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LATEST NEWS UPDATES | Where the frontline is key to the bottomline -Lant Pritchett and Yamini Aiyar

Where the frontline is key to the bottomline -Lant Pritchett and Yamini Aiyar

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published Published on Nov 28, 2014   modified Modified on Nov 28, 2014
-The Indian Express

Prime Minister Narendra Modi has repeatedly promised India "maximum governance". But to get there, the high costs and ineffectiveness of frontline service providers need to be addressed. Take elementary school teachers, for instance.

"Complete rest in comfortable conditions" is the description a rather candid elementary education cluster resource centre coordinator (CRCC) in Bihar gave his own job. And it's not just him, it is also how the CRCC describes teaching from a government teacher's perspective: "a government (that is, a comfortable) job". This CRCC - responsible for academic support to teachers in 15-20 government schools - concludes: "The same teacher is likely to work harder and with greater effort in a private school." What he doesn't point out is that less effort comes with much higher pay but much lower student learning.

This CRCC's experience in Bihar resonates with recent research on the state of India's elementary education system. Nearly every empirical study on teachers in India shows that government teachers command high salaries. Significantly higher, as Geeta Kingdon's work in Uttar Pradesh shows, than private sector teachers. In UP, government teachers earn 20 times more than private sector counterparts. But, rather than working harder and better, evidence shows that government teachers are often missing in action. Karthik Muralidharan's 2014 study estimates an absence rate of 23.6 per cent. And when they are present, they spend much of their day engaged in non-teaching activities, or teaching with little professional competence, and exercise little effort.

But even as research on government teachers has highlighted the "comfortable conditions" under which they work, the full extent of the implications of these high wages and low levels of performance can only be judged through an analysis of the costs this imposes both on the learning achievement of children and on fiscal health.

The starting point for any discussion on efficiency is the distinction between "accounting cost" and "economic cost." The "accounting cost" is what the government spends on budget. The "economic cost" is the lowest possible cost at which services of a particular quantity and quality can be obtained. Wasteful expenditure can be included on government books as an "accounting cost", but the excess over economic cost is conceptually not a "cost" but a "subsidy."

To estimate the "accounting" and "economic" costs of a year of schooling, we draw on a data compiled by Accountability Initiative. These estimates show that in 2011-12 the accounting cost of education was Rs 14,615 per schooling year per student in a government school. The cost of sending a student to a private school was significantly lower at Rs 5,961, and hence the "economic cost" is at least that low. In other words, in a typical state, a student in a government school costs more than twice as much per year as parents spend on a child in a private school.

Just these accounting cost gaps aggregated by state suggest an annual excess cost of Rs 50,000 crore, or 0.6 per cent of GDP. The per-child gap is more than what a rural household spends on food per person. So the excess cost to government to school a child could double their food consumption. The difference in cost is largely due to the higher wages paid to government teachers - in some states, teacher salaries account for as much as 90 per cent of the education budget.

These high salary costs might be worth it if they resulted in high quality education. But evidence suggests the opposite. Learning levels in India's low-cost private schools, while low, are significantly better than in government schools. The annual ASER survey shows that in rural areas of the median state, the fraction of students in Class V who can read a simple story (or better) in a government school is 10 percentage points lower than students in private schools, while the gap between students who can do basic subtraction (or better) in Class V in government schools is 19 percentage points.

In other words, there are two dimensions to the inefficiency of government expenditure: higher costs and lower performance. What is the total cost of the inefficiency?

To get money total to the loss from learning ineffectiveness, we calculate what the government would have to spend at its existing cost structures to achieve the private sector results. Our calculations show that the excess cost of reaching private sector learning levels at current public sector costs is a staggering Rs 2,32,000 crore, or 2.8 per cent of GDP. This is more than total spending, because the value of the losses from low learning is larger than the pure accounting cost excesses.

Two important consequences emerge. First, conceptually, this highlights that the current government "cost" of education is not a necessary "cost" of education. Although the government pays high wages to teachers, this is a political decision, not an economic cost. Quality teachers can be attracted into teaching, retained as teachers and motivated to perform at far lower costs. This conclusion does not depend on comparisons with the private sector. Accountability Initiative's PAISA surveys record the average contract teacher salary in government schools at Rs 6,775. And research from states as varied as UP and Andhra Pradesh finds these teachers perform at least as well (or much better) for their students. A crude calculation at the national level is that, with these wage differences, the annual cost per child of a year of schooling could be lower by Rs 11,000 per child, suggesting that the total fiscal cost from excess payments to teachers is roughly Rs 90,000 crore.

We are not saying that India shouldn't be paying its teachers well. But they should be paid well for teaching well. Simply paying teachers more without an expectation of high performance or means of accountability isn't a "wage". It is a subsidy.

Second, these calculations turn the debate on the costs of welfare programmes and social protection in India on its head. The current high-decibel public debate on India's inefficient subsidy bill misses the point. The three subsidies that have occupied the debate - food, fuel and fertiliser - cost the government 2.5 per cent. The other programme at the centre of the current debate, the MGNREGA, accounts for 0.3 per cent of GDP. But as our calculations show, the total loss to the government from an inefficient frontline is far higher.

Current calculations of who benefits from public spending are wrong. The methods assume that a child in a government school receives "benefits" equal to the accounting cost and hence the "benefits" of schooling are quite progressively distributed. But in reality, the "benefit" to a child is at most the quality-adjusted achievable cost - the rest is a rent or subsidy that goes to others, mainly teachers. Given that the current teacher wage in most states would put a household of four in a rural area into the 90th percentile of the distribution of consumption, much government spending is not a "benefit" to students but a subsidy flowing to quite well-off households.

Pritchett is professor of the practice of international development at Harvard Kennedy School, US. Aiyar is senior fellow, Centre for Policy Research and director, Accountability Initiative, Delhi. This material has been funded by the UK's Department for International Development.

 

The Indian Express, 28 November, 2014, http://indianexpress.com/article/opinion/columns/where-the-frontline-is-key-to-the-bottomline/99/


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