Investing in education in a post-Covid EU.
Date: 2022-06-16
Institutions: Directorate-General for Education, Youth, Sport and Culture
Subjects: EU Member State, coronavirus disease, economic growth, economic recession, education budget, educational system, investment, public expenditure, public finance

Investing in education 

in a post-Covid EU 

EUROPEAN COMMISSION 

Directorate-General for Education, Youth, Sport and Culture 
Directorate A — Policy Strategy and Evaluation 
Unit A.4 — Evidence-Based Policy and Evaluation 

Contact:  Marco Montanari 

E-mail:  eac-unite-a4@ec.europa.eu

European Commission 
B-1049 Brussels

EUROPEAN COMMISSION 

Investing in education 
in a post-Covid EU 

Directorate-General for Education, Youth, Sport and Culture 

2022 

EN 

Manuscript completed in May 2022 

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5 

Foreword 

The Covid-19 pandemic triggered the biggest disruption to 
our  societies  and  economies,  including  our  education 
systems, since World War II. Responding to the crisis has 
forced national governments to increase their spending to 
keep  the  economy  and  public  services  afloat.  This 
situation  has  brought  about  significant  opportunities  as 
well as challenges for investment in the education sector. 

This report is a first attempt to document how EU Member 
States  adapted  their  education  investment  to  cope  with 
the outbreak of Covid-19. The report also highlights some 
the  similarities  and 
lessons 
differences  with  the  previous  economic  and  financial  crisis  at  the  end  of  the  2000s.  The  main 
message is clear: education is part of the solutions and preserving investment in education will be 
key to improving future economic growth in the EU and keeping our Member States’ public finances 
sustainable. However, we will reach these goals only if investment in education is of high quality.  

learnt  by  analysing 

The European Commission is committed to better understanding which investments produce greater 
returns  in  terms  of  educational  outcomes  and  equity,  as  part  of  the  implementation  of  the 
European Education Area. By working together with our Member States, we aim at strengthening the 
quality of investment in education in the long term. To meet this objective, I have decided to create 
a “Learning Lab on Investing in Quality Education and Training”, to be launched in November 2022. 
This lab will work to improve the quality of data and promote the use of rigorous evaluation tools 
and  practices  in  education  policymaking.  It  will  help  authorities  to  make  the  most  of  the  public 
resources invested in education.  

At this point in time, the EU is channelling more funds into education and training than ever before 
through various  programmes.  The  Recovery  and  Resilience  Facility  is particularly important  in this 
respect, as it will make almost €50 billion available to all Member States to modernise and improve 
their  education  systems.  We  must  live  up  to  our  ambitions,  so  that  the  resources  invested  in 
education open up new opportunities and maximise learning outcomes, inclusion and well-being of 
all our youth. 

Mariya Gabriel  

Commissioner for Innovation, Research, Culture, Education and Youth 

Executive summary 

7 

The  Covid-19  pandemic  affected  investment  in  education.  Public  expenditure  on  education 
continued its increasing trend in nominal terms in 2020, but the economic effects of Covid-19 had 
a large impact on its main indicators. On the one hand, public expenditure on education as share of 
GDP  largely  increased,  due  to  the  heavy  recession  which  reduced  GDP.  On  the  other  hand,  it 
significantly dropped as a share of total public expenditure because of stronger increases in public 
expenditure on some other sectors, in particular to support economic activities during the lockdown 
periods. These dynamics do not allow identifying any new trend for investment in education. There 
is  a  need  to  explore  what  happened  to  public  expenditure  on  education  in  the  aftermath  of  the 
economic and financial crisis at the end of the 2000s (the ‘Great Recession’) and look for possible 
similarities and differences with the post-Covid period. 

The  lesson  from the  Great  Recession  is  that  the  aftermath was  very  difficult  for  some 
countries, but not necessarily bleak everywhere. EU Member States’ patterns of investment in 
education  were  quite  heterogeneous.  In  post-crisis  years,  some  countries  significantly  cut  public 
expenditure on education due  to fiscal consolidation,  but  others  did not. It was  possible for  many 
countries  to  prioritise  investment  in  education  compared  to  other  sectors,  even  in  a  fiscal 
consolidation paradigm. Overall, Member  States  with lower public  deficit at the  end of the  2000s 
were subsequently able to have more positive trends in public expenditure on education. 

But there are also important differences in the EU response to the Covid crisis compared 
with  the  Great  Recession,  which  make  the  current  situation  more  favourable  to 
investment in education. Member States have benefitted from a more flexible application of EU 
fiscal rules in 2020-2022, while the Recovery and Resilience Facility provides support for reforms 
and investment. 

Nevertheless,  in  the  medium-to-long  term,  education  may  have  to  compete  more  for 
public  funding  with  other  sectors.  Quality  investment  in  education  means  making  investment 
effective, equitable and efficient. This is why the Commission has been working with Member States 
since  the  November  2019  joint  debate  of  Ministers  of  Education  and  Finance  and  will  create  a 
learning laboratory to promote sound education policy evaluation. In the long term, if investment in 
education improves  economic  growth,  it  will  also  help make public debt more  sustainable.  With  a 
declining working-age population, the EU economy will require higher employment rates to ensure 
sustained growth. Education will be key to achieving this objective, because better-educated people 
have  better  employment  prospects.  These  potential  benefits  call  for  preserving  investment  in 
education in the medium-to-long term. 

9 

Table of Contents 

1. Investment in education in 2020:

An atypical year for the EU................................... 11 

2. Investing  in  education  in  the  aftermath  of
an  economic  crisis:  the  Great  Recession
versus the Covid-19 crisis...................................... 17 

3. Preserving  investment  in  education  in  the
future:  the  challenges  of  quality,  fiscal
sustainability and demography ......................... 23 

Annexes 

1. Public  expenditure  on  education  by  educational
level and category in 2020 ......................................... 30 

2. Further details about Figure 5 ................................... 32 

3. References .......................................................................... 34 

 
 
 
 
 
 
1. Investment  in  education  in  2020:  an  atypical

year for the EU

11 

1. Investment in education in 2020:

an atypical year for the EU

12 

Investing in education in a post-Covid EU 

2020  was  a  challenging  year  for  the  EU.  The  Covid-19  pandemic  has  exposed  the  education 
community  to  new  realities and  caused  a serious  disruption  of  its  activities,  which  affected  both  the 
individuals and society as a whole. The Covid-induced economic recession and the subsequent response 
by  Member  States  had  a  large  impact  on  general  government  expenditure  (henceforth,  ‘public 
expenditure’) on education as a share of GDP and as a share of total public expenditure.1  

Public  expenditure  on  education  as  a  share  of  GDP  peaked  at  5%  in  the  EU.  Public 
expenditure on education increased by around 2% in the EU in nominal terms,2 continuing its increasing 
trend (Figure 1).  This,  combined  with  a  heavy  GDP  decline,3 produced  a  spike  in  public  expenditure  on 
education as a share of GDP (+ 0.3 percentage points compared to 2019), similarly to what happened in 
2009  due  to  the  outburst  of  the  economic  and  financial  crisis  (the  ‘Great  Recession’).4  Consequently, 
this indicator reached  its  highest  level  in  the  EU  as  a  whole  since  2009  (Figure  2).  At  country  level,  it 
ranged  from  7.2% in Sweden to 3.7% in Romania.  

By contrast, public expenditure on education as a share of total public expenditure dropped 
significantly.  The  EU  average  declined  from  10.1%  in  2019  to  9.4%  in  2020,  reaching  a 
historical  minimum  (Figure  2).  Figure  3  explains  why  this  happened,  by  showing  the  changes  in  the 
composition  of  total  public  expenditure  between  2019  and  2020.  “Economic  affairs”  (which  include 
the  measures  to  support the various productive sectors affected by the lockdowns and/or other Covid-
related  restrictions)  jumped  by  2.1  percentage  points  (European  Commission  2022c).  The  only 
other  function  that  (marginally)  increased  its  share  was  “Health”,  because  of  the  response  to  new 
public  health  needs.  Other  expenditure  functions  saw  their  share  declining,  and  education  experienced 
one of the largest drops.     

The various dynamics induced by Covid-19 qualify 2020 as an atypical year for investment 
in education, but do not allow identifying any new trend. Only in 2024, when expenditure data up 
to  2022  will  be  available,  it  will  be  possible  to  have  a  clearer  picture  of  how  the  EU  and  its  Member 
States reacted  to  the  Covid-19  crisis  and  which  trajectories  investment  in  education  may  take  in  the 
2020s.  However,  a  possible  way  to  provide  useful  forward-looking  insights  is  studying  past 
experiences.  The  next  section  will  analyse  what  happened  to  public  expenditure  on  education  in  the 
aftermath  of  the  Great  Recession.  By  comparing  the  situation  after  2009  with  the  present  one  and 
looking  for  possible  similarities  and  differences,  it  will  try  to  draw  some  lessons  for  the  post-Covid 
period. 

1

2

3

4

Annex  1  presents an analysis  of  indicators  of  public  expenditure  on  education  not  affected  by  Covid-19,  i.e.  the  breakdowns  by 
educational level and by category of expenditure. 

This report will use expenditure data at current prices (i.e., in nominal terms, not adjusted for price variations over time) because its 
focus is on investment in education in a public finance context, where budgetary items are defined in nominal terms. 

The EU GDP decreased by 4.4% in nominal terms in 2020. See Eurostat, National accounts (ESA 2010) database. Online data code: 
namq_10_gdp.   

The EU GDP decreased by 4.5% in nominal terms in 2009. See Eurostat, National accounts (ESA 2010) database. Online data code: 
namq_10_gdp.   

Investing in education in a post-Covid EU 

13 

Figure 1. Evolution of public expenditure on education (2018-2020) 

Year-on-year nominal change (%) 

Share of GDP (%) 

Share of total public expenditure (%) 

2018 

2019 

3.9 

3.0 

7.0 

19.0 

2.0 

5.1 

18.6 

5.5 

6.8 

2.8 

1.5 

4.0 

3.7 

2.2 

9.1 

7.3 

6.8 

9.3 

3.8 

2.7 

18.2 

13.8 

1.6 

5.0 

5.6 

7.8 

-0.6

4.8

1.7

6.8

0.8

9.6

3.4

9.2

8.3

3.2

15.7 

10.9

3.4 

3.1 

8.8 

1.4 

23.5 

5.5 

7.5 

1.3 

7.3 

3.6

3.3

8.4

5.2

28.2

7.2

13.6

3.9

4.9

EU 

BE 

BG 

CZ 

DK 

DE 

EE 

IE 

EL 

ES 

FR 

HR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

2020 

2.2 

2018 

2019 

2020 

4.7 

4.7 

5.0 

3.2 

4.5 

2.8 

1.6 

4.2 

4.0 

3.2 

0.7 

3.8 

-0.9

5.7

0.7

5.8

-0.3

13.4

6.8

1.2

7.6

4.5

1.1

5.0

4.5

1.0

2.2

5.3

3.2

2.4

6.2 

3.5 

4.6 

6.4 

4.3 

6.2 

3.2 

4.1 

4.0 

5.3 

4.7 

3.9 

5.0 

5.8 

4.5 

4.6 

5.0 

5.0 

5.1 

4.8 

5.0 

4.4 

3.2 

5.4 

3.9 

5.5 

6.9 

6.1 

3.8 

4.9 

6.3 

4.3 

6.1 

3.1 

4.0 

4.0 

5.2 

4.7 

3.9 

5.2 

5.7 

4.6 

4.8 

4.7 

5.1 

5.0 

4.8 

5.0 

4.5 

3.6 

5.5 

4.3 

5.6 

6.9 

6.6 

4.0 

5.1 

6.4 

4.7 

6.6 

3.1 

4.5 

4.6 

5.5 

5.4 

4.3 

5.9 

5.9 

5.2 

5.0 

4.7 

5.9 

5.3 

5.1 

5.2 

5.0 

3.7 

5.8 

4.6 

5.9 

7.2 

2018 

10.0 

11.9 

9.5 

11.3 

12.6 

9.6 

15.8 

12.6 

8.4 

9.5 

9.6 

10.3 

8.1 

11.8 

14.8 

13.3 

10.9 

10.9 

13.9 

12.0 

9.8 

12.0 

10.3 

9.1 

12.4 

9.9 

10.4 

13.8 

Source:  Eurostat COFOG database. Online data code: [gov_10a_exp]  

Note: 

Provisional data for: DE (2018-2019-2020); ES (2020); FR (2019-2020); PT (2020). 

2019 

10.1 

11.8 

10.7 

11.8 

12.7 

9.6 

15.5 

13.0 

8.3 

9.6 

9.5 

10.3 

8.0 

13.5 

15.0 

13.2 

11.1 

10.3 

14.1 

11.9 

9.9 

12.0 

10.5 

10.1 

12.6 

10.5 

10.5 

14.1 

2020 

9.4 

11.2 

9.5 

10.8 

11.9 

9.2 

14.3 

11.3 

7.4 

8.8 

8.9 

10.0 

7.5 

13.0 

13.8 

12.0 

10.5 

9.2 

12.8 

11.0 

8.9 

10.7 

10.1 

8.8 

11.2 

10.1 

10.2 

13.6 

14 

Investing in education in a post-Covid EU 

Figure 2. Public expenditure on education as a share of GDP and of total public expenditure in 
the EU (2007-2020) 

10.5

10.0

9.5

9.0

8.5

8.0

6.5

6.0

5.5

5.0

4.5

4.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

% of GDP (left-hand scale)

% of total public expenditure (right-hand scale)

Source:   Eurostat COFOG database. Online data code: [gov_10a_exp]  

Figure 3. Public expenditure by function between 2019 and 2020  

Economic affairs 

Health 

Housing and community amenities 

Environmental protection 

Defence 

Public order and safety 

Recreation, culture and religion 

Social protection 

Education 

General public services 

2019 
(% of total) 
9.4 

2020 
(% of total) 
11.5 

15.0 

15.1 

1.2 

1.7 

2.6 

3.6 

2.5 

41.5 

10.1 

12.4 

1.2 

1.6 

2.5 

3.4 

2.3 

41.3 

9.4 

11.6 

Yearly change 
(percentage points) 

2.1 

0.1 

0.0 

-0.1 

-0.1 

-0.2 

-0.2 

-0.2 

-0.7 

-0.8 

Source:   Eurostat COFOG database. Online data code: [gov_10a_exp]  

 
 
 
 
 
 
 
  
 
 
 
 
 
 
16 

Investing in education in a post-Covid EU 

 
 
 
 
2. Investing  in  education  in  the  aftermath  of  an
economic  crisis:  the  Great  Recession  versus  the
Covid-19 crisis

2. Investing  in  education  in  the
aftermath of an economic crisis:
the  Great  Recession  versus  the
Covid-19 crisis

18 

Investing in education in a post-Covid EU 

The  Great  Recession  strongly  hit  the  EU  economy  and  public  finances,  leading  to  fiscal 
consolidation needs. The Great Recession reduced EU GDP for five consecutive quarters between 2008 
and  2009.5  Consequently,  public  finances  deteriorated  in  most  countries.  At  EU  level,  general 
government net borrowing (henceforth, ‘public deficit’) as a share of GDP increased from 0.5% to 2.0% 
in  2008  and peaked  at  6.0%  in 2009  and  2010.  It returned below  the  3%  reference  value  set by  the 
Treaty  on  the  Functioning  of  the  European  Union6  only  in  2013,  when  it  reached  2.9%.  General 
government  consolidated  gross  debt  (henceforth,  ‘public  debt’)  peaked  at  86.5%  of  GDP  in  2014,  24 
percentage points  above  its  level  in  2007.  All  EU  Member  States,  except  for  Estonia,  Luxembourg  and 
Sweden,  were  subject  to  the  Excessive  Deficit  Procedure  and  had  to  take  specific  measures  to  correct 
their excessive deficits (European Commission 2022a).7  

Overall EU countries with sounder public finances at the peak of the Great Recession tended 
to  preserve  or  increase  investment  in  education  in  subsequent  years.  Figure  4  shows  a 
significant  negative  association  among  EU  countries  between  the  level  of  public  deficit  as  a  share  of 
GDP in 2009 and the change in public expenditure on education in 2009-2013. Large fiscal consolidation 
needs  led  to  particularly  pronounced  cuts  in  expenditure  on  education  in  some  countries  (Greece, 
Portugal and Spain), while several countries with more fiscal space largely increased their expenditure. 

However,  there  was  no  one-size-fits-all  response  to  fiscal  consolidation  needs.  Figure  4 
provides  a  general  picture  of  the  relationship  between  fiscal  consolidation  needs  and  expenditure  on 
education,  but  it  cannot  tell  whether  Member  States  prioritised  education  vis-à-vis  other  public 
expenditure  functions.  This  is  done  in  Figure  5.  It  summarises  how  public  expenditure  on  education 
changed  (in percent  terms) compared with  the  rest  of public expenditure in Member  States,  five  years 
after each country had reached its highest deficit-to-GDP ratio. Full details and all the  country-specific 
graphs used to construct Figure 5 are in Annex 2. Four different areas are identified with capital letters 
in Figure 5, each one corresponding to a different pattern:  

A: Expenditure on education increased more8 than the rest of public expenditure;  
B: Expenditure on education increased, but less than the rest of public expenditure; 
C: Expenditure on education decreased, but less than the rest of public expenditure;  
D: Expenditure on education decreased more9 than the rest of public expenditure.  

Countries  in  areas  A  and  C  prioritised  education  compared  to  other  sectors,  while  in  relative  terms 
education  suffered  most in  countries  in  area  D.  Around  half  of Member  States were in  area A  and  22 
countries  (areas  A+B)  had a  higher  expenditure  on  education  than five  years before, when  their  public 
deficit had peaked. In the remaining five countries, expenditure on education was still significantly lower 
than five years before, but with different patterns. In Portugal, Spain and Italy (area D), cuts in education 
were larger than for other sectors, while the opposite happened in Cyprus and Greece (area C).  

5  

6  

7  

8  

9  

From the second quarter of 2008 to the second quarter of 2009 included. See Eurostat, National accounts (ESA 2010) database. 
Online data code: namq_10_gdp.  

Art. 126(2) and annexed Protocol on the Excessive Deficit Procedure, Art.1. 

According to Art 126(7) of the Treaty on the Functioning of the European Union. 

This  also  applies  to  a  situation  where  expenditure  on  education  increased  while  the  rest  of  public  expenditure  decreased.  For 
instance, this is what happened in Ireland and Slovenia. 

This  also  applies  to  a  situation  where  expenditure  on  education  decreased  while  the  rest  of  public  expenditure  increased.  For 
instance, this what happened in Italy. 

 
 
 
 
 
                                                 
Investing in education in a post-Covid EU 

19 

Figure  4.  Public  finance  situation  in  2009  and  change  in  public  expenditure  on  education 
between 2009 and 2013 

Source:   DG EAC calculations based on Eurostat COFOG and Government deficit and debt data. 

Note:  

Pearson correlation coefficient (r = -0.62) statistically significant at 1% level. 

Figure  5.    Changes  in  public  expenditure  on  education  and  total  public  expenditure  net  of 
education five years after the peak in public deficit-to-GDP ratio (index year t=100) 

Source: DG EAC calculations based on Eurostat COFOG data 

Note: The diagonal axis (y=x) identifies all points where public expenditure on education and the rest of public expenditure 
would have had the same percent change. See Annex 2 for more details.  

 
 
 
 
 
 
 
 
20 

Investing in education in a post-Covid EU 

The  experience  from  the  Great  Recession  is  that  the  aftermath  of  the  crisis  strongly 
penalised  investment  in  education  in  some  countries,  but  the  picture  was  not  necessarily 
bleak  everywhere.  Most  countries  were  able  to  at  least  preserve  investment  in  education  even  in  a 
fiscal consolidation paradigm and many actually prioritised public expenditure on education compared to 
expenditure on other sectors.  

The immediate impact of the Covid-19 crisis on public finances was even stronger than that 
of the Great Recession, but there have also been important differences in the EU response. 
Between 2019 and 2020 (i.e. in just a single year), the EU public deficit-to-GDP ratio rose from 0.5% to 
6.9% and the public debt-to-GDP ratio increased by 13 percentage points, reaching 90%. However, the 
EU response did not focus on fiscal consolidation. This has made the current situation more favourable 
to investment in education through two main channels.  

First, Member States have benefitted from a more flexible application of the EU fiscal rules 
in  2020-2022.  Already  at  the  beginning  of  the  Covid-19  pandemic,  in  March  2020  the  Commission 
argued that “the scale of the fiscal effort needed to protect European citizens and businesses from the 
consequences  of  this  crisis,  and  to  support  the  economy  following  the  pandemic,  requires  the  use  of 
more  far-reaching  flexibility  under  the  Stability  and  Growth Pact”10  (European  Commission 2020, p.  1). 
Consequently, from 2020 to 2022 the Commission activated the so-called ‘general escape clause’: in a 
period of severe economic downturn for the EU as a whole, Member States can temporarily deviate from 
their  medium-term  budgetary  objectives  (European  Commission  2020;  European  Commission  2022b). 
This has given EU countries more room for using public expenditure to respond to the crisis than after 
the Great Recession, including in education. The general escape clause will be extended through 2023, 
because of increased economic uncertainty “in the context of war in Europe, unprecedented energy price 
hikes and continued supply chain disturbances” (European Commission 2022f, p.12). 

Second, the new NextGenerationEU programme, through its Recovery and Resilience Facility, 
may  become  a  game-changer  by  spurring  reforms  and  boosting  investment  in  education 
across  the  EU.  As  part  of  a  wide-ranging  response  to  the  Covid-19  crisis,  in  February  2021  the  EU 
established the Recovery and Resilience Facility (RRF).11 Running from 2021 to 2026, the RRF aims to 
mitigate the economic and social impact of the crisis and make European economies and societies more 
sustainable, resilient and better prepared for the challenges and opportunities of the green and digital 
transitions.  By  February  2022,  22  national  Recovery  and  Resilience  Plans  had  been  adopted  and  the 
financial  amount  allocated  in  these  plans  through  grants  and  loans  totalled  €445  billion.  Measures 
related  to  pillar  6  ‘Policies  for  the  next  generation,  children  and  the  youth,  such  as  education  and 
skills’ accounted  for  €49  billion,  representing  approximately  11%  of  the  total  budget.  The  estimated 
spending  on  education  (from  early  childhood  education  and  care  to  tertiary  education)  amounted  to 
around  €45  billion,  i.e.  about  10%  of  the  total  budget  (European  Commission  2022e).  Box  1  provides 
some  examples  of  how  Member  States  plan  to  use  the  RRF  to  promote  reforms  and  investments  in 
education. 

10  

11  

The Stability and Growth Pact is a set of rules designed to ensure that EU countries pursue sound public finances and coordinate 
their fiscal policies. 

Regulation (EU) 2021/241 of 12 February 2021. 

 
 
 
 
 
                                                 
21 

CLOSE-UP 

Examples  of  investments  and  reforms  in  education  in  the  national 
Recovery and Resilience Plans 

  Italy 

Italy’s  Recovery  and  Resilience  Plan  (RPP)  is  structured  around  6  areas  of  intervention  (‘Missions’), 
representing  a  total  investment  of  €191.5  billion  (€68.9  billion in  non-repayable  financial  support  and 
€122.6  billion  in  loans).  Mission  4,  ‘Education  and  research’,  is  allocated  almost  €31  billion.  Of  this 
amount, more than €19 billion (around 10% of the total RRP) are for measures related to strengthening 
the education and training offer and improving its quality at all levels, from early childhood education 
and  care  to  higher  education.  Further  measures  for  the  reskilling  and  upskilling  of  the  workforce  are 
planned in other parts of the RRP. To this end, the plan envisages interventions in the following areas:  

- strengthening and improving the education offer; 
- improving teachers’ recruitment and training; 
- extending competences and improving infrastructure; 
- reforming and enhancing the PhD system. 

  Portugal 

The EU will provide €13.9 billion in grants and €2.7 billion in loans to Portugal under the Recovery and 
Resilience  Facility  (RRF).  Investments  related  to  education  and  skills  represent  about  13%  of  the  total 
RRF  budget.  The  Portuguese  RRP  aims  to:  (i)  build  childcare  facilities  and  provide  financial  support  to 
low-income families  to increase  their  children’s  participation  in early  childhood  education  and  care;  (ii) 
improve  digital  and  STEAM  (science,  technology,  engineering,  arts  and  mathematics)  education;  (iii) 
invest  in  energy  efficiency  in  school  buildings  and  affordable  accommodation  for  higher  education 
students;  and  (iv)  help  modernise  vocational  education  and  training  and  upskill/reskill  adults.  For 
disadvantaged  communities  in  the  deprived  metropolitan  areas  of  Lisbon  and  Porto,  it  provides  for 
investment  into  schools  and  projects  to  combat  school  failure  and  reduce  the  number  of  dropouts  by 
fostering vocational education and training. 

  Slovakia 

The RRF provides €6.58 billion to Slovakia, of which €6.3 billion in grants. Investments in education and 
skills  related  measures  represent  over  15  %  of  the  Slovak  grants.  Slovakia  plans  to  expand  early 
childhood  education  and  care,  reform  school  curricula  supported  by  digitalisation,  reform  teacher 
education  and  professional  requirements,  improve  inclusiveness  at  all  levels  of  education,  curb  Roma 
segregation  and  mitigate  the  COVID-19  impact  on  students.  It  also  aims  to  improve  the  governance, 
quality and internationalisation of higher education, as well as boost digital skills. 

Source: European Commission (2021b) 

 
 
 
 
 
 
 
22 

Investing in education in a post-Covid EU 

 
 
 
 
investment 

3. Preserving 
future: 
sustainability and demography

in  education 
the  challenges  of  quality, 

23 

in  the
fiscal

investment 

3. Preserving 
education 
challenges  of  quality, 
sustainability and demography

in
in  the  future:  the
fiscal

24 

Investing in education in a post-Covid EU 

In  the  medium-to-long  term,  education  may  have  to  compete  for  public  funding  with  other 
sectors. The COVID-19 crisis has made more visible and more urgent the structural challenges that the 
EU  economy  was  already  facing:  rapidly  ageing  population,  weak  productivity  growth,  slow  digital 
transformation,  the  socio-economic  costs  of  climate  change,  rising  inequalities  (European  Commission 
2021a). Russia’s invasion of Ukraine “exposed the EU’s dependency on fossil fuel imports. It reinforces 
the  environmental,  economic  and  security  case  for  scaling  up  renewable  energy  and  reducing  energy 
consumption”  (European  Commission  2022f,  p.8).  On  top  of  this,  Member  States  have  to  “provide 
assistance  addressing  the  immediate  needs  of  people fleeing  Ukraine, but they  also  need  to  equip  the 
national administrations in their efforts to support displaced persons in accessing healthcare, childcare, 
housing, social protection, engaging in education and training, and finding jobs” (European Commission 
2022f,  p.  10).  Addressing  all  these  existing  and  emerging  challenges  will  require  major  public 
investments in  several  sectors,  also  beyond  the  scope and time horizon  of  the  RRF.  At  the  same  time, 
Member States will have to ensure medium-to-long-term sustainability of their public finances. This is 
likely to translate into increasing competition for public funding among the various policy sectors and to 
call for improving the overall quality of public expenditure.  

These considerations raise three important questions for education. Firstly, how can one define 
quality  of  investment  in  education?  Secondly,  public  expenditure  will  have  to  contribute  to  increasing 
economic growth to keep EU public finances sustainable. How can investment in education make public 
debt more sustainable? The last question stems from the demographic challenge, as an ageing society 
and a decreasing number of students may reduce the political ambition to invest in education. How can 
education help address the economic consequences of demographic change? This section will briefly try 
to answer those three questions. 

Making  the  best  use  of  public  resources  to  enhance  educational  outcomes  is  of  critical 
importance. The  OECD  Programme  for  International  Student  Assessment  (PISA)  surveys  show  that 
effective  educational  outcomes  cannot  be  achieved  below  a  minimum  level  of  financing  (OECD  2020; 
Woessmann 2016). Some Member States have not been investing sufficiently to achieve good long-term 
results  (European  Commission  2021b). However,  at  a  comparable  level  of  spending,  some  Member 
States achieve better results than others (European Commission 2018).  

Promoting quality investment in education means making investment in education effective, 
equitable  and  efficient.  One  can  think  of  quality  as  the  interplay  of  effectiveness,  equity  and 
efficiency (European Commission 2017). ‘Effectiveness’ refers to the ability to provide good educational 
outcomes,  by  making  the most  of  the  available  human  and  physical  resources. Studies  of educational 
effectiveness  usually  analyse  whether  specific  resources  have  positive  effects  on  different  outcomes, 
and  if  so,  how  large  these  effects  are.  ‘Equity’  means  that  the  variation  in  educational  outcomes  is 
relatively  small  among  different  social  groups  (e.g.  socio-economically  advantaged  and  disadvantaged 
students). ‘Efficiency’ adds a financial dimension to the analysis of effectiveness and refers to the ability 
to  provide  the  desired  educational  outcomes  at  the  lowest  possible  cost.  The  immediate  concern  is  to 
what extent a school education system can be effective, equitable and efficient at the same time. The 
OECD PISA surveys have consistently found that education systems can combine effective outcomes and 
high  levels  of  equity  (OECD  2019;  European  Commission  2019).  Efficiency  would  then  complete  the 
picture  by  answering  the  following  policy  question:  can  education  systems  provide  at  least  the  same 
levels of effectiveness and equity at a lower cost? If the answer is yes, then there is room for increasing 
efficiency.  If  the  answer  is  no,  then  cost-saving  policies  would  worsen  educational  outcomes.  In  other 
words,  increasing  efficiency  is  a  desirable  policy  goal  only  if  it  does  not  reduce  the  effectiveness  or 
equity of an education system. 

 
 
 
 
Investing in education in a post-Covid EU 

25 

If investing in education improves economic growth, it will also help make public debt more 
sustainable.12 From  a  theoretical  viewpoint,  education  boosts  labour  productivity  and  supports  the 
innovation pace required by the digital transition and an increasingly knowledge-based economy (Égert 
et  al.  2022;  Thum-Thysen et  al.  2021; Woessmann  2014).  Higher  productivity  and  stronger  innovation 
will translate into faster GDP growth and, all other things being equal, this will reduce the debt-to-GDP 
rate.  Hanushek  and  Woessmann  (2019)  simulate  the  possible  macroeconomic  impact  of  increasing 
young people’s basic skill achievement. In their most favourable scenario, by 2100 the EU GDP could be 
30%  higher  than  the  level  projected  with  today’s  skill  levels.  Moreover,  there  is  usually  a  strong 
relationship between education and earnings. For instance, a meta-analysis based on 139 countries over 
several years showed that, on a global level, the private rate of return on one extra year of schooling is 
on average about 7% in Europe and 9% at a global level (Psacharopoulos and Patrinos 2018). Therefore, 
higher levels of education also directly benefit public finances via higher revenues from direct taxation. 

Demographic  change  may  jeopardise  economic  prospects  in  the  EU.  According  to  Eurostat’s 
demographic  projections,13 the  EU  population  aged  25 -54  (the  so-called  “prime  working  age”)  is 
expected to drop by around 7% by 2030 and almost 12% by 2040, compared to 2020. This represents a 
serious challenge for the EU: if population decline translated into lower labour supply, then it would risk 
reducing economic growth rates.   

With  a  declining  working-age  population,  the  EU  will  need  higher  employment  rates  to 
ensure  sustained  economic  growth.  A  simple  simulation  can  illustrate  this  argument,  by 
answering  the  following  question:  what  should  the  EU  employment  rates  be  in  2030  and  2040  to 
keep  the  same  number  of  employed  people  as  in  2021?  The  analysis  here  focuses  on  25-34  year-
olds  to  establish  a  link  with  today’s  education  systems.  This  age  group  will  roughly  cover  in  2030 
the  current  upper  secondary and higher education cohorts and in 2040 the present primary and lower 
secondary education cohorts.  Based  on  Eurostat’s  baseline  demographic  scenario,  the  EU  employment 
rate  of  25-34  year-olds  would  need  to  rise  by  around  6  percentage  points  by  2030  and  by  5 
percentage  points  by  2040  to  continue  having  the  same  absolute  number  of  employed  people  as  in 
2021  (Figure  6).  Alternative  scenarios  based  on  more  and  less  favourable  migration  assumptions 
would  modify  the  magnitude of the required change in the employment rate (by around ±2 percentage 
points by 2030 and ±3 percentage points by 2040), but not its direction.  

12

13

Education also brings several other socio-economic benefits. For instance, it promotes equal opportunities, helps prevent poverty 
and social exclusion, fosters active citizenship and democratic values (Algan et al. 2021). Here the focus is on how it can improve 
sustainability of public finances. 

The  figures  presented  in the  text  refer to  the  baseline  scenario.  See European  Commission  (2021c)  for  more  information  about 
Eurostat population projections. 

26 

Investing in education in a post-Covid EU 

Figure 6. Employment rates required to stabilise the number of employed people aged 25-34 
in the EU (%) 

Source: DG EAC calculations based on Eurostat Labour Force Survey and Population Projections data. 

Education will be key to addressing the economic impact of demography, as better-educated 
people  have  better  employment  prospects.  Education  is  a  major  driver  of  young  people’s  labour 
market  outcomes.  In  2021,  among  25-34  year-olds,  the  employment  rates  of  high-educated  and 
medium-educated people were 85% and 77%, respectively, compared with only 55% for low-educated 
people14 (Figure 7). This ‘education employability premium’ widened during the Great Recession and the 
Covid-19  crisis,  showing  that  education  also  improves  resilience  when  labour  market  conditions 
deteriorate. Quality investment in education can help unlock the still large pool of unused talent in EU. In 
2021, Member States set the EU-level targets that by 2030 less than 9% of people aged 18-24 should 
have left education or training with a low qualification and at least 45% of 25-34 year-olds should have 
a tertiary qualification (Council of the European Union 2021). 

Figure 7. Employment rates of 25-34 year-olds by educational level (%) 

Source: DG EAC calculations based on Eurostat Labour Force Survey data. 

Note: Break in time series in 2014 and 2021. 

14

Low-educated  people  are  those  with  at  most  a  lower  secondary  qualification,  corresponding  to  International  Standard 
Classification of Education (ISCED) levels 0-2. Medium-educated people have an upper secondary or post-secondary non-tertiary 
qualification (ISCED 3-4). High-educated people are those with a tertiary qualification (ISCED 5-8). 

Investing in education in a post-Covid EU 

27 

Member  States  and  the  Commission  are  promoting  an  evidence-informed  approach  to 
investment  in education,  so  that  it  can  reap  all  its  potential  economic  benefits.  Sound  policy 
evaluation allows understanding how public resources can be spent effectively, equitably and efficiently. 
It takes place throughout the entire policy cycle: before, during and after a reform, policy or programme 
is implemented. Member States and the Commission have been working together in this area, starting 
from a joint debate between the Ministers of Education and Finance in November 2019 (Council of the 
European  Union  2019).  A  Commission  expert  group  is  carrying  out  a  review  of  education  policies  to 
evaluate their effectiveness, equity and efficiency (European Commission 2022d). Building on this work, 
the  Commission  will  set  up  a  learning  laboratory  on  investment  in  education  by  end-2022  (French 
Presidency of the Council of the European Union 2022). It will encourage an evidence-informed approach 
to policy design and implementation, by providing Member States’ relevant authorities with knowledge, 
tools, methods and resources they could use for assessing their investment in education.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28 

Investing in education in a post-Covid EU 

 
 
 
 
 
Investing in education in a post-Covid EU 

29 

Annexes 

Annexes 

1. Public  expenditure  on  education  by
educational level and category in 2020

2. Further details about Figure 5

3. References

30 

ANNEX  1.  Public  expenditure  on  education  by 
educational level and category in 2020 

In 2020, at EU level more than 70% of public expenditure on education went to school education, with a 
roughly  equal  split  between,  on  the  one  side,  pre-primary  and  primary  levels  (34%)  and,  on  the  other 
side, secondary level (38%). Tertiary education accounted for 16% of expenditure. These averages mask 
large  differences  among  Member  States  (Figure  A1).  Those  differences  can  be  explained  by  many 
factors:  involvement  of  the  general  government  in  the  education  system,    enrolment,  the  duration  of 
compulsory  education,  relative  wages  in  the  education  sector,  class  size  and  student  teacher  ratios, 
instruction  time,  and  the  cost  of  teaching  materials  and  facilities.  At  tertiary  level,  tuition  fees  and 
support for students are also determining factors. 

Figure A.1. Distribution of public expenditure on education by educational level (2020) 

Source: DG EAC calculations based on Eurostat COFOG data 

Note:  The  category  “Other”  is  the  sum  of  the  following  items:  education  not  definable  by  level,  subsidiary  services  to 
education, R&D education and education not elsewhere classified. 

Almost two-thirds (65%) of public expenditure on education at EU level was devoted to compensation of 
employees  (i.e.  wages  and  non-wage  costs  such  as  employers’  social  contributions).  Intermediate 
consumption  (i.e.  purchases  of  non-durable  goods,  such  as  teaching  materials,  and  services  needed  to 
provide  education,  such  as  heating,  electricity,  cleaning  and  maintenance  services)  received  13%  of 
expenditure. Gross capital formation (i.e. investment in acquiring fixed assets and durable goods, such as 
computers and buildings, and also including the depreciation of fixed assets) accounted for around 7% 
of expenditure (Figure A.2). 

31 

Figure A.2. Distribution of public expenditure on education by category (2020) 

Source: DG EAC calculations based on Eurostat COFOG data 

Note: The category “Other” is the sum of the following items: subsidies, other taxes on production, property income, social 
benefits, other current transfers, capital transfers. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32 

ANNEX 2.  
Further details about Figure 5 

This Annex displays the country-specific figures used to construct 
Figure  5.  Public  expenditure  on  education  and  total  public 
expenditure  net  of  education  are  set  at  100  in  the  year  when 
each  country  reached  its  highest  deficit-to-GDP  ratio  as  a 
consequence of the Great Recession (year t): 

2009:   EU-27,  Belgium,  Bulgaria,  Czechia,  Estonia,  Greece, 
Italy,  Latvia,  Lithuania,  Austria, 

Spain,  France, 
Romania, Slovakia, Finland; 

2010:   Germany, Ireland, Luxembourg, Netherlands, Poland, 

Portugal; 

2011:   Croatia, Hungary; 

2012:   Denmark, Cyprus, Malta; 

2013:   Slovenia, Sweden. 

The  figures  show  how  those  two  public  expenditure  indicators 
evolved  over  the  subsequent  five  years.  Each  data  point 
represents  the  percent  change between expenditure in  that  year 
and  expenditure  in  year  t.  For  instance,  in  Belgium  public 
expenditure  on  education  and  total  public  expenditure  net  of 
education  were,  respectively,  21%  and  18%  higher  in  2014 
compared to 2009. 

33 

34 

ANNEX 3. References 

Algan  Y.,  Brunello  G.,  Goreichy  E.  and  Hristova  A.  (2021).  Boosting  Social  and  Economic  Resilience  in 
Europe by Investing in Education, EENEE Analytical Report No 42. 
Council  of  the  European  Union  (2019).  Education,  Youth,  Culture  and  Sport  Council  (Education)  - 
November 2019. 

Council  of  the  European  Union  (2021).  Council  Resolution  on  a  strategic  framework  for  European 
cooperation  in education  and  training  towards  the  European  Education  Area  and beyond  (2021-2030), 
2021/C 66/01. 

Égert B., de la Maisonneuve C. and Turner D. (2022). A New Macroeconomic Measure of Human Capital 
Exploiting  PISA  and  PIAAC:  Linking  Education  Policies  to  Productivity,  OECD  Economics  Department 
Working Papers, No. 1709. 

European  Commission  (2017).  Commission  staff  working  document  accompanying  the  document 
Communication on school development and excellent teaching for a great start in life, SWD(2017) 165 
final. 

European Commission (2018). Education and Training Monitor 2018, Luxembourg: Publications Office of 
the European Union.  

European  Commission  (2019).  PISA  2018  and  the  EU.  Striving  for  social  fairness  through  education, 
Luxembourg: Publications Office of the European Union.   

European Commission (2020). Communication from the Commission to the Council on the activation of 
the general escape clause of the Stability and Growth Pact, COM(2020) 123 final. 

European  Commission  (2021a).  Communication  from  the  Commission  to  the  European  Parliament,  the 
Council, the European Central Bank, the European Economic and Social Committee, the Committee of the 
Regions. The EU economy after COVID-19: implications for economic governance, COM(2021), 662 final. 

European  Commission  (2021b).  Education  and  Training  Monitor  2021, Luxembourg:  Publications  Office 
of the European Union. 

European Commission (2021c). Population projections (proj) reference metadata. 

European Commission (2022a). Closed Excessive Deficit Procedures. 

European  Commission  (2022b).  Communication  from  the  Commission  to  the  Council.  Fiscal  policy 
guidance for 2023, COM(2022) 85 final. 

European Commission (2022c). Government expenditure by function, Eurostat Statistics Explained. 

European Commission (2022d). Interim report of the Commission expert group on quality investment in 
education and training, Luxembourg: Publications Office of the European Union. 

35 

European Commission (2022e). Report from the European Commission to the European Parliament and 
the Council on the implementation of the Recovery and Resilience Facility, COM(2022) 75 final. 

European  Commission  (2022f).  Communication  from  the  Commission  to  the  European  Parliament,  the 
Council, the European Central Bank, the European Economic and Social Committee, the Committee of the 
Regions. 2022 European Semester - Spring Package, COM(2022) 600 final. 

French Presidency of the Council of the European Union (2022). Investing in effective, efficient and equal 
European education systems: a key factor for potential growth and social resilience, 5 April. 

Hanushek E.A. and Woessmann L. (2019). The Economic Benefits of Improving Educational Achievement 
in the European Union: An Update and Extension, EENEE Analytical Report No 39. 

OECD (2019). PISA 2018 Results (Volume II). Where All Students Can Succeed, Paris: OECD Publishing. 

OECD  (2020).  PISA  2018  Results  (Volume  V).  Effective  Policies,  Successful  Schools,  Paris:  OECD 
Publishing. 

Psacharopoulos  G.  and  Patrinos  H.A.  (2018).  Returns  to  investment  in education:  a  decennial  review  of 
the global literature, Education Economics, Vol.26 No.5, pp. 445-458. 

Thum-Thysen A., Cravetto R. and Varchola J. (2021). Investing in People’s Competences – A Cornerstone 
for Growth and Wellbeing in the EU, European Economy Discussion Papers 139. 

Woessmann L. (2014). The Economic Case for Education, EENEE Analytical Report No 20. 

Woessmann  L.  (2016).  The  Importance  of  School  Systems:  Evidence  from  International  Differences  in 
Student Achievement, Journal of Economic Perspectives, Vol.30, No.3, pp. 3–32. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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