Adult Community Education Benefits

February 23rd, 2010 at 2:00 pm by David Farrar

Three good posts on . First at TVHE fisks a PWC report:

In a report the is often used to justify ACE spending, the net benefit of adult community education (for 409,000) was stated to be between $4.8bn and $6.3bn annually – giving a total return of $54-$72 per $1 invested (see page 48).  Wow, really – if I could get that sort of return I would be investing in adult community education for sure.

A 50:1 to 70:1 return on every dollar spent is of course beyond implausible. I am surprised PWC allowed their name to be associated with such a nonsense report.

Bill English was quoted as saying that on the basis of the report “we would spend $10 billion on adult and community education and would have an economy that is twice the size it currently is”

Nolan looks at how they have mixed up public and private benefits:

Now the factors that are policy relevant are NOT private benefits – these help determine the market price.  They are benefits that stem from some third party, uninvolved in the transaction, gaining some benefit from the individual taking an adult community course.  And they are not “fiscal externalities” (ht Offsetting Behaviour).  So the policy relevant factors are:

  • Increase in direct income:  No
  • Savings in government benefits:  No
  • Marginal increase in individual income:  No
  • Increase in income from self-confidence:  No
  • Reduction in family violence:  No
  • Savings for health:  No
  • Savings from crime reduction:  Potentially, partially
  • Increased community involvement by individual:  No
  • Higher income taxes:  No

So eight of the nine benefits are private, not public. The one public benefit is a possible reduced crime rate. But PWC have assumed that anyone doing an ACE course instantly has a 50% less chance of committing a crime. Yep – attending one Moroccan cooking course, and you are 50% less crime likely.

at the very good Education Directions blog looks at the future of ACE:

The ACE market will be reshaped, rather than destroyed, because there is so much demand for such education. In 2008 there were 140,000 ACE students (EFTS unavailable)  in schools and 78,000 ACE students (4,000 EFTS) in TEIs (MOE). Enrolment numbers have been boosted by significant government subsidies and by the availability at schools of physical and business infrastructure to run community education programmes, but people still want this type of education. The subsidies are now largely gone and many schools have dropped their programmes, but there are new opportunities.

In the absence of nationwide coverage by subsidised school providers, I expect that private ACE co-ordinators will spring up. They won’t get the same administrative  support from schools, but equally they won’t be bound by the collective employment agreement or be treated as an add-on to the school’s main business. There are still plenty of empty school rooms at night to rent at low cost too. Prior to schools getting so involved in community education, there was a thriving private market in ACE-type courses and I would expect many of the previous school-based tutors to explore new models. There are bound to be several viable models out there for ACE delivery.

If ACE does produce such huge private benefits as 50:1, there will indeed remain great demand for ACE courses – even if one has to pay say $50 for it.

Eric Cramption looks into where the nonsense about a 50% reduction in crime rate comes from, if you do an ACE course. He finds:

So folks taking adult ed courses are assumed to have a 50% reduction in their chances of committing a crime. PWC cites a 1999 working paper as evidence; a 2004 AER piece by the same author has the crime reduction associated with high school graduation as being less than half that figure (14-26%). This latter study uses a far more cautious identification strategy: changes in minimum age of dropping out of school as instrument for completion rates. And note that the numbers cited are for HIGH SCHOOL GRADUATION, not for taking a night course in Indian cooking.

Remind me to never get PWC to do a report, if I want it taken credibly.

Thank God for the Internet where we can get some solid analysis of these ever growing number of crappy reports, justifying whatever the commissioning party has asked for.

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12 Responses to “Adult Community Education Benefits”

  1. Whoops (136 comments) says:

    “Remind me to never get PWC to do a report, if I want it taken credibly.”

    What? You mean like NZIER?

    Pffft – guns for hire are just that, and everybody over the age of 14 knows it.

    (All this fuss over a few million? Really? Worthwhile much?)

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  2. David Farrar (1,894 comments) says:

    I disagree that all guns for hire are the same. If a firm makes basic mistakes like counting private benefits as public benefits and vice-versa with costs, then they do not deserve to be taken seriously.

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  3. Kimble (4,438 comments) says:

    Schooled.

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  4. Tassman (234 comments) says:

    ESL was booming earlier on until the immigrant and teacher cowboys moved in and ripped the guts out of Asian students.

    ACE is a narrow road without a foreseeable impact.

    ESL was booming with younger students, all wanted to share their technical knowledge with NZ.

    ACE may be booming now, but where are you going to employ the adult graduates who are already finding it difficult to get a job when physicists are driving taxis? They should make NZ the brainiest cleaners and taxi drivers huh? Put your investment in it an see yet another spiral down the road…

    This is so much like the government’s economic plan, only worry about making profit and never mind about the consequences…

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  5. Whoops (136 comments) says:

    “I disagree that all guns for hire are the same. If a firm makes basic mistakes like counting private benefits as public benefits and vice-versa with costs, then they do not deserve to be taken seriously.”

    Not if they do it on purpose to provide ammunition for a point of view (ref; NZIER). Often waved away by noting something is ‘outside the scope’… but I do take your point that basic mistakes – like say Treasury did with a billion dollars or whatever it was – should never make it through the review process prior to publication.

    (nb; as PWC can afford much better lawyers than I ever could I will note that I am not suggesting this was the case here).

    Kimble – best wipe your nose, it’s all brown.

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  6. RightNow (6,994 comments) says:

    I think the PWC report is even more flaky than that. The lion’s share of the PV (perceived value) from ACE is derived from the expected increase in earnings over the remainder of the student’s life. I don’t see any evidence they’ve taken into account that one student may continue ACE year after year and the perceived benefits attributed to such a student are counted multiple times (and that is just one criticism of the way they’ve calculated the benefits).

    Frankly all I can be sure of from this report is that I would never commission PWC to produce a report.

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  7. Tauhei Notts (1,711 comments) says:

    I used to think that PWC stood for pricks with calculators.
    But then I learned that it stood for Price WaterhouseCoopers, a renown firm of chartered accountants.
    The best advice I was given when I became a chartered accountant was;
    “credibilty is like virginity, you only lose it once.”
    PWC, by their report, have deflowered themselves.
    John Shewan, and all your partners; you are gentlemen whose truthfulness I doubt a bit.

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  8. louie (96 comments) says:

    As an ACE student I just got spammed this afternoon by the High School provider lobbying to reverse the cuts. The email attached a letter from the PPTA and pointed at a web site http://www.dimming.co.nz .
    I went to the web site to vote no but I imagine they will be overwhelmed by yes votes from the PPTA and their Labour Party mates.

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  9. Anthony (796 comments) says:

    Was reading in the weekend paper about a woman who runs clay modelling classes in her neighbourhood and it is popular and profitable for her. The free market can and will deliver all sorts of non academic courses (and probably academic ones too for that matter) if people are interested and get some benefit or pleasure out of taking them. Why does the government have to be involved and subsidise them??

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  10. Grendel (1,002 comments) says:

    i run a course on first home buying with a local college, and i told them that if it meant keeping the course going and some of the costs down, then they can cut my $40 an hour for running it (the payrates have not changed in over a decade either).

    i usually get at least one referral from the course who wants to do business with me, and that more than makes up for it.

    Interestingly enough when we got the email asking about our term two course there was this add on.

    >I could use another tutor who could teach a fitness programme on either Tuesday or Wednesday. Yoga would be great. Any other suggestions are also useful as we do not have the same restrictions on the self funded programme
    >

    this says to me, that without govt interference the school is free to run whatever courses they like. seems like its better overall.

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  11. mpledger (425 comments) says:

    You might excuse Bill English for having no statistical skills (“never extrapolate outside the region under study”) but you’d expect him to understand economics e.g. if you get $1,000,000 for raising 1,000,000 sheep then it doesn’t mean you’ll get $100,000,000 if you raise 100,000,000 sheep.

    That aside…
    My uncle has his course cut that trained electricians to get a qualifications that allowed them to practice (IIRC).

    I guess there must be some third party health benefits in having the course – a decrease in electrocutions of DYIers because they can’t get hold of a registered electrician. Perhaps the third party cost savings in not having to pay the electrician to do the work are more important.

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  12. glubbster (344 comments) says:

    The estimates contained in the report cannot be correct because if returns were 50-70/1 for the course, anyone with half a brain would pay for the course with little or no government assistance. So it would be a non-issue. The stranded have blogged on this and they have shown no understanding of economics AT ALL! In any other country nonsense figures like these would be laughed away. Why shouldn’t these courses have funding cuts in a difficult public expenditure environment?

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