Private Schooling : Limits and Possibilities October 2005

This paper looks at the private schooling sector in Pakistan, a country that is seriously behind schedule in achieving the Millennium Development Goals. Using new data, we document the phenomenal rise of the private sector in Pakistan and show that an increasing segment of children enrolled in private schools are from rural areas and from middle-class and poorer families. We argue that private schools are better able to adapt to local conditions and use local labor markets in a cost-effective manner, allowing the savings to be passed on to parents through very low fees. We explore two strategies—the use of coeducational schools and the use of female teachers who are locally resident— that private schools follow to ensure low costs in the provision of education. This mechanism—the need to hire teachers with a certain demographic profile so that salary costs are minimized—defines both the possibility of private schools (where they arise, fees are low) and their limits (private schools will not arise everywhere and at all levels of education). The 2000 Millennium Development Goals (MDGs) created a powerful global consensus to improve the development of poor countries by 2015. Central to this promise are the MDGs related to educational outcomes: (1) ensure that all children complete primary education by 2015 and; (2) eliminate gender disparities in primary and secondary education by 2005. By 2005, most countries had already fallen well behind the necessary targets to meet these goals and the second target had been missed by a large margin. These worrying trends led to renewed calls for greater public investment in schools through school construction, teacher training programs and cash transfers for children. Notably absent from the debate has been the role of private schools. This paper looks at the private schooling sector in Pakistan, a country that is seriously off-track in achieving the MDG goals. Using new data, we document the phenomenal rise of the private sector in Pakistan and show that an increasing segment of children enrolled in private schools are from rural areas and from middle-class and poorer families. We argue that private schools are better able to adapt to local conditions and use local labor markets in a cost-effective manner, allowing the savings to be passed on to parents through very low fees. If replicable in other countries, the results suggest that separating the financing of education (the government) from the provision of education (through the private sector) will have large gains, without necessarily sacrificing equity. One reason why private schools have never been seen or used as an instrument for mass education is that they typically serve the elite. In the US, 4 percent of low-income families send their children to private schools compared to 19 percent among the rich. Of parents with less than high school education, only 3 percent send their children to private schools; for parents with graduate or professional degrees, the share increases to 19 percent. Moreover, the share of private schooling is higher in tertiary and secondary education compared to primary education, by which time a large share of children from poor families have dropped out. These patterns are not unique to the US, neither are they unique to high-income countries. The share of private schooling is higher in secondary compared to primary education for the majority of the sample(Table 1) ; in the others the difference is fairly low and is usually associated with the high state funding of private schools (Belgium, Spain, Netherlands and Chile are four such examples). In contrast, countries such as Pakistan and Zimbabwe in Sub-Saharan Africa and Lebanon and the gulf-states in the Middle East stand out, with both high private school enrollment and a larger share at the primary level. South Asian countries such as Pakistan, Bangladesh and India all show high shares of private enrollment at the primary level. A study on private education in India (Tooley, 2001, pg.13) (which has private share of 15%) recently observed that “Any visitor to the ‘slums’ of any of the big cities in India will be struck by the sheer number of private schools—there seems to be one on almost every street corner or down every alleyway. Some of these confusingly follow what they see as an English tradition and call themselves public schools but they are wholly private in every way and are certainly not elite institutions. ” Two considerations drive our focus on Pakistan. First, the extent of private schooling in Pakistan is striking. In 2000, 35 percent of children enrolled in school at the primary level were in private schools, and this number falls by a third for middle and high schools to 25 percent. Private schooling in Pakistan at the primary level is large, widespread and increasing over time. Second, Pakistan is the only low-income country, to our knowledge, that has a high quality census of all private schooling facilities in the country. These data allow us to understand the structure of private schools throughout the country; the large sample size permits useful comparisons even in regions where the extent of private schooling is smaller. Using data from the census of private schools and household surveys, we document that the growth in private schooling is higher in rural compared to urban areas and is high among the poorest segments of the population. What is equally remarkable is that these schools are overwhelmingly for-profit enterprises—they have sprung up around the country without much state regulation or subsidy. A natural question, and one that defines the possibilities and limits of private schooling, is how and to what extent for1 There do not exist any clear patterns in a preliminary cross country economic analysis of prevalence of private education as country specific institutional context matters in whether private education is subsidized by the state or not. profit schools are able to grow and cater to a wide variety of households, many of whom are drawn from the poorer segments of the population, within a market setting. We use a variety of data sources to examine this question. Data from the census of private schools provide information on school location and fees. Data from two rounds of the Pakistan Integrated Household Survey (PIHS) in 1991 and 2001 are combined to study trends in enrollments for the rich and poor in rural and urban areas. Data from the 1998 population census present a detailed picture of the extent of private school enrollment at a highly disaggregated level. Finally, data collected by the authors on the demographic composition and salary structure of close to 5000 teachers in public and private schools allow us to complete the “balance-sheet” of a typical private school. We document that private schools are popular among the poor because they charge (very) low fees. A typical private school in a rural village of Pakistan charges Rs.1000 ($18) per year, which represents 4 percent of the GDP per capita for the country. In the US, private schools (elementary and secondary) charged $3524 in 1991. At 14 percent of GDP per capita, the relative cost of private schooling is almost 3.5 times as high in the US compared to Pakistan. At an accounting level, for-profit schools can survive with low fees only if costs are also very low. We explore two strategies—the use of coeducational schools and the use of female teachers who are locally resident—that private schools follow to ensure low costs in the provision of education. Using data on school revenues and salary structures, we show that private schools are exceptionally adept at maintaining low wages for teachers. Since wage costs of teachers constitute the bulk of educational budgets around the world, lowering wages significantly reduces the overall cost of providing education. Private schools primarily employ young, single, moderately educated and untrained local women and pay them relatively low wages. This mechanism—the need to hire teachers with a 2 These schools are not religious schools, or madrassas. A recent study by the authors (Andrabi, et. al. 2005) shows in detail that in fact contrary to popular views, religious schools play a much smaller role in Pakistan. In fact the share of religious schooling is less than one percent, lower than that in the US (check? ). 3 Private Schools in the United States: A Statistical Profile 1990-91, NCES Statistical Study, January 1995, Table 1.5. certain demographic profile so that salary costs are minimized—defines both the possibility of private schools (where they arise, fees are low) and their limits (private schools will not arise everywhere and at all levels of education). Understanding the evolution of the private sector for education in Pakistan has wider implications. Governments in low-income countries around the world are struggling to meet the educational demands of an ever increasing young population. In Pakistan half the population is less than 17 years old and this proportion is increasing. With less than 60 percent of children enrolled in school, there are already signs of stress. Mean studentteacher ratios in government schools exceed 40 and have been rising. School construction has slowed down and less than half of all classrooms have desks for their children. Private schools can play a role in breaking these institutional constraints, and the Pakistani experience demonstrates that they can do so without catering only to the elite. This then is the possibility that private schools represent—in the villages that they choose to locate in, they are relatively cheap, used by the poorer segments of the population and reduce the considerable stress on over-burdened public schools. Simultaneously, the Pakistani experience shows that private schools are not a panacea—there are real limits to where these schools will arise and the type of education they can impart. The reasons why private schools op