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.
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.