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Why the matric pass rate is important

What do South Africa’s poor education outcomes mean for all of us?

Education is something that many of us take for granted. Unfortunately it isn’t for the majority of South Africans. Our education system has very poor outcomes. Few who start school leave with a good education. It’s sad to see so much wasted potential, but how does it really affect us as a society?

We know that the overall level of education in a country is an important determinant of its prosperity. I don’t just benefit from my own education, but from the education of those around me. It’s possible for most of us to empathise with individuals who fail or drop out. They often end up in dead-end jobs, or worse, unemployed. We can imagine how tough life is for them and their families. But it’s difficult to get a sense of what this means for the country overall. It’s harder to imagine, so here’s a little story to help.

20:7:3

Imagine you are among a class of 20 entering grade one. This class is special. It represents all the grade ones starting school in South Africa in a particular year. In your mind, keep imagining this class of 20 throughout the example, sitting behind their little desks. I’ll keep you posted on the actual numbers in brackets (there were 1,208,993 little people who started grade one in 2016, according to the Department of Basic Education).

Now fast forward to grade twelve. Unfortunately, only 58% of those entering grade one made it this far (704,533). Fortunately, you are one of only 12 in the class who started the final year of school, and one of 9 who actually wrote the final, matric exams (roughly 520,000).

It’s you and your 9 peers who eagerly anticipate their final school results. We could be in for a surprise, but based on previous years’ performances, the cards will fall something like this:

  • 7 of you will pass (roughly 400,000)
  • 2 will fail (roughly 125,000)

Of the 7 who pass, there’s a range of achievement:

  • 2 will do well enough to qualify for admission to a bachelor’s programme, at a university (roughly 150,000)
  • 3 will qualify for admission to a diploma (roughly 165,000)
  • 1 will qualify for admission to a Higher Certificate (roughly 85,000)

You’ve made it out of school and been accepted into a university. Now it’s time to focus on your degree.

Unfortunately, the culling doesn’t end here. After the first year, of the 7 of you in higher education, half drop out due to financial strain, or simply not being able to cut it as school inadequately prepared them for further study. These dropouts are in a state almost worse than those who failed matric. They have the additional burden of student debt for their failed year of higher education.

why-are-education-outcomes-important_-infographic

3 of you manage to stick it out and graduate. You’re the lucky 15% from the starting class of 20 who graduate. And you’re the only 1, the 5%, who managed to get a university bachelor’s degree. You’re the successful outcome from the education system.

Now some good news, although South Africa’s youth unemployment rate is very high, graduate unemployment is low. Nearly everyone with a degree gets a job (75% in July – September 2016, according to Stats SA’s Quarterly Labour Force). So you find a job and start work. Let’s say your 2 other grade one classmates, who graduated with diplomas or higher certificates, also manage to get jobs, which makes 3 of you, in total, entering the workforce.

Let’s imagine that, on average, the 3 of you get jobs paying R10,000 per month. That’s not bad for an entry-level salary. You’ll pay minimal tax on this (R675 per month). But you’re young, full of potential, and soon to be promoted. Everything will work out, right?

What does a public education cost?

You’re one of the lucky ones who succeeded in and benefited from the education system. But what did your education cost the government, and the taxpayer?

  • Primary school: seven years at just over R10,000 per year is almost R75,000
  • Secondary school: five years at just under R15,000 per year is just over R70,000
  • Higher education: three years at just under R75,000 per year is just over R220,000

Thus, in total, you are looking at a cost of around R365,000 to educate one learner from grade one to grade twelve, plus three years of higher education. That’s the government’s share. Fees come on top of this.

How long would it take you to repay the government’s cost of your education via income tax?

Payback

Public education is heavily subsidised by government through tax revenue. The justification is that if the state helps to educate you, you’ll be in a better position to earn a decent living, contribute to tax, and pay for more government services like education in the future. It’s not so much payback as it is paying-forward. Now that you have a job, it’s time to pay it forward.

Given your good starting salary, and let’s assume healthy promotion prospects (20% annual increase for the first five years, 10% after that, all above inflation), it would take about 10 years of income tax, at current rates, to payback just the cost of your own education. That’s a pretty long time.

Only things are far worse. You’re not just paying back your own education. This is where the overall outcomes of the education system come into play. Only 3 of your grade one classmates are formally employed and paying tax, the other 17 aren’t doing so well.

Half of them are unemployed, barely scraping by, and definitely not paying tax. If anything, they’re receiving support from the government through child grants, public health care costs, etc.

Of the other half, let’s assume none of them are earning much over the taxable threshold and their promotion prospects aren’t good.

So here’s the rub, as there are only 3 of you making significant income tax contributions, you’re going to have to foot the bill. The 3 of you have to pay, not just for your own education, but for the entire next generation’s. That’s fifteen years of education for 20 kids, wait, let’s make that 21, the population has grown since you started school.

How long will that take?

The total government cost of education we calculated was R365,000 for one learner, multiplied by 21 gets to R7,665,000. Divided by the 3 successful taxpayers in our example, means each of you must make an income tax contribution of R2,555,000!

Even with these very generous assumptions for salary increases, it will take over 20 years paying income tax, at current rates, to fund the costs of education. That’s just to pay for education, not to mention all the other costs your tax has to cover.

Our failing education system, with its poor education outcomes, is a fiscal time bomb. If we don’t improve the system so that more people complete school, graduate from university, get jobs, and contribute to income tax, we’re screwed. Those of us who somehow succeeded in the current system aren’t going to be able to afford to educate the next generation, or look after the many people the education system has already failed, unless education outcomes are drastically improved.

 

 

For a specific example of how to improve higher education outcomes, read on here.

Notes

Main sources:

  1.     Stats SA, Financial statistics of consolidated general government 2014/2015
  2.     Department of Basic Education, Education Statistics in South Africa 2014
  3.     Department of Basic Education, 2016 School Realities
  4.   Stats SA, Quarterly Labour Force Survey, October 2016
  5.     Old Mutual Income Tax Calculator, 2016

I made many simplifications, including:

  1.     Treating public and private education equally.
  2.     Ignoring inflation: it sounds like a big thing to ignore, but since I didn’t account for it on the salary growth or education costs, it won’t make a big difference.

Most of the calculations and links to the sources can be found here.

[https://docs.google.com/spreadsheets/d/1KhzxsnwE3Wh6GVm3vak4mET4Ukwf__0KVdndULTbHM4/edit?usp=sharing]

 

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