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Oct 12 / thomas.krafft

Simple reasons against privatizing education

Privatization efforts have become an increasingly popular farce force in American politics, with alarming resources being put into 1) cutting funding for (and thereby severely limiting the efficacy of) public programs, 2) using said reduced efficacy as supposed proof of the failure of public programs, and then 3) offering privatization as some great solution to the whole (fake, make-up) problem.

Here’s the simple truth: The real force behind efforts to privatize government and public programs is simple and pure greed. There are plenty of well connected business interests who would love nothing more than to insert themselves in between you and something you need, in order to profit from it. Privatization doesn’t eliminate or reduce the cost of anything — it simply adds a middleman.

But more importantly, all the rhetoric against any and all government programs has long since escaped any notion of reality. So, today, let’s understand why (some) government and public programs are not only important and essential, but literally impossible to privatize. The lessons here are applicable to almost any necessary service that promotes the general welfare, but we’ll start with education.

First, some facts: (note: figures vary by state, but overall averages are valid for purposes of this discussion)

  • It conservatively costs more than $10,000 per year to educate a child from kindergarten through 12th grade (graduating high school), for a total of $120,000 lifetime individual investment in K-12 education.
  • An average college education (4 year Bachelor’s degree from a state school, for state residents) will cost roughly $40,000 (paid by the individual).
  • The average amount of individual (federal plus state) tax burden, or the portion of individual federal and state taxes which are allocated to education, is roughly $1,400 per year (or $16,800 for a K-12 education).

For those of you keeping score, it costs roughly $160,000 to produce one average college-educated individual, while the average lifetime cost to each individual tax-payer is roughly $57,000. The important thing to note here is the $103,000 every tax-payer is not paying to educate someone. So, who’s paying the difference? Well, before we get there, let’s talk about what we get from education.

  • The average annual income for a high school graduate is $25,900, and we’ll assume this individual will work at least 39 years in their lifetime (calculations typically include data from age 25 to 64), for a minimum career earning potential of $1,010,100.
    • Notes: Average annual incomes vary by upwards of 5x when comparing those with the least education to those with the highest. High school drop-outs, for example, average $18,900 per year in wages (or $737,100 in career earnings), while those with advanced and professional degrees can earn as much as $99,300 per year (or $3,872,700 in career earnings).
    • For purposes of this discussion however, let’s just use an average calculation based on a standard 4 year degree (Bachelor’s) from a state school – for which graduates earn $45,400 per year or $1,770,600 over their entire careers.

Now here’s where the entire argument for or against privatization specifically of education hopefully becomes more clear…

The figures from the first half of this discussion, if taken alone, seem to show education is a big expensive waste of money, and a huge burden to the American economic system. Basically, it costs nearly 2.8 times more to educate someone, than we actually collect from individual tax-payers — with the difference made up by taxes on businesses and revenue from other sources.

However, when we factor in the second half of this discussion, we begin to see how investment in education perhaps might make some sense. For every $1 (from any source) invested in American education, we get more than $11 back into the American economy, from the income and wages earned by every individual over the course of their careers and professional lives.

But, wait. Weren’t we talking about privatization?

Yes. Yes we were.

Let’s say some group of politicians start telling you how you need the “freedom” to “choose” among greater educational offerings, where “private” schools can “compete” in a “marketplace” to give you better education. The entire position is based on an incredibly simplistic and straw-man reference to the system of capitalism (competition, efficiency, etc) we all know and love, but entirely leaves out the societal cost-benefit analysis.

Private education means you, the parent, will be required to pay the full cost of educating your child or children. The cost of education will not be spread among all individual tax-payers, and corporate taxes, and other tax revenue – but will be borne completely by you — the “consumer”. Private business also requires profit margins, so add 20% to the $10,000 annual cost. And, corporations also need to keep their investors happy by showing year-over-year growth of at least 5% — so, make sure to add 5% every year to your calculations. Also, let’s not forget that 2/3rd of households have no children, and people who do have children are generally are having fewer of them. This essentially means that $10,000 figure noted up top would need to be increased significantly before we even start privatizing education en masse because, in private business, no one else pays for anything you need.

And let’s not even get started on quality of education… We have seen, time and time again how private corporations will do everything possible to reduce costs, far beyond any notion of “efficiency” simply to maximize profits. In privatized education, the corporation will make sure your children receive the minimum benefits at the minimum cost. And since you can’t fire or un-elect your private school’s leadership, nor hold them accountable for how little your child knows upon graduating, you’re stuck – both in terms of out-of-pocket costs you just paid for 12 to 16 years, and for the reduced earning potential and lower wages your child will see in their lifetime due to the poor quality of education they received.

The above is basically (or should be) making clear some very important points: The government is us. The government will exist beyond our individual life spans. And, the government can afford to spend more money on some essential public programs than they get in direct reimbursement (immediate tax revenues), because they can also factor in the long term financial and other benefits to the entire market, ecosystem, or population — which in this case is very simply the fact that an average educated individual will return more than 11 times what we spent on them, back into the country, buying stuff, taking vacations, donating to worthy causes, building their own businesses (creating new jobs in the process), and investing in the economy.

If only the above data and references weren’t even necessary to this discussion… But sadly, the voices of privatization are exceptionally skilled at only telling you the part of the story that supports their flawed case.

Education is just one example where privatization literally makes no sense. Privatization is essentially an attempt by a few corporate interests to extract nearly half your child’s lifetime earning potential (and money that would otherwise go into every area of our economy) directly into their own pockets instead. By contrast, public education is willing to bear most of the cost of education, in exchange for enabling your child to go out into the world with increased earning potential and greater career options – which ultimately gives back more than $11 for every $1 spent.

When you hear the often attractive arguments for privatization, be sure and ask them to show you the lifetime cost-benefit of the public option compared to their private proposals, along with the actual year over year costs and increases you can expect from any switch. At least that’ll help keep the conversations somewhat closer to reality, for you and your family, and for society.

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