School Vouchers – A Better Choice for the
Future of America
Lauren Dorman
MGMT-6300 – Business Economics
Assignment 5
May 2007
Thesis Statement
School vouchers, which give parents the opportunity to select the public or
private school of their choice using government dollars, will, by nature of
competition, increase the performance of all schools. School vouchers would
provide equity, equal opportunity, in education.
Abstract
American public schools, on average, are underperforming. Our children
deserve the best education possible, and the future of our society depends on it.
This paper will examine how a school voucher program, which provides parents
with educational vouchers which can be used at the school of their choice, will
foster competition in our educational system and increase performance at all
schools. This paper examines the factors influencing student performance, how
competition would drive improvements and a look at existing voucher systems in
place today. Counterarguments against vouchers will be discussed and
recommendations on how to implement such a system will be presented.
Introduction
America spends more per child on education and the results are not impressive. 1
The primary source of funding is from state governments, followed by local
funding, then federal government funding. Since the majority of money is related
to state and its respective localities, the average spending per child varies.
According to the About U.S. Gov Info web site, the variance can be significant.
“From a high of $12,981 in New Jersey, to a low of $5,008 in Utah, U.S. public
school districts spent an average of $8,287 per student during 2004, according to
the Census Bureau.” 2 Yet the quality of education in some areas of the country
is frightening.
While this may seem like a local issue or simply a parental concern, the problem
is far more reaching. The quality of compulsory education in America is
important not only to the child and their family, but to society as a whole. If we
want today’s children to be tomorrow’s business people, care givers and global
leaders, the quality of their education is paramount. Better educated individuals
increase the quality of life and socioeconomic conditions for all of America.
The US government, namely state government, is responsible for financing the
education of children grades K thru 12. The primary model in effect today has
the government not only financing compulsory education, but also administering
the schools themselves. The government should not be responsible for the
administration of educational intuitions. Instead, the role of government should
be to set minimum levels or standards for education and provide the funding via
vouchers funds to be used for educational services. The voucher amount would
1
Change gotta come, The Economist, 5/22/04, Vol. 371, Issue 8376, P 12-13
Robert Longley, About: U.S. Gov Info / Resources web site, (Last visited 5/13/07)
http://usgovinfo.about.com/b/a/217115.htm
2
Page 2 of 10
be up to a maximum per child per year. Parents would then select the
educational institute of their choice (provided the institute was approved via
government standards). The voucher would cover up to a set value and parents
could pay the difference if the facility selected charged a rate higher than that
covered by the voucher.
School vouchers would drive competition between schools, driving increased
performance and the result would be better schools in America. While all
children would benefit, black and latino children, often those students found in
the underperforming schools, could benefit greatly by overall improvements in
the educational system.
“The state pays; parents choose; schools compete; standards rise; everybody
gains.”3
Argument for the introduction of school vouchers:
On average, a student’s education is funded by: 49% from state governments,
44% from local sources and the balance is paid by the federal government. 4
Those education dollars allotted follow the student, so the number of students
attending a school dictates the dollars available to that school system. If a
student leaves the school, the state and federally funded dollars follow the
student. Any local funds stay within the school system. If number of students
attending a school increases, theoretically the school will have a larger pool of
funds available. The reverse is true when there are fewer students.
States and local governments impose taxes on their citizens that are used to pay
for the education of the children who live in those areas. Lower income, high
unemployment towns and cities tend to have under-funded, underperforming
schools. Middle and higher income families tend to settle in more affluent cities
and towns which have well established and higher performing school systems.
Adding to the disparity, middle and upper income families can choose to send
their children to private school as they can afford to pay the tuition. In a sense,
these families are paying for their child’s education twice: once in the form of
taxes and again in the tuition fees paid directly to the school.
In economist Milton Friedman’s 1955 paper, he advocated that the government’s
role was not to administer schools. He claimed that “In such a free private
enterprise exchange economy, government’s primary role is to preserve the rules
of the game by enforcing contracts, preventing coercion, and keeping markets
3
Free to choose, and learn, The Economist Print Edition, 5/3/07, (last visited)
http://www.economist.com/world/international/PrinterFriendly.cfm?story_id=9119786
4 Paul E Peterson, Harvard University, A Choice Between Public and Private Schools: What Next
for School Vouchers?, Symposium: Public – Private Cooperation, Spectrum: The Journal of State
Government, Fall 2003
Page 3 of 10
free.” 5 Luengo-Prado and Volij’s examination of school vouchers included a
very sobering comment which applies to this discussion. They state that
“education, it is argued, is a fundamental right which should not be allocated
according to ability to pay. But if parental resources are unequal, a well
functioning private market for education will result in differences in the quality of
education that children receive. These differences in education imply differences
in earning opportunities, which may be seen as unfair since they are beyond the
child’s control.” 6
The recommendation of parental choice via school vouchers back in started in
1955. Friedman contends that the educational system is inefficient and that free
market competition would improve the quality of our schools. “Free market
competition can do for education what it has done already for other areas, such
as agriculture, transportation, power, communication and, most recently,
computers and the Internet. Only a truly competitive educational industry can
empower the ultimate consumers of educational services -- parents and their
children.”7 Allowing the parent to choose the school that provides the best
educational opportunity for their child will drive overall performance.
Friedman maintains that in every other industry which was opened to
competition, quality and choice soared, and costs would go down. The
opportunity to select the local public school, private school or even a public
school outside the students’ neighborhood would be incentive for all schools to
operate as effectively and efficiently as possible. If public schools are not
drawing enough students, they would have to close. The risk of losing students
should be motivation for lower performing schools to be creative in finding way to
improve, and therefore keep, students enrolled.
Successes in other countries
Evidence from other countries shows that a school voucher program can be
effective. Those students participating in the voucher program received a better
education at a cost less than the traditional public educational system.
Columbia:
In 1990, Columbia established the PACES program which supports 125,000
students. Vouchers are assigned randomly due to demand exceeding supply.
The results of this program show that voucher participants are: 15-20% more
likely to finish secondary education, 5% less likely to repeat a grade, scored a
“bit” better on scholastic tests and are more likely to take college entrance
5
Milton Friedman, The Role of Government in Education, Economics and the Public Interest,
1955, (last visited 5/11/07) Milton and Rose D. Friedman Foundation web site
http://www.friedmanfoundation.org/friedman/friedmans/writings/1955.jsp
6
María José Luengo-Prado ,and Oscar Volij, Public education, communities and vouchers, The
Quarterly Review of Economics and Finance Volume 43, Issue 1, 2003, Page 52
7 Milton Friedman, Why America Needs School Vouchers, The Wall Street Journal Eastern
Edition, New York, N.Y., 9/28/00, pg A22
Page 4 of 10
exams. Additionally, the voucher cost to the system is around half the cost of
private secondary education.
Sweden:
In 1992 Sweden passed educational reforms in which parents are free to select
the schools their children attend. The child’s education is paid for by the
government program that allocates the money for education. Students can
select between public, private, religious, and for profit institutions. The only rule
is that the school must accept children based on a first come, first served basis
(schools cannot refuse to accept low ability children8) and the school cannot
charge “top up” fees. (“Top up” fees are typically charges which overall increase
the cost of tuition.)
In Sweden most independent schools are not aimed at any special group of
people (i.e. religion) and the socioeconomic makeup of students in the
independent school compared to the public schools is similar.
Since the program went into effect, 10% (up from 1%) are now attending private
school.9 The private sector has joined the education ranks by opening for profit
schools, expanding the number of schools to keep up with demand. This “eases”
over populated schools with the private sector expanding to meet demand. The
overall performance of Swedish students is above the OECD average.10 The
Swedish education also reports little variation in the performance across schools.
The Swedish experience relates closely to the theories of Freidman. “Here, as in
other fields, competitive private enterprise is likely to be far more efficient in
meeting consumer demands than either nationalized enterprises or enterprises
run to serve other purposes.”11
Successes in the US:
Similar results can be found in the few school voucher programs that exist in the
US. Studies show that students participating in school voucher programs
performed better and the cost was less than what governments would have paid
for the child’s education. Since the students participating were randomly
selected, outside influences such as home life and ability, are not factors that
resulted in the students overall doing better. The Milwaukee and Cleveland
programs are examples commonly examined, where a smaller number of
8
F. Mikael Sandström , and Fredrik Bergström, School vouchers in practice: competition will not
hurt you, Journal of Public Economics Volume 89, Issues 2-3, February 2005, Pages 351-380
9 Free to choose, and learn, The Economist Print Edition, 5/3/07, (last visited)
http://www.economist.com/world/international/PrinterFriendly.cfm?story_id=9119786
10 Ann Carlson Ericsson, Anita Wester, Equity Trends in the Swedish
School System: A quantitative analysis of variation in student performance and equity from a
time perspective, Swedish National Agency for Education Report 275, 2006 , Page 3
11 Milton Friedman, The Role of Government in Education, Economics and the Public Interest,
1955, (last visited 5/11/07) Milton and Rose D. Friedman Foundation web site
http://www.friedmanfoundation.org/friedman/friedmans/writings/1955.jsp
Page 5 of 10
randomly selected students succeeded. According to Friedman, “fewer
youngsters in the inner cities dropped out of school and more acquired the skills
needed for remunerative employment, economic levels would rise, street
violence decline, and crime become less attractive to the young.” 12
A study based on the voucher program in New York showed that AfricanAmerican students involved in the voucher program, after 3 years, scored nearly
two grade levels higher than their counterparts who remained in public school.
Under the New York program, it was cheaper to educate “voucher” students than
those enrolled in public school.
The results are valuable because those participating are not different than their
counterparts who choose not to participate. If students are doing poorly in a
school and are given a chance to switch, they are likely to do so; just as if a
student is doing well, they are likely to want to stay. Overall, the profiles of those
opting for vouchers are similar to those opting not to participate. Vouchers are
most attractive to those families who are not in a position to be able to take
advantage of alternative educational opportunities.
Public schools who fear losing students and funding are more likely to buckle
down and improve their services than those without added competition. A study
by Harvard economist Caroline Minter Hoxby has shown that schools in areas
which were most intensely affected by the loss of students accepting vouchers
increased their test scores much higher than schools not as intensely affected.
Opponents claim that this is because the students were from a better
background, family values. But when vouchers are distributed randomly, the
affect of external influences are reduced.
Counterarguments against school vouchers:
“The 'competition hypothesis' is valid if two conditions are satisfied: ( 1) public
school production causes inefficiencies in the provision of education; ( 2)
promoting greater competition between public and private schools will reduce the
inefficiency. “13 This position is held by reputable economists such as Peter
Rangazas, an oppose of the competition theory.
Economist Helen Ladd opposes the notion of school vouchers. In her paper, she
disagrees that vouchers would benefit all but instead would cause harm to select
groups. Voucher would (a) shift students out of public sector and into private, (b)
generate greater polarization as students seeks to improve the quality of their
peers and (c) increase competition for students.14
12
Milton Friedman, Why America Needs School Vouchers, The Wall Street Journal Eastern
Edition, New York, N.Y., 9/28/00, pg A22
13 Rangazas, Peter, Competition and Private School Vouchers, Education Economics, Dec 97,
Vol. 5, Issue 3, p 245
14 Helen Ladd, School Vouchers: A Critical View, Journal of Economic Perspectives, Fall 2002,
Vol. 16, Issue 4, p 3 – 24
Page 6 of 10
Many middle to higher income families with school age or soon to be school age
children select to live in towns which have higher quality schools. These more
affluent towns tend to have higher property taxes and as a result provide more
funding to their local schools. The more advantaged families would also be in a
better financial position to elect to send their children to private schools. Those
families with lower financial means do not have the luxury of moving their families
in order for their children to attend better schools. When groups of lower income
families end up in the same neighborhoods, the total tax dollars available for
schools for is reduced, resulting in lower quality schools.
Those students from wealthier socioeconomic backgrounds tend to have an
educationally rich home environment and do well in any educational
environment. Those from impoverished educational backgrounds tend to rely
more heavily on the schools. Studies have shown that there is a positive
correlation between socioeconomic composition of a school and performance of
its students is truly reflective of what happens at home rather than what happens
at school. However, there are positive influences: there tends to be greater
dollars available for education, they tend to be able to attract higher quality
teachers, etc. However, in the current public school model, successful schools
have no incentive to expand and poorly performing schools cannot close without
having placed all students in other schools.
Ladd expressed the following concerns on school vouchers:
1.) Creates a hierarchy of schools – parents judge quality based on the abilities
of the other students attending the school.
2.) When characteristics of the student body are important factors, there’s no
simple strategy to make lower performing or disadvantaged students looks
effective. This is often referred to the Peer Externality, where peer performance
affects the performance of others.
3.) Successful schools will not wish to expand if it means lowering socioeconomic
or ability levels of the student population (which makes it attractive in the first
place)
4.) Schools with large populations of disadvantaged students will not be able to
attract other students.
Helen Ladd’s article argues that the successes seen in Milwaukee are not real
successes. African American students attending catholic schools performed
better than their counterparts who attended public school. Meanwhile whites and
Hispanics did not post higher achievements. This variation in performance
negates the value added by school choice. Her article also argued that the
students in the program where not really random samples and therefore could
not use this program as the unbiased study for pushing vouchers.
She disregards the theory about competition driving cost efficiencies. She cites
two for profit educational centers (Edison and Tesseract) as not making a profit,
Page 7 of 10
arguing that if the private sector could educate our children in a more cost
effective manner, they would be. She argues that a voucher program could
possibly cost the government more than we are paying now because vouchers
would be used by families who would have otherwise paid for private education.
(Those that are paying twice today.)
Teachers:
Teachers and their unions are very much against a voucher system. They claim
that competition would not increase quality. It would leave those in less fortunate
areas, or those with disabilities behind. It is their opinions that they are the
“professionals” and they know what’s best for our children. Peter Rangazas
argues that in order to gain efficiencies, teachers, principals and superintendents
need performance monitoring. Teachers and their unions may or may not
impede this process.
Another common opinion shared by teachers and their unions is that vouchers
will reduce the funding available to those schools that really need it. The
Freidman Foundation has studies which point to the opposite. “School choice
programs do not drain money from public schools. Actually, they leave more
money behind to educate fewer students. No state or city with school choice has
seen its public school budgets go down.”15 This is because the local taxes will
stay with those schools in the local area and would not be paid to schools outside
the area. And the voucher dollars per student will be used at the schools they
attend. The theory is that when there are more schools, class sizes can be
reduced, leaving the school to use the same level of funding per student to teach
more reasonable class sizes.
Segregation
Today, public schools are setup by neighborhood. The area in which live the
student lives dictates the public school they will attend. If you live in a primarily
white neighborhood, the schools will serve primarily white children. The situation
is the same for latino and black neighborhoods. Some argue that a voucher
program will drive more segregation rather than less. Campbell and West’s
study of families electing to participate in such programs found this concern to be
unjustified. “We find no evidence that Whites in districts with a high
concentration of minorities are especially likely to be voucher applicants or
takers.”16
The ABC’s of School Choice, 2006-2007 Edition, Updated 11/19/06, Milton & Rose D.
Freidman Foundation web site, (last visited 5/11/07)
http://www.friedmanfoundation.org/friedman/newsroom/ItemAbc.do?filterId=1
15
16
David E. Campbell , Martin R. West, Paul E. Peterson, Participation in a National,
Means-Tested School Voucher Program, Association for Public Policy Analysis and
Management, Journal of Policy Analysis and Management, Vol. 24, No. 3, Page 537 (2005)
Page 8 of 10
In US studies, Campbell and West have found that “Taken as a whole, these
results suggest that African Americans have a high level of interest in vouchers,
but may experience practical obstacles when using them to enroll in private
schools.”17 This may well be that the African American population wasn’t in a
position to select private schools without the voucher funding.
School vouchers should not be viewed as a program for lower income or minority
children alone. Focusing on one segment would not drive the potential
“customer” size to be great enough to really drive competition between schools.
That requires greater numbers of participants in order to encourage the
development of innovative schools and new methods of teaching. To date in the
US, only a very small portion of the population has had the opportunity to
participate in a voucher program. They have been limited, small scale
implementations which need to be expanded.
Constitutionality
Critics argue that school vouchers are unconstitutional. The courts are deciding
otherwise. In 1954 the Supreme Court ruled on the segregation case of Brown vs
Board of Education of Topeka, Kansas. In that ruling, Chief Justice Earl Warren
declared that the “separate but equal” had no place in America.18 In 2002, the
Supreme Court ruled that school vouchers did not violate the separation between
church and state. The justification for this ruling was that the government is not
directly financing education through religious institutions. The government is
providing the financing to the parent, and it is the parent who is ultimately
selecting the institution. This distinction allows the separation between church
and state to be upheld in a parental choice model.
A voucher program will not drive all students to private religious schools, as
some fear. Instead, parents will choose a school that teaches values that most
closely reflect their own. If a family practices a specific religion, they may choose
a school that teaches those values and ideals. For those families which are not
actively practicing a religion, a private religious school may be not a factor.
“The significance of religion as a factor shaping participation in voucher programs
underscores that, under the status quo, private education is especially appealing
to Catholic and Evangelical Protestant families.”19
Conclusion
Today, most US voucher programs focus on low- income or disadvantaged
children who do not typically do well in the public sector. This program needs to
be extended to cover all compulsory school age children. Creating the right
17
David E. Campbell , Martin R. West, Paul E. Peterson, Participation in a National,
Means-Tested School Voucher Program, Association for Public Policy Analysis and
Management, Journal of Policy Analysis and Management, Vol. 24, No. 3, page 527 (2005)
18 Change gotta come, The Economist, 5/22/04, Vol. 371, Issue 8376, P 12
19 David E. Campbell , Martin R. West, Paul E. Peterson, Participation in a National,
Means-Tested School Voucher Program, Association for Public Policy Analysis and
Management, Journal of Policy Analysis and Management, Vol. 24, No. 3, 523–541 (2005)
Page 9 of 10
school voucher model sets the stage for a better educated society and a better
world. A US voucher program should establish the following standards:
1.) Schools must be approved by an Educational Committee which establishes
minimum quality criteria and must meet minimum guidelines on curriculum.
2.) Vouchers can only be used for education – they cannot be cashed in or
used for anything else.
3.) Voucher schools are not allowed to charge fees and tuition in addition to the
amount of the voucher.
4.) Transportation to the chosen schools must be provided in order to avoid
disproportionately affecting low income families.
5.) Voucher schools must admit students on a first come, first serve basis and
cannot “select” their students based on ability or other criteria.
6.) Access to school choice information must be made available to all.
The future of our nation rests on the shoulders of our children. As parents,
professionals and citizens, all Americans are stakeholders in our educational
system. With school vouchers the list of winners is long: better educated
students; good teachers where there is more competition and a broader market
for their services; existing private schools; educational entrepreneurs opening
new schools; taxpayers since will be a decline in spending; employers who have
access to a better pool of candidates and higher education who can reduce their
remedial programs. 20
20
Milton Friedman, Why America Needs School Vouchers, The Wall Street Journal Eastern
Edition, New York, N.Y., 9/28/00, pg A22
Page 10 of 10