Chapter Eight

Cost & Funding


Finnish education expert, Pasi Sahlberg, says the much lauded transformation of the Finnish education system came “at a reasonable cost.” 92

So reasonable, in fact, that 98% of the cost of education at all levels is covered by government rather than by private sources – and, indeed, Finland’s education spending per child is not far from the OECD average.93

Overall, Finland spends about ,200 less per student than the US ’ ,700 per-pupil average,94 with learners having fewer hours of instruction than in any other OECD country. At the lower secondary level, Finnish teachers teach around 600 hours per year, compared with around 1,080 hours for middle school teachers in the United States. The interesting result is that Finnish 15 year olds outperform their peers in other nations – at least, in terms of the PIS A results – despite the equivalent of three fewer years of schooling.

With all the changes we are proposing – and we are aware that they are radical changes, though not unprecedented except in scale – any education provider is certain to have one question rising above all others in their heads. Even if the suggested transformation is desirable, sensible and laudable, a key issue remains: is it affordable? In this section, we will attempt to answer that question.

In order to do so, we will offer examples of low-cost implementations of similar measures already in place. We will demonstrate the long-term view of “return on investment,” demonstrating that it is financially imprudent to carry on with things as they are, especially when there may be costs associated with falling behind as others move forward. We will argue that increased spending may be most wisely used in teacher training programmes. Finally, we will briefly discuss the issues of public vs. private education and the potential for establishing public-private partnerships to move towards this kind of transformed provision.

Cost of Existing Implementations

What do existing implementations of similar change cost? Not necessarily very much. A great deal of the necessary change can be accomplished through the refocussing or redistribution of existing resources. As an example, it is worth noting that all education jurisdictions spend large sums on professional development for educators: it costs nothing to shift what is being taught in these training sessions.

In his 2009 book The Money Myth, University of California, Berkeley professor W. Norton Grubb demonstrated that leadership, instruction, and policies for tracking student progress are more powerful factors in school performance than financial investment. Grubb showed only the weakest of correlations between fiscal resources and educational outcomes.

We will demonstrate the affordability of radical change using three exemplar implementations of change in Colombia, Mexico and Canada.

Escuela Nueva, Colombia

The Escuela Nueva programme was developed in the mid-1970s to cope with exactly the kinds of problems we are looking to counter – though only in primary education. Vicky Colbert identified the Colombian rural schooling system as a victim of weak relationships between schools and communities, low teacher morale, low learner engagement and high dropout rates, lack of learning resources (including teaching staff) and gender disparities, amongst other issues. She changed the teacher-led learning approach to one that was student led, finding learning systems that  encourage literacy and numeracy, create entrepreneurial, team-working and critical thinking skills, and advancement at a pace of each learners’ choosing.95

Within a few years of its implementation in rural areas, the Colombian government recognized the transformative power of Escuela Nueva thanks to the fact that rural schools were outperforming urban schools. This was achieved without any significant financial investment, which no doubt was a factor in the Colombian government’s decision to embed Escuela Nueva widely across the country. 20,000 Colombian schools now use the program; in the two years between 2007 and 2009, 700,000 Colombian children gained an education this way.

José Urbina López Primary School, Mexico

Our second example is in many ways a similar suite of low-cost innovations. José Urbina López school in Matamoros, Mexico, gained national attention when a shift towards student-led group work and self-directed learning resulted in one of its students gaining the country’s highest score in a national math test, with a further nine students placed in the 99.99th percentile. Only 7% failed the exam, a figure that had dropped from 45 % before the innovations. Sixty-three percent were considered “excellent” in math. All languages scores were above the national average, with only 3.5% failing Spanish compared to the previous year’s 31%.

This meteoric rise in achievement was made possible by a shift in teaching style, and a motivated, dynamic and risk-embracing teacher, but no financial investment. Though this is also a primary school example, there is no reason to think similar low- or no-cost improvements could not be achieved through similar pedagogical shifts in high school. Achieving better outcomes from education will involve investment in teachers, but need not involve capital investment. With student-directed learning and group work, and community involvement, it may be that the cost of teaching staff will fall overall. Costs associated with having administrative support staff design assessments and curricula should fall significantly.

Ontario Ministry of Education, Canada

Our third example comes from Ontario, Canada. An analysis of system-wide education reforms in the province, published by the International Academy of Education, suggests that cost is not a serious impediment to change.96

Ontario is a jurisdiction of 13 million people, including 2 million students. In 2004 it began a program of educational reforms that raised the number of students with “high” levels of numeracy and literacy from 55% to 70%. High school graduation rose from 68% in 2004 to 82% in 2011. The rate of teacher dropout fell significantly over that same period.

The IAE report highlights the fact that Ontario “was able to lever substantial change from relatively small amounts of funding.” One of the contributing factors was that local leaders were given “more discretion over spending provided they had a good improvement strategy in place.” The report notes that “better professional development, leadership development, or
in-school coaching of teaching practice can all be supported with very modest increases in funding,” and that putting measures in place to prevent high teacher turnover saves money. Being unable to pay decent salaries to sufficient teachers can be a problem, but “once a reasonable level of investment is reached, additional money is not the critical driver.”

Public-Private Partnerships

There is no reason to think that the changes we are proposing in this document require a prohibitively large amount of fiscal support. However, we acknowledge that there may be a role for public-private partnership in the deployment of these ideas. The Internationals High Schools network, which operates schools in New York, California and Virginia, provides one example.97 This network operates in innovative ways to help those who are not good English speakers to succeed in high school. The schools are successful, with progress report rankings putting Brooklyn International High School and International High School at LaGuardia Community College in the top 3% of high schools. They are part of the public school system and receive the standard amount of per pupil funding allocated by their local Departments of Education. There are funding partners involved, though, including the Bill and Melinda Gates Foundation, Bank of America, and many individual donors.

Another model is provided by the PEAS network of schools working in rural Uganda: they combine funding from the Ugandan government with financial contributions from a variety of sources such as Absolute Return for Kids (ARK), the UK government’s Department for International Development and the Costa Foundation.

Return on Investment

Changes that improve education are likely to prove prudent in the long term even if the short-term cost is higher. This section discusses the evidence for higher long-term payoffs. We strongly believe that there is also a moral case for making the suggested changes to learning programs across the globe, but we admit that, for those with responsibility for proper use of public money, the financial rewards may be a more compelling reason for action.

Higher Salaries

According to UNESCO calculations, every dollar invested in education gives a tenfold return on investment.98 In the United States, a high school graduate earns around 260,000 USD more through his or her life than an early school leaver.99 That results in approximately 60,000 USD more tax income and significantly reduced unemployment, welfare and public health spending. According to 2009 OECD figures, these differentials are also particularly pronounced in Hungary, the Czech Republic, Poland and Portugal.

We would also point out that the kinds of changes we are suggesting will lead to learners leaving high school education with skills and learning habits that render them well-equipped to thrive in the fast-changing world of 2030 and beyond. If the entire approach we recommend is taken up, it is likely that the emerging learners will be disproportionately better off, in terms of pleasing employers and gatekeepers of tertiary education, than peers who have completed a “business as usual” secondary education. To quote a Nokia manager: “If I hire a youngster who doesn’t know all the mathematics or physics that is needed to work here, I have colleagues here who can easily teach those things. But if I get somebody who doesn’t know how to work with other people, how to think differently or how to create original ideas and somebody who is afraid of making a mistake, there is nothing we can do here.”100

Reduced Crime

The kinds of transformations we are recommending will also have financial payback in terms of lower social exclusion, higher school completion rates, and thus reduced costs associated with crime. A number of studies have found that staying in school makes young people less likely to be convicted of a crime or incarcerated. The causal relationships here are subtle, but a trio of Swedish researchers found in 2011 that one additional year of schooling decreases the likelihood of conviction by 7.5% for males and by 11% for females.101 The benefits accrue across crime categories, reducing property damage and violent crimes, and improving quality of life for all citizens.

Being physically in school reduces the opportunities to be involved in criminal activity in the larger community, but there are deeper reasons why increased school engagement cuts criminal engagement.102 To start, it creates better economic opportunities in the years after education.

Stephen Machin, Olivier Marie and Snuck Vujic studied the outcome of a change to the legal school-leaving age in the UK. They found that the first cohort of British school-leavers forced by a change in the law to stay in school for an extra year were less likely to engage in criminal behavior than students who had left school at a younger age. In this scenario, the cost of schooling students for an extra year was offset by savings associated with reduced property crime, which makes up 70% of UK crime.

In the US, education has a clear effect on violent crime. A 2004 study by Lance Lochner and Enrico Moretti demonstrated a social benefit of about .4 billion per extra school year as a result of fewer violent crimes. The UK study put the benefit of an extra year’s schooling at 38–50 million USD.103 According to a 2004 study by Lochner and Moretti, increasing high school graduation rates by 1% in one year would have resulted in an estimated 100,000 fewer crimes in the US. That, they say, has a value to society greater than billion – that is 00 per additional male graduate.

Improved Health

Improved education can offer further savings to society through improved health. According to the OECD “[there is] considerable international evidence that education is strongly linked to health and to determinants of health such as health behaviours, risky contexts and preventative service use. Moreover, we find that a substantial element of this effect is causal […] Education is an important mechanism for enhancing the health and well-being of individuals because it reduces the need for healthcare, the associated costs of dependence, lost earnings and human suffering.”104

Smoking incidence, for instance, is reduced by 10% per additional year of schooling.105 Self-reported health is between 15 and 30% higher with an additional year of high school in the US.106 It is worth noting that not all European studies show similarly stark improvements, and obesity outcomes are not significantly changed by education. Nonetheless, Lochner offers a ballpark figure for the mortality benefits of an extra year of school, in terms of reduced healthcare interventions of ,500–,500 per year.107

Investment in learning professionals

There will, of course, be areas in which our suggestions call for increased investment. The learning professionals involved in this new style of learning need to be high-calibre individuals and in this section we offer a very brief analysis of what that might mean in terms of cost. Surprisingly, excellent teachers need not cost top dollar in terms of salary. Professional freedom may be a sufficient substitute. Finnish secondary teachers, for example, are paid an average of , 601 after a decade in the profession, which is well below those in the UK, Spain, and the US. Nevertheless, the profession freedom to do their job in the way they see fit.

Teacher training costs vary enormously between jurisdictions and even between methodologies in one jurisdiction.108 Pauline Musset points out that different countries require different teacher education programmes, and offers a useful survey, should the reader want to think more deeply about what would be relevant in their situation.109

Even if teacher-training costs do rise, this investment can be offset by financial gains for the learners. Stanford University’s Eric A. Hanushek has estimated that “a good but not great teacher, one at the 69th percentile of all teachers rather than at the 50th percentile […] produces an increase of ,600 on each student’s lifetime earnings.110 Even a modestly better than average teacher (60th percentile) raises individual earnings by ,300, compared to what would otherwise be expected.” That raise applies to every student in the class. For that reason, Hanushek points out, a teacher at the 60th percentile will each year raise students’ aggregate earnings by a total of 6,000. “The impact of one at the 69th percentile (as compared to the average) is 2,000, and one at the 84th percentile will shift earnings up by more than 0,000.”

Though not all teachers can be above average, raising the level of the average teacher is certainly not a wasted investment. Another result of investing in teacher training programmes is to reduce teacher attrition. A study conducted in Florida, US found that new-hire retention rates varied between 45% and 73% depending on school district. The district with the highest teacher retention rate was one that had a strong and supportive teacher induction and mentoring program.111 Finland, too, has a high retention rate for teachers, with about 90% of trained teachers remaining in the profession for the duration of their careers.112 This has been attributed to the autonomy, intellectual opportunities and trust afforded to Finnish teachers.

Costs of physical infrastructure

It is tempting to think that investment in buildings is a essential part of any school improvement plan. However, physical structures are not a central part of our improvements. Mexico and Colombia, for instance, have achieved major improvements in student outcomes without any expensive alterations to the physical learning environment. A technology infrastructure requires capital investment, of course, and as we noted in Chapter 3, digital technology is an extremely valuable tool for education. Where it is available and affordable, it makes sense for learners and learning professionals to access and use all such aids to learning. We would argue that our pedagogical approach will not be any more expensive than standard approaches to technology use. It will, however, put such capabilities to smarter use.

One physical infrastructure consideration we do recommend concerns the learners’ physical safety. While some communities celebrate removing physical barriers between the school and the local community, in other contexts learners are far more secure and able to learn when they know they are not at risk of intrusion from outside. We refer the reader to the Learners’ Charter of Rights found in the Appendix that declares a safe environment to be an essential prerequisite for fruitful learning. How that safety is established will vary depending upon context.


Though the cost of implementing our vision of learning will vary with geographical context, there is no reason to believe that it will be prohibitively expensive. Many innovations have been achieved at minimal financial cost, and investment in effective, learner-centered education will largely pay for itself by a variety of means, through society writ large, including including increased personal incomes and reduced costs associated with criminal activity or healthcare requirements.



92. Sahlberg, 2009, Educational Change in Finland, in A. Hargreaves, M. Fullan, A. Lieberman, and D. Hopkins (Eds.), International Handbook of Educational

93. OECD, 2013. “PIS A 2012 Results: What Makes Schools Successful? Resources, Policies and Practices (Volume IV),” p 41

94. D’Orio, W. “Finland is #1!”

95. Escuela Nueva Model.

96. International Academy of Education, 2012. “System-Wide Improvement in Education.” 

97. Internationals Network for Public Schools.

98. Education for All, 2012. “EFA Global Monitoring Report: Youth and skills: Putting Education to Work.”

99. Rouse, C. E., 2005. “Labor Market Consequences of an Inadequate Education.” Paper Prepared for the Symposium on the Social Costs of Inadequate
Education, Teachers College Columbia University, October 2005

100.  Sahlberg, P, 2012. Finnish Lessons, What Can the World Learn From Educational Change in Finland?. Blackstone Audio, Inc.

101.  Hjalmarsson, R et al, 2011. “Can Education Policy Be Used to Fight Crime?.”

102.  Tauchen, H et al, 1994. “Criminal Deterrence: Revisiting the Issue with a Birth Cohort.” Review of Economics and Statistics 76, 399-412 (1994)

103. Royal Economic Society, 2011. “Cutting Crime Through Education: Evidence From British School-Leavers.” 

104. Feinstein, L et al, 2005. “What Are the Effects of Education On Health?.” 

105. Clark, D & Royer, H, 2013. “The Effect of Education on Adult Mortality and Health: Evidence from Britain.” American Economic Review, 103(6), 2087-2120

106. Mazumder, B, 2008. “Does Education Improve Health? A Reexamination of the Evidence from Compulsory Schooling Laws.” Economic Perspectives, 33(2), 2–16.

107. Lochner, L, 2011. “The Impacts of Education on Crime, Health and Mortality, and Civic Participation.” 

108. Savage, J. “How Much Does it Cost to Train One Teacher?” 

109. Musset, P, 2010. “Initial Teacher Education and Continuing Training Policies in a Comparative Perspective: Current Practices in OECD Countries and a
Literature Review on Potential Effects.” 

110. Hanushek, E, 2011. “Valuing Teachers: How Much is a Good Teacher Worth?”

111. Shockley, R et al, 2005. “The Relationships Between Demographic Variables and Teacher Retention: A Longitudinal Study.” Paper presented at the Florida
Educational Research Association (FERA), November 2005.

112. Center on International Education Benchmarking. “Finland: Teacher and Principal Quality.” 


“Finnish education expert, Pasi Sahlberg, says the much lauded transformation of the Finnish education system came “at a reasonable cost.” So reasonable, in fact, that 98% of the cost of education at all levels is covered by government rather than by private sources.”

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