The Profit Motive in Education: Continuing the Revolution

Education reforms at risk unless government allows for-profit free schools

Executive Summary:

  • The criticism of the ‘profit motive’ in education is unjustified: we should not be concerned about the corporate structure of organisations that provide educational services. Furthermore, while people are disparaging about the profit motive they ignore other self-interested motives operating within the education sector, such as those within teachers’ unions, government educational bureaucracies, and so on.
  • The school reform debate currently focuses to too great an extent on ‘school choice’. Instead, we need to focus on the supply side. By liberating the supply of education, we will see radical new ways to deliver education, including new ways of bundling education services. Those models that are successful will be scaled up rapidly if the profit motive is allowed to work.
  • The UK government is wrong to exclude profit-making schools from its free-school programme and it might fail as
a result. Allowing profit-making free schools would draw more capital into the sector; allow people who wished to take financial risks to do so while reducing risks for parents and other groups involved in setting up free schools; help ensure that the necessary site and buildings can be obtained and financed; and radically reduce the cost of regulation.
  • Non-profit foundations generally do not have the ability or incentives to scale up successful practices and roll them out widely. They are therefore not the answer to promoting high- quality education available to all.
  • 
Profit-making schools in Sweden have raised standards and provided a competitive spur to state schools. One chain of schools has increased teacher contact time by 50 per cent through developing curriculum materials that can easily be adapted by teachers.
  • The UK lags behind the UN in terms of developing good practice in education policy – despite the fact that the UN tends to lag behind best practice by many years itself. The UN has taken an empirical approach and has decided that, if profit-making schools can raise educational standards, they should be welcomed. If the UN’s success is to be spread more widely so that the profit motive is accepted by national governments in developed countries, those supporting the profit motive must choose their language prudently. Words such as ‘inclusive’, ‘diverse’ and ‘open’ can be applied to an education sector that is not limited to state institutions and can be helpful in winning the political debate.
  • For-profit higher education institutions in the USA have opened up universities and colleges to groups in society that have previously been excluded. More than half of students at for-profit institutions in 2007 were over 25 years old and ethnic minority enrolments comprised nearly 40 per cent of the total. Furthermore, a greater proportion of students at for-profit institutions were ‘first generation’ students whose parents did not have a degree.
  • There are, however, important lessons from the USA for UK policy. Mechanisms of government financing can distort incentives and lead to lower completion rates than is desirable. The UK government seems to be repeating the mistakes made in the USA by directing greater subsidies towards those former students who do not make best use of their degree courses. The advantages of profit-making institutions should not be forgotten, however, and it would be better to correct the distorting systems of government financing than to undermine the for-profit sector.
  • UK business schools are not entirely the success story that is often claimed. Graduate unemployment from UK business schools is higher than the average for all graduates. Reform is needed. Business schools operating in the ‘mass market’ for business education should be profit-making. This would bring stronger customer focus, cost control, expertise from other service areas, links with other businesses and new sources of capital.
  • In general, private capital and the profit motive are needed
to create widely replicated, low-margin, low-cost methods of education. Such innovation will lead to the development of entirely new personal learning formats and services and move the sector away from the ‘batch processing’ of children in classrooms where children of the same age progress through material at the same pace.

2012, Readings 65, ISBN 978-0-255-36646-5, pp 204.

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