Education Policy Reforms to Boost Productivity in Australia

• Date: 01 June 2018
• Published date: 01 June 2018
• DOI: http://doi.org/10.1111/1467-8462.12271
• Author: Gigi Foster

Policy Forum: ‘Shifting the Dial’, The Productivity Commission’s

Productivity Review

Education Policy Reforms to Boost Productivity in Australia

Gigi Foster*

Abstract

Chapter 3 of the 2017 Australian Productivity

Commission’s recent report ‘Shifting the dial’,

commissioned by the Commonwealth Trea-

surer to interrogate ‘Australia’s productivity

performance’, focuses on education policy.

The Treasurer explicitly asks that the report

include ‘recommendations on productivity-

enhancing reform’, and Chapter 3, entitled

‘Future Skills and Work’, delivers these for

the education policy sphere. In this article

I evaluate the education policy reform recom-

mendations set out in Chapter 3 against

Australia’s educational performance and land-

scape today, and what we know in general

about the educational inputs to productivity.

Different, though overlapping, policy recom-

mendations emerge from my analysis.

1. Introduction

Anation’s education system is unquestionably

one of the most importantdrivers of its long-run

productivity. Economists have estimated sub-

stantial private and public returns to education

within countries, including within Australia

(Leigh 2008), and educationhas been shown to

strongly relate to productivity across countries

(e.g., Qadri and Waheed 2013). Caplan (2018)

has recently proposed that much of the value of

education systems relates to their signalling

role, rather than their role in building individu-

als’human capital. Yet even if some of the

government dollars spent supporting education

go towards helping workers signal their abili-

ties, well-honed signallingmechanisms support

a country’s need to match workers to jobs. It is

also diff‌icult to argue that no humancapital—a

core driver of labour productivity—is built in

schools and universities.

The Productivity Commission is thus well-

advised to undertake the evaluation it presents in

Chapter 3 of ‘Shifting the dial’(Productivity

Commission 2017), asking whether Australian

educational policy is aligned with the policy

settings that would best promote Australian

productivity. As is customary in the realm of

economics, this evaluation is partly scientif‌icand

partly artistic, as we do not have a perfect

understanding of exactly which policy settings are

optimal: we can only craft arguments based on the

best available evidence plus economic logic and

common sense. The Commission acknowledges

this implicitly in its use of broad adjectives

(Productivity Commission 2017, p. 84): ‘agood

quality and adaptive education and training

system’, the reader infers, enables productivity

growth. What do ‘good quality’and ‘adaptive’

mean?

* School of Economics, University of New South Wales,

NSW 2052 Australia; email <gigi.foster@unsw.edu.au>

The Australian Economic Review, vol. 51, no. 2, pp. 253–61

°

C2018 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research

Published by John Wiley & Sons Australia, Ltd