Why Education Reform is Probably Not The Best Way to Fight Poverty

12383520_78bc1448e2_nDoug Lemov is skeptical that I’m right about education being a (relatively) ineffective way of fighting poverty. His response is thoughtful and deserves a response of its own.

First, it’s worth being clear that the only claim I’m prepared to advance and defend is that education reform is not the best way to fight poverty in the United States today. This is entirely compatible with the ideas that (1) education might be modestly effective at fighting poverty, even if only indirectly, and (2) improving education is worthwhile for reasons entirely unrelated to poverty. In fact, I believe both of those things.

The problem I have is with the contention – made by many prominent reformers – that education is the best way to fight poverty. And yes, this is often what they say.

Consider, for example Michelle Rhee, who claims that when it comes to poverty, “teachers can be the answer for so many kids”; otherwise you are going to “write a generation of children off”. Arne Duncan apparently thinks that “the only way to end poverty is through education.” Mike Petrilli claims that “schools are the indispensable anti-poverty program”. He also, curiously, thinks that poverty is “(mostly) not about money”, which is both (mostly) false by definition and an implicit dismissal of money-based methods of fighting poverty.

It’s that denigration (implicit or otherwise) of other poverty-fighting programs that’s the problem. If education is the best way to fight poverty – or the only way – then that means we should worry relatively less about other methods. Here is Rhee again explicitly disparaging other ways of fighting poverty, saying “the best tool that we have to fight intergenerational poverty and break that cycle of poverty is education. It’s not a particular social program or this or that.”

So I object to the claim that education is the best way to fight poverty (in the United States) because (1) we should not in general claim things that are false and (2) we should not in any way discourage people from supporting other, more effective methods of fighting poverty.

With all of that being said, let’s look at Doug’s defense of education as a poverty-fighting measure and why I find it unpersuasive, at least on this narrow question of relative effectiveness.

My Original Post

First, Doug is absolutely right that my international comparison in my original post does not in any way prove that education is unrelated to poverty. All I did was show that countries with higher PISA scores today also tend to have higher pre-tax/transfer poverty rates. There would be lots of ways of running that analysis more persuasively, but my goal was really just to try to prod people into making the affirmative case for education as a poverty-fighting tool.

Part of the issue, here, is that I view the claim that education is the best way to fight poverty as radical, and therefore requiring substantial evidence. I would like to see reformers make the case that all of the other developed countries that have dramatically reduced their poverty rates have done so through education, but I don’t think I’ve ever even seen that attempted.

If we want to ignore my graph, that’s fine, but let’s also be clear that strong claims about education reform’s poverty-fighting power have not (yet) been supported with much international evidence.

On the other hand, I did also point out that domestically it is noteworthy that decades of improving educational outcomes have not done much to reduce poverty rates. I think that’s a more substantive point that I’d like to see addressed. There’s a lot more to say about it – for both sides – but it’s a good starting place (and one I’ll briefly return to below).

Doug’s Affirmative Case

Doug’s affirmative case for education as a poverty-fighting measure rests primarily on three arguments. First, that educational outcomes strongly predict economic growth; second, that the individual economic benefits of more or better education are substantial; and third, that we should worry less about relative measures of poverty and more about absolute measures of poverty.

Education and Economic Growth

Doug bases his case for the importance of education to economic growth on Eric Hanushek’s analysis finding that

If one country’s test-score performance was 0.5 standard deviations higher than another country during the 1960s—a little less than the current difference in the scores between such top-performing countries as Finland and Hong Kong and the United States—the first country’s growth rate was, on average, one full percentage point higher annually over the following 40-year period than the second country’s growth rate.

Doug continues:

That may not seem like much, but, as Hanushek notes, world economic growth averages about 2 to 3 percent of GDP annually, so a difference of a full percentage point in growth is massive.

I, for one, have little trouble believing that education is correlated with economic growth. While his analysis is in many respects interesting, however, there are lots of reasons to doubt that Hanushek has found useful causal phenomena of the magnitude he suggests.

Hanushek admits that “[o]ther economic research has identified two additional factors that affect a country’s economic growth rate: the security of its property rights and its openness to international trade.” This highlights the fact even though economic growth is likely a complicated process dependent on many factors, we understand very few (only two?) of those factors. This makes it unlikely that it is currently possible to adequately control for all of the relevant factors to identify the “true” explanatory power of education.

Additionally, explanatory power in a correlation is not the same as magnitude of causality. Correlation is not causation, etc. I suspect that the correlation Hanushek identifies reflects some causality in the direction he and Doug expect, but our certainties about how much causation runs in each direction should be quite low.

More importantly, there are at least two reasons that Hanushek’s analysis does not speak directly to the question Doug and I are discussing (viz., whether education is the best way to fight poverty in the U.S.).

First, when we talk about “the importance of education” in the United States, we are really talking about the importance of education reform. We already have an extensive education system which means we are already reaping a substantial fraction of the potential benefits of education. The question is about the extent to which we can additionally improve our education system, and we can’t just assume we’re going to be able to get anywhere near the sorts of gains that Hanushek uses to illustrate “the importance of education” for economic growth. Those are hypothetical numbers, not options for us to choose off of a public policy menu.

Second, and as I mentioned to Doug on Twitter, economic growth is not the same thing as poverty reduction. Economic growth means increases in productivity and wealth, but poverty reduction is about the extent to which those economic gains flow to, and improve the material well-being of, the poorest people. To see why it’s a mistake to conflate economic growth and poverty reduction, these graphs of inflation-adjusted median household incomes are a good place to start:

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Median household data can be misleading – e.g., family sizes have shrunk, inflation measures are imperfect, and people can move between income quintiles  – but this is not a graph of an economy where the benefits of economic growth are flowing proportionally to the poorest households. During the time period examined in that graph, real GDP roughly tripled and per capita GDP roughly doubled, but our economic “floor” budged fairly little.

And lest you think that some sort of Simpson’s paradox is obscuring substantial gains by subgroups, consider how the household income numbers break down by race:

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Again, remember that this covers a time period of well-documented academic gains for most subgroups of students and for Black and Hispanic students in particular, but their incomes have not obviously risen accordingly. There are ways to slice the data that make the economic gains look somewhat better, but you have to slice them pretty fine to make it look like educational improvements are contributing to substantially reduced rates of poverty as a result of economic growth per se.

The Individual Returns to Education

Here’s Doug:

In the US, I reminded myself, not finishing high school or finishing high school with skills that don’t allow you to go on to college is one of the fastest way to increase your likelihood of ending up in poverty. (Would anyone dispute that? The trend in fact has steepened recently as middle class industrial jobs erode and “knowledge work” is the overwhelming way to the middle class and above).

Make no mistake: education seems to have positive, causal effects on earnings. Frankly, I find that literature daunting and my understanding of it is limited.

For present purposes it will suffice to say that however substantial the individual returns to education may be, they do not appear to be putting a major dent in our poverty rates. I would guess various factors are at play. For one thing, the returns to education are heterogeneous. Consider, for example, that a substantial fraction of recent college graduates earn less than the average high school-only graduate.

So while college is lucrative for the average student – and very lucrative for some fraction of graduates – a great many college graduates appear to be reaping much smaller economic gains from their degrees. If this is particularly true of marginal college students – those who would not have been ready for college at all if not for reform and who are perhaps less likely to enter the most lucrative fields – the poverty-fighting power of additional education may be limited.

Second, large shifts in overall levels of education may have effects on individuals’ returns to education. If, for example, the supply of high school graduates increases, that may put downward pressure on wages for high school graduates or drop-outs. This sort of dynamic effect would (I think) further reduce the impact of education on poverty at the national level.

Finally, it is worth remembering, again, that we are considering the effects of education reform, not of education as such. The standard line among education reformers today is that the best route to improving educational outcomes is through improvements in teacher quality, but you apparently have to improve a teacher’s quality by a full standard deviation to get a student even a 1% income boost at age 28. That’s not nothing, but it’s also a purely theoretical hypothetical; it’s not the kind of return that gives us much reason to think education reform is going to be the best way to fight poverty.

Measures of Poverty

Here’s Doug again:

My understanding is that Paul may have used GINI as a proxy for poverty but according to the World Bank, GINI is a measure of income distribution rather than of poverty. And this could be a major confounding factor. For example, roughly speaking, being in the bottom quintile of incomes in the United States makes you “poor”…relatively speaking. I do not intend to mitigate the suffering or difficulties that come with that poverty. (In fact, I work primarily with high poverty schools because i care so much about it) but being in the bottom quintile in the US would not make you poor in India or El Salvador.  Your income and quality of life would be far above the mean.  So your opportunity and quality of life even at the bottom of the economic hierarchy in the US is far better than that of people far higher on a relative ranking of poverty within other countries. So if i improved my nation’s schools and GDP growth went up steeply, everyone would become more prosperous and better off and poverty would be mitigated but my country’s GINI scores might not change. In fact they’d be just as likely to become more pronounced–poverty and income distribution are different things.

To clarify, the measure of poverty I used in my original post was the “poverty rate before taxes and transfers” with the “poverty” line set at 50% of each country’s median income. This is not technically the same as using Gini though most of the differences are unimportant here. Doug is correct that the measure of poverty I used is defined in some sense relative to each country’s overall wealth and that in absolute terms the poorest Americans are often better off than the median residents of much poorer countries.

Still, I think my chosen measure is preferable.

The fact that my chosen poverty measure is in some sense relative is a feature, not a bug. As far as I am aware all conversations about education reform in the United States are about improving welfare in the United States. Whether the poorest Americans are richer than the average residents of poorer countries is therefore immaterial. In a hypothetical conversation in which I have to choose between improving the absolute well-being of the poorest people in the world and improving the absolute well-being of the poorest quintile in the United States, I will likely prioritize the former. In our actual conversation about fighting domestic poverty, however, it seems not just useful but essential to factor in our overall level of wealth when thinking about what is possible or acceptable.

Also, even if we prefer to ignore our considerable national wealth when evaluating how effectively we are ameliorating suffering for our poorest citizens we still come out poorly in international comparisons. Here, for example, is a comparison of international child poverty rates measured both in relative (median income) and absolute (PPP) terms:

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Note that even using this more “comparable” measure the child poverty rate in the U.S. is still double or triple that in many other developed countries.

Compared to What?

The effectiveness of an intervention should always be understood in comparative terms. If my claim is that education is probably not the best way to fight poverty, that must be because I think there are better ways and I have been remiss in not stating them explicitly.

We know that the United States has already significantly reduced its poverty rate by collecting taxes and then transferring the money to less-fortunate families through tax credits and benefits:

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We also know that it is possible to have substantially lower rates of poverty than we have in the United States because other countries have successfully reduced their poverty rates well below ours. (Remember, this is true regardless of whether we are measuring poverty in relative or absolute terms.)

How have these countries achieved these reductions in their poverty rates? For the most part, they do it the way we’ve done it: via government redistribution (i.e., taxes and transfers). Here is a comparison of OECD countries’ pre- and post-transfer poverty rates:

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This is what education reform is competing against for the title of “best way to fight poverty”.

It will not do here to say that tax-and-transfer programs are less effective by hand-waving away their political viability. Their benefits are substantial in magnitude, we’ve implemented major programs in the past, and many programs today could still enjoy bipartisan support (especially if we avoid the ‘education-is-the-best-or-only-way’ narrative). We may not be close to implementing other, more effective poverty-fighting schemes, but we’re not obviously “close” to achieving any particular educational reform panacea, either.

Conclusion

Education is good and we should improve education when reasonably possible. Education may even have some utility when it comes to reducing poverty. Nevertheless, the claim that education is the best way to fight poverty seems both empirically false and politically destructive for other, more direct and effective poverty reduction measures.

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6 Comments

  1. EB
    Posted April 29, 2014 at 2:40 PM | Permalink

    This raises an interesting contrast that is sometimes glossed over. Your points illustrating the limited effectiveness of education in reducing poverty are pretty convincing, but I think some school reformers, when they describe the effects of their programs on poverty, are really describing the effect that education can have in increasing the number of children in the lower two income quintiles who succeed in rising to the upper three quintiles. In other words, really good education has (they hope, and I’m guessing they’re right) an effect on social mobility from the lower to the upper quintiles that transfer payments don’t have; that’s why they focus a lot on the effects of education.

    • Posted April 29, 2014 at 4:35 PM | Permalink

      That may be true for some reformers, but then they face a similar problems about why academic gains haven’t done much to boost mobility. I don’t know that international comparisons would be kind to that argument, either.

      Another problem is that I’m not sure why we’re supposed to care much about whether people sometimes shuffle between the income quartiles if the bottom quartiles involve so much unnecessary deprivation. It seems to me the bigger priority by far is raising the economic floor.

  2. Posted April 29, 2014 at 6:22 PM | Permalink

    Paul — you and Doug are both partially right (though you’re a little bit more right): Our current education system might help to chip away at poverty. But I think you both have it backwards with respect to the cause/effect relationship between poverty and education. I’d contend that it’s our high poverty rates, driven by our political obsession to avoid redistribution, that create an environment where a poor education system can exist and thrive.

    If we want a great system of education we need to abandon the idea that the it’s a solution to any problem. A great system of education is a goal unto itself. In order to build such a system in the United States we need to eradicate poverty by instructing the political oligarchy about the value of income and wealth redistribution. Call me a socialist, but the path to a society free of poverty, inequity, and injustice (if that’s the society we aspire to build), is a path that starts with redistribution of wealth. In such a society, an education system is likely to emerge where children are eager to participate in learning, where creative and effective methods of teaching are not supplanted by the need to discipline and maintain order, and where the subject of study is driven by the interests and curiosity of the student and not by a narrowly defined set of standards that exist to reduce and limit education to a functional process designed to produce a compliant, docile workforce.

  3. Ray
    Posted May 3, 2014 at 12:26 PM | Permalink

    Sweden provides on of the most interesting examples showing the disconnect between education “reform” and reducing poverty. As your chart shows, Sweden has one of the lowest poverty rates in the world. Interestingly, its education education results as measured by standardized tests are mediocre. Its results on the latest PISA test were below average and well below the results of the United States which were above the international average.

    Even more interesting is the story behind the dramatic drop in international rankings that Sweden has suffered over the past few years. Sweden did not always do so poorly on these tests. Then they instituted school “reforms” based on a commitment to government funded school choice that included private and for profit schools. I realize that this does not prove a connection, but it is interesting to note that Sweden’s education minister, Jan Björklund, said the Pisa results were “the final nail in the coffin for the old school reform,”

  4. ceolaf
    Posted April 22, 2015 at 9:33 AM | Permalink

    well done.

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