Photo: Flickr user Tristan Schmurr/Creative Commons 2013
Carte blanche: The government’s schools policy should be grounded in economic arguments, writes Carlo Klein.
I had the occasion to participate in a recent roundtable organised by Amcham about English language education in Luxembourg. The roundtable did not just allow panel members to present the English language education programmes at their own schools, but it also clearly showed that there is a demand in the Grand Duchy for this kind of schooling from English speaking expats and other Luxembourg residents who consider, correctly, that the English language is becoming more and more important here.
The field of economics considers this question as a demand for investment in human capital where individuals spend time on education expecting a return in the future: mainly a mix of higher wages and lower risks of unemployment depending on the theoretical models that we consider. The underlying assumptions are that either education increases individuals’ productivity compared to less educated individuals, or that educational systems select the most productive individuals and hence an educational degree may be used as a signal of one’s level of productivity.
Apart from these expected individual returns to education, there are also expectations about social returns to these investments. One of these expected returns was mentioned at the roundtable: the existence of English language education can be considered as an incentive for foreign investors to open facilities in Luxembourg and hence attract highly skilled expats to the Grand Duchy. This will have a positive impact on Luxembourg’s economy and will even contribute to better and easier integration of expat kids and parents when the children of longer term residents are enrolled in these same classes.
If we turn now to the supply side of this market, two options are available: a private and a public supply and Luxembourg is no exception in this domain.
Public or private finance?
Economic theory again allows us to justify the existence of both offers. First of all, as we mentioned before, education is considered a private investment yielding private returns so that we can expect that investors in human capital pay for these investments like any other investor in the economy. These private costs of educational investments are of course tuition fees, school material, but mainly foregone earnings, the opportunity cost when a person is at school and cannot work during that period.
On the other hand education also has social returns so that there is a theoretical argument in favour of a public participation to cover the costs of educational institutions. This is particularly true for compulsory education for kids up to 16 years in Luxembourg. Here we can even consider that this public investment is part of a much broader economic problem, the need for development and maintenance of public infrastructure to improve Luxembourg’s economy and social life in general.
What does this mean for our English language education problem? As usual in economics, a cost/benefit analysis should be made to clearly determine private and public returns to this investment and to determine who will benefit from these investments.
Based on this analysis the government should come up with proposals how to match demand and supply. It will not only be in the interest of Luxembourg’s economy, but it will be in the interest of Luxembourg’s society as a whole.
Carlo Klein teaches economics and social sciences at the Athénée de Luxembourg and international economics at Miami University in Differdange.