Effective Investments in Education

The Challenge

Education is a fundamental right for everyone and key to the future of any country. Education has its price everywhere—but the only thing more expensive than investing in education is not investing in education. Inadequate education produces high costs for society in terms of public spending, crime, health, and economic growth. No country can afford to leave too many of its children behind and not to help them achieve the competencies needed for a self-fulfilled life in economic independence.

But the main challenges in education differ across countries and continents. The industrialized world faces the impacts of demographic change, such as a shortage of skilled labor and ageing societies. Emerging countries need to respond to increasing demand in education. And in some parts of the world, it is still not a given that every child has the right to go to school—and, hence, a big share of the population cannot read and write.

Despite these differences, there are common challenges. For example, the "inheritance of educational status" is a global problem: people's education achievement largely depends on their socioeconomic background and the educational status of their parents. Although some countries provide more equal opportunities than others, it remains a challenge everywhere to improve the chances of those children lost to inadequate education.

But education budgets are limited, especially in times of economic downturn. Thus, it is worth comparing countries that have decreased and augmented their education budgets during the crisis—and evaluating the consequences of these decisions. If, on the one hand, investments in education are vital and, on the other hand, budget constraints restrict the available resources, investments should be as effective as possible. The question then is: where does it make sense to invest most in education?


An alternative view of investments in education is that they should be higher where the problems are greatest: that would mean greater effort to tackle inadequate education and more money for programs for children who are lagging behind. Research shows that inadequate education is a problem for the whole of society—even the elites—and that everyone benefits from minimizing the number of low-educated people. Is it possible to invest in more quality in education? What form of qualification will produce the best teachers and pedagogues? And what mechanisms should be used to allocate resources?

Education remains one of the most important duties of any government: it is a public responsibility to provide access to high quality education for everyone. Therefore, public investments need to ensure a good educational infrastructure for lifelong learning. But can private organizations, companies and Nonprofit organizations provide additional supply. Could they become substitutes or should they instead function as supplements to public institutions?

Intelligent financing concepts for education should be based on needs and specific background rather than distributing untargeted subsidies. New concepts of resource distribution require greater transparency. But what should this transparency look like? Will external accountability enhance quality or should there be more focus on capacity-building and self-assessment to improve the education system? How can financing mechanisms provide effective and sufficient investments in education even in times of crisis?