposes a model of higher education finance, whose benefits are thoroughly illustrated in Appendix B by means of hypothetical example. The last section concludes.
1. Educational qualifications are more important today than they were during the communist era.
In the planned economy, level of education made less difference to an individual’s experience in the world of work than it does in a market economy. Unemployment was unknown, and many well-educated people earned only a little more (and sometimes less) than production workers, although they did enjoy better working conditions, an important “non- wage benefit” of a job. To the contrast, in the generally depressed labor markets of the transition period, with rising unemployment rates and falling real wages, it pays more to stay in the education system as long as possible. The higher the educational attainment, the lower the odds of being unemployed and the higher the likely level of earnings.
Figure 1 shows how unemployment rates vary among 15-64 year-olds with differing education levels in 10 countries in the region. In all countries but Romania, the unemployment rate is lower for those with upper secondary schooling than for those without it, and lowest of all for those with tertiary qualifications. Romania appears to make an exception to these general patterns, with a reversal of the gradient between low and medium education; this peculiar pattern can be attributed to the particularly high level of agricultural employment in the latter country.
Figure 1: Unemployment rates by level of education, 2001 (percent of population aged 15-64)
Source: Data from EUROSTAT (2003).
Figure 2 shows how the unemployment probabilities of 25-64 year-olds have changed between 1995 and 2003 in the Czech Republic, Slovakia and Poland. In all 3 countries, the rise in unemployment rates was considerably smaller among secondary school graduates than among those who did not complete upper secondary education, while being almost negligible in the case of university graduates. By 2003, the gaps between educational groups were larger in the 3 countries than they were on average among countries of the OECD. Thus, it appears
0 10 20 30 40 50
Slovakia Bulgaria
Poland Lithuania
Czech Latvia
Estonia Hungary
Slovenia Rom
ania
Below secondary Upper secondary Tertiary
that transition to market economies has tended to widen the gaps in unemployment probabilities between people with different levels of educational attainment.
Figure 2: Trends in unemployment rates by educational attainment, 1995 and 2003 (percent of population aged 25-64)
0 5 10 15 20 25 30 35 40 45 50
Below second.
Second. Tertiary Below second.
Second. Tertiary Below second.
Second. Tertiary Below second.
Second. Tertiary
Czech Slovakia Poland OECD
2003
1995
Source: Data from OECD (2005).
A similar trend is suggested by data on earnings. Since the transition, the gap between the wages of secondary and basic school graduates, and that between tertiary and secondary graduates, have widened considerably in many countries. Figure 3 shows the process of widening differentials in Hungary, Poland and the Czech Republic. The returns to higher education tended to increase exponentially, being comparable with those obtained in high- income market economies. A more moderate increase is observed for the case of upper secondary education, with the exception of Hungary, where the secondary school premium began to fall in 1998.
Figure 3: Wages of males by level of education,
percentage differences from lower secondary (or less)
0 20 40 60 80 100 120 140 160 180 200 220 240 260
1989 1998 2003 1989 1996 1999 1989 1995
Hungary Czech Poland
Upper secondary
Tertiary
Sources: Calculated from UNICEF (2001) and OECD (2005). The secondary school premium is calculated as an average between the wage premiums for general and those for vocational education.
Finally, in the newly emerging market economies of the region, educational attainment appears to be a strong predictor of household poverty. Studies by World Bank in a number of Eastern European countries (including the Czech Republic, Estonia, Hungary, Poland, Romania and Slovakia) found that household poverty is closely related to the education of household head: households whose heads have completed only basic education are 20-to-60%
more likely to be poor than the average household; vocational education yields an average probability of being poor; general secondary education reduces that probability by about one half; and, except in Slovakia, a university degree virtually guarantees that a household will not be poor.2 By contrast, in the less-developed labor markets of the CIS countries, secondary education does not protect against poverty; only higher education is correlated with low poverty rates, while households headed by secondary school graduates have rates of poverty comparable with (or even higher than) the national average. In Uzbekistan and Russia, for example, households whose heads have completed general secondary education are 14% and 50%, respectively, more likely to be poor than the average household, while those headed by a university graduate are half as likely to do so.3
In short, as EE/CIS countries make the transition to market economies, educational qualifications (as a component of human capital) increasingly matter to individuals and the state. For the individual, human capital affects earnings, unemployment probabilities and the likelihood of transmitting intergenerational poverty: since the human capital acquired by parents affects that acquired by their children, lower levels of human capital in one generation can ignite intergenerational cycles of less human capital and greater poverty. For the state, human capital constitutes a source of economic growth and increasing competitive power, both of which are necessary conditions for survival in a globalized world.
2. Many countries have cut their education budgets just as the importance of human capital has increased.
The economic decline experienced by most EE/CIS countries since the transition has reduced total public funds available for education. Figure 4 compares the trends in real GDP and public education expenditure for the 1990-2003 period. Only in 9 of the 20 countries in the figure did real education spending rise over time (in Slovenia, Poland, Belarus, Kazakhstan and the Czech Republic, spending on education rose more rapidly than GDP, while in Romania and Lithuania, it increased in spite of a decline in real GDP). Spending on
2 cf. WB (2000), pp.29.
3 Calculated from WB (2005b): Table 2.8 for Russia, and from WB (2003): Table 4 for Uzbekistan.
education remained unchanged in Albania, but it declined in the other 10 countries, with these declines being often steeper than the falls in real GDP.
Figure 4: Percent changes in national incomes and real education spending, 1990 to 2003
Georgia Azerbaijan
Macedonia Kyrgyzstan Moldova
Armenia Russia Bulgaria
Slovakia Latvia Albania Belarus
Kazakhstan
Estonia
Czech
Hungary
Romania Lithuania Poland
Slovenia
-100 -80 -60 -40 -20 0 20 40 60 80 100
Real GDP
Real education spending
Source: Calculated from Tables A1 and A2 in Appendix A. The earlier year is 1991 for Slovenia, Belarus, Armenia, Azerbaijan and Kyrgyzstan, and 1992 for Estonia, Moldova and Kazakhstan.
The later year is 2002 for Slovakia, Slovenia, Estonia, Romania, Russia and Kazakhstan.
As illustrated by Figure 5, the rise in real education spending in the first 9 countries is generally explained by the fact that an increasing share of GDP has been allocated to education; by 2003, the shares of national income devoted to education by most of these countries were comparable with (or even larger than) the average figure for OECD countries.
By contrast, in the other 11 countries, the share of GDP going to education has generally decreased, with most figures for 2003 lagging far behind the OECD average.
Figure 5: Public expenditures on education as percent of GDP, 1990 and 2003
OECD average: 5.4% 1990
2003
0 1 2 3 4 5 6 7 8 9
Belarus Slovenia
Lithuania Moldova
Hungary Estonia
Latvia Poland
Czec
h Bulgaria
Slovakia Kyrgyzstan
Russia Roman
ia
Macedonia Azerbaijan
Arm
enia
Kaza
khstan Albania
Georgia
Source: Table A2 in Appendix A. The earlier year is 1991 for Slovenia, Belarus, Armenia, Azerbaijan and Kyrgyzstan, and 1992 for Estonia, Moldova and Kazakhstan.
The later year is 2002 for Slovakia, Slovenia, Estonia, Romania, Russia and Kazakhstan.
However, it is worth noting that the recent improvement in economic growth in EE/CIS provides an opportunity to increase the resources for education. The share of GDP devoted to education has been increasing in Kyrgyzstan since 2000, and in a few other countries since 2001 (see Table A2 in Appendix A). This real gain in public expenditure will not, on its own, be enough to solve the region’s problems of education finance, but in conjunction with further education reforms, it will be a good start.
3. The per-student expenditure has declined at all educational levels, but it is still relatively high at the tertiary level.
The demographic decline, which has occurred in most of the region since the transition, has motivated many countries to reduce their share of GDP devoted to pre-tertiary education (see Table A3 in Appendix A). As a result of this policy, the budgets available to preschool, primary and secondary educational institutions have tended to decline, sometimes more rapidly than the number of 3-17 year-olds (the relevant age group in pre-tertiary education). As can be seen in Figure 6, only 8 of the richer countries of the region show an increase in real expenditure per child over 1989-2002; in the other 7 countries for which data are available, expenditure per child has decreased, with the steepest declines being reported in Kyrgyzstan and Tajikistan (two countries where spending on pre-tertiary education has fallen, in spite of an increase in the size of school-aged cohorts).
Figure 6: Real public expenditure per 3-17 year-old, 1989 to 2002 (percent change)
Tajikistan Kyrgyzstan Ukraine Azerbaijan Macedonia Bulgaria Slovakia Slovenia
Poland Estonia
Lithuania Latvia
Czech Hungary
Romania
-120 -80 -40 0 40 80 120
Source: Table A3 in Appendix AThe earlier year is 1990 for Romania, 1991 for Poland, Slovenia and Ukraine, and 1992 for Estonia, Lithuania, the Czech Republic, Slovakia, Macedonia and Azerbaijan. The later year is 2001 for Bulgaria, Romania and Slovakia.
The declines in per-student expenditure might be smaller, given that in frequent cases, the number of students has decreased more rapidly than the number of 3-17 year-olds.
Overall spending on tertiary education has tended to increase in real terms (due to higher shares of GDP being allocated to tertiary levels). In all countries, however, this
increase was smaller than the rise in student numbers, leading to a decline in real expenditure per student (see Table in A4 in Appendix A).
Table 1 compares the current levels of per-student spending in EE/CIS and 22 countries of the OECD group. At all levels of education, the figures for EE/CIS countries are considerably lower than the average figures for the OECD group: of the 17 EE/CIS countries for which data are available, only Slovenia compares favourably with the OECD group for primary education; in the other 16 countries (for primary education), and in all 17 countries (for secondary and tertiary education), expenditure per student accounts for less than 60% of the OECD average. The level of spending is extremely low in a number of the poorer countries: it accounts for less than 20% of the OECD average in Romania and Ukraine, and for less than 15% in Moldova, Armenia, Azerbaijan, Kyrgyzstan and Tajikistan.
Table 1: Public expenditure per student by level of education, 2002 (PPP $)
Primary Secondary Tertiary
Slovenia OECD average
Hungary Estonia
Poland Latvia Czech
Macedonia Slovakia Bulgaria
Romania Ukraine Kazakhstan Armenia Moldova Azerbaijan Kyrgyzstan Tajikistan
11,124 5,291 2,814 2,575 2,534 2,303 2,051 1,618 1,541 1,146 722 584 470 312 265 225 97 69
2,596 6,569 2,814 3,065 2,218 2,395 3,629 518 2,440 1,281 1,050 828 763 374 397 417 162 88
5,377 9,568 4,288 2,942 2,218 1,658 4,892 1,553 3,852 1,348 1,574 1,899 587 1,154 294 417 227 206 Sources: Table A5 in Appendix A for EE/CIS countries, and calculated from OECD (2004a)
and WB (2005c) for OECD countries. Year of reference is 2001 for Bulgaria. Rankings by level of expenditure per primary school pupil. The OECD figures refer to year 2001 and are calculated as the unweighted average for Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Korea, the Netherlands, New Zeeland, Norway, Portugal, Spain, Sweden, Switzerland, the UK and the US.
Interestingly, in EE/CIS expenditure per student is relatively high at the tertiary level, compared to what individual countries spend per primary and secondary school pupil: in half of the countries in Table 1, the ratio between tertiary and primary school expenditure, and that between tertiary and secondary education expenditure, are higher than the average figures for the OECD group. Tajikistan and Ukraine spend 2 times more per student on tertiary education than on secondary, and 3 times as much as on primary, as compared to 1.5 and 1.8 times more in the countries of the OECD; similar patterns are found in the Czech Republic and Kyrgyzstan (for tertiary versus primary), in Slovenia, Hungary and Macedonia (for tertiary
versus secondary), and in Armenia, Slovakia and Romania (for both). This suggests that EE/CIS countries allocate too many public resources for tertiary education, endangering the funding of lower levels of schooling that should have a higher priority.4
4. To compensate for the decline in public resources, an increasing portion of educational costs have been transferred to parents. This has occurred during a time of dramatic fall in real wages and of significant growth in income inequality.
The data on families’ costs of education are fragmentary and elusive because costs are levied both officially and informally. It seems however safe to conclude that education is costing families more today than prior to the transition period. The costs of education to households usually include 1) formal tuition charges, 2) payments for textbooks, other school materials, and extra-curricular activities, 3) transportation and dormitory costs for children studying away from home, 4) payments for complementary requisites such as clothing and shoes, as well as, 5) bribes and other informal fees.
1) Formal tuition charges
Since the transition, tuition charges have become a prominent feature of the region’s educational systems. The most obvious case is the emergence of private education, the fees charged by private schools and universities being often beyond the means of even families with average incomes.5 Even within the sector of public education, tuition charges have become very common, particularly at the non-compulsory levels. Many countries allow public universities to charge tuition fees in addition to the state subsidy: in Bulgaria, such fees are charged for all students attending public institutions of higher education, while in other countries, they are only imposed on those students who are admitted beyond the quota of government-subsidized places (see Table A6 in Appendix A). These fees account for less than 10% of the average wage in Bulgaria and Hungary, but they are much higher in other countries (such as Romania and the 3 Baltic States), being likely to have a restrictive effect.
Only in 4 EE/CIS countries –Poland, the Czech Republic, Slovakia and Slovenia – is higher education entirely free of charge for regular students.6
4 The case for publicly funded education is strongest for the lower educational levels (particularly, the primary and the lower secondary level), where the social returns to education are highest. Such returns arise from the fact that education does not only benefit the educated one, but also the society as a whole; for example, education can contribute to economic growth, strengthen social cohesion, lower crime rates, improve health and environment quality, etc.
5 The fees charged at private institutions account for between 10% and 85% of the average wage at the higher education level, while being even higher at the pre-tertiary level (own calculations).
6 No tuition is charged for regular study programs; only very low entrance examination registration fees, student/cards, certificates/diplomas, or re-registration for courses that students attempt a second time have to be paid for.
Formal tuition charges are not exclusively present at the tertiary level. In a large number of countries, relatively high fees are being charged for public sector kindergartens;
such fees already existed under communist regimes and they have increased further during the transition (for example, from 4% to 14% of the average wage in Latvia7). In a number of the poorer countries, formal fees are now charged for upper secondary education in the public sector: in Georgia, for example, the secondary school fee introduced in 1997 accounts for half of the average consumption per capita of poor families8, discouraging enrolment among the latter.
2) Payments for textbooks, other school materials, and extra-curricular activities
Most countries have abandoned the policy of supplying textbooks free of charge, especially outside of the compulsory age for schooling. In Azerbaijan, for example, the government pays for textbooks for grades 1 to 4, and parents pay for textbooks in the latter grades; in Georgia, parents undertake the full cost of textbooks, while in Latvia they only bear two thirds of this cost.9 The cost of textbooks and other school materials appears to be a serious barrier to learning and even enrolment among children from poorer households in many countries, with textbook prices far higher relative to household incomes than in the West.10
Another feature of the transition period is the decline in what may be termed the
‘social’ aspects of education, not directly related to the curriculum. These include after school clubs, school meals, health care services, etc. that were generally provided free of charge under communism but which have declined since. Parents now have to pay for many of these items, which obviously impacts more heavily upon the poor.
3) Transportation and dormitory costs for children studying away from home
In the past, most EE/CIS countries had a system of cheap or free boarding schools, dormitories and hostels, which enabled children from poor rural families to attend schools in town. In Poland, for example, 23% of vocational school pupils and 40% of university students received free accommodation in the late 1980s; these figures have dramatically declined during the transition (to 8% and 31%, respectively), meaning decreased opportunity of access for pupils and students from the poorer, less-well provided rural areas.11 Students in EE/CIS are now more likely to have to pay for transport to school that was previously free, and there
7 cf. UNICEF (1998), pp.71.
8 cf. WB (2000): Box 2.1, pp.37.
9 cf. WB (2000), pp.70.
10 In Bulgaria, a student spends on average $170-$230 per year for textbooks, which is more than 30% of income per-capita of the average household (own calculations).
11 cf. Barrow (1998), pp.10.
is evidence of increasing variation in spending between the lowest and highest income households. In Russia, for example, households in the higher quintiles of the income distribution spend 8 times more per year on transportation than do households in the lower quintiles.12
In some countries (including Romania and Russia), merit scholarships – intended to cover the costs of living – are granted on the basis of performance criteria for students in secondary vocational and higher education. Benefit-incidence analysis of these scholarship programs, however, shows that they have a regressive distributive impact, in favour of children from middle to rich class.13
4) Clothing and shoes
The real prices of children’s clothing and shoes have increased significantly with price liberalization. The standard of clothing required to attend school and that sufficient for home may differ sharply due to societal norms. This is the case in Armenia, where parents report spending on clothing as the single biggest item of expenditure on education; parents in Azerbaijan report not sending their children to school in preference to their going poorly dressed, with inadequate clothing for school considered a serious educational issue in about half the population points in the survey.14 But cultural norms are not the only factor at work – a pair of shoes is a necessary condition to even get to school in winter.
5) Bribes and other informal fees
Informal user charges are payments that are neither explicit, nor public. They can take several different forms. Teachers may force parents to pay for private lessons by not doing their work in class, or they may accept bribes from parents in exchange for good grades.
Informal ‘entrance fees’ may have to be paid in some cases to get a child into a public sector kindergarten, school or university. There is considerable evidence of such practices being a common feature of school and university life in the EE/CIS region. In Russia, ‘desirable’
schools and universities charge for entry by requiring parents to make a donation, thereby restricting the access opportunities of poor students.15 In Uzbekistan, approximately 10% of households report making unofficial payments or providing gifts to staff, for their primary school aged children, 18% for their secondary school aged children, and over a fifth for their older children; in all cases, the incidence of these payments is higher by the non-poor.16 In Albania, a significant share of the total household expenditure on education is for private
12 cf. WB (2005b), pp.118.
13 On the results of the benefit-incidence analysis see WB (2001a), pp.26, and WB (2005b), pp.120.
14 cf. Micklewright (2000).
15 cf. WB (2000): Box 2.1, pp.37.
16 cf. WB (2003): Table 5, pp.100.
