Tuesday, 10 November 2015


In the early years of the Greek crisis, I used to feel a stirring of guilty pleasure when foreign media were forced to take deep dives into Greek politics. I would imagine young journos doing their meticulous research with a smug look on their faces and then suddenly being hit with a depressing realisation: "wow, this story goes so deep and so far back; I don't know who to trust; and every policy decision past or present hurts someone! - is that how it feels to be Greek?"

I rarely feel this way anymore, but the Economist's recent piece on Greek private education brought it all back for a moment.

VAT on Private Education: the story so far

As readers may know, in the aftermath of its capitulation in July and as details of the Third Memorandum were being ironed out with the Troika Institutions Quadriga, the Greek government found itself looking for alternatives to a VAT hike on beef. This idea, nominally popular with creditors, had run into stiff opposition within the ruling party, and speculation persists that pressure was being applied on the government by the French, eager to protect their beef exports (context here and here).

The Greek counter-proposal was to raise VAT on private education to an eye-watering 23%, and the story offered to the electorate at the time - that this was a specific demand from Greece's creditors - turned out to be a lie. On 'discovering' this in September, Syriza (now campaigning for re-election) pledged to reverse the measure if re-elected. However, on returning to power, they found little to offer the creditors in return and mooted a counterproposal for a three-tier VAT regime (0% for primary and pre-primary, 6% for vocational and cramming schools and 13% for private secondary schools). Unfortunately, the three-tier proposal was illegal. The VAT Directive lists services to which a two-or three-tier VAT regime may apply but this does not include education (for the entire context, read Articles 98, 132-133 and Annex III here). Effectively, the Greek government has only ever had a choice between applying a full VAT rate or a zero VAT rate to all private education.

With opposition to the VAT hike growing, and a number of private schools already in significant difficulty as a result, the Greek government will now, perhaps more appropriately, raise equivalent from gambling instead. Turns out the owners of newly-privatised OPAP aren't as good at lobbying as private schools, or maybe they did their lobbying too early.

Unfortunately, too little actual evidence was used in debating this issue; which is a shame because the facts on the ground tell us a fascinating (and often tragic) story about Greek society and how it's coping with the crisis.

An objection in principle

Before I go into the statistics, I need to clarify one thing: I believe that true education should not be taxed, and definitely shouldn't be subject to VAT of all taxes. Education, whether private or public, is not consumption; it is an investment. The time to tax is is when the human capital it creates starts generating income. There is a significant debate about how good the returns on investment in education are and whether any of the mechanisms that we assume produce its returns actually work (see this gem from Pseudoerasmus for example), but there is no doubting the purpose of most such spending; it is an investment in human capital.

I say most because not all spending with education providers purchases education as such. Parents may eg pay a premium for kids to be looked after a little while longer while they're at work. This extra schooling might build no human capital, but instead simply buy employers and employees additional flexibility. Rich parents might pay for access to a social elite - an investment in social capital but also (in less meritocratic societies) in future economic rents - which many libertarians would happily agree should be taxed. Parents afraid of the stiff competition their kids will face in getting into university or finding a job market may be paying for teaching-to-the-test even though they know it does not build human capital; as a kind of insurance for their children.

How education spending should be taxed or subsidised, whether it is investment or consumption, and whether it ought to be promoted or suppressed through better co-ordination really depends on these questions. It is perhaps natural for the ideological Left (whatever's left of it in Syriza) to despise private provision of a public good. However it's also worth bearing in mind a historical irony: in Greece's modern history, the expulson and, later, exclusion of teachers with open communist sympathies from public schools contributed strongly to building the supply of private tuition; this may also help explain its ability to specialise in serving lower-income groups.

How many Greek households use private education anyway?

The obvious starting point is the actual share of pupils enrolled in private education. 'Private education' is a very wide term, so it helps to speak more precisely by level of education, and to distinguish between provision in private schools and tuition in private institutions such as frontistiria, or by private tutors. Each of these sectors is a whole different kettle of fish, and taxability varies. Private one-on-one tutoring in particular can go underground in the blink of an eye - good luck collecting VAT on that.

About 7% of Greek pre-primary and primary school pupils go to private schools (see p 416 here or raw data here). The percentage falls as children grow, from 5% in lower secondary (gymnasio) to 4% in upper secondary (lykeio). By most countries' standards this is actually a small share of the population - only three OECD countries have (marginally) less privatised education systems. On last count (2012) there were ca 75,500 pupils in Greek private schools excluding nurseries and pre-schools (on which more details will follow), and an additional 11,500 in the latter.

Not only is the Greek private school population small in relative terms, it's also not growing; in fact (again, excluding nurseries) it peaked in 2003 and has fallen relatively consistently over the years, both in absolute numbers and as a share of the pupil population. Demand for upper secondary schools is positively falling in the long term. Overall, the private school population was down 12% from its peak even in 2007, and down 18% in 2012. This suggests to me that, all other arguments aside, private school fees make for a rather poor tax base, unless they are somehow a fantastic proxy for undeclared income (which I expect they are not).

But schools are not the only kind of private education out there. Private foreign language tuition is common. Over half a million Greek children were enrolled in 6,500 language schools as of 2013 - roughly one in three Greek children in education of any kind.

Then there is private tuition across a range of academic subjects, whether remedial or as a top-up for students cramming ahead of their final exams. PISA findings reveal that the majority of Greek secondary school pupils attended private lessons outside school in 2012 - 56% in the case of mathematics, though fewer when it came to other subjects. That might sound like a lot but the equivalent figure was 74% in 2009 and 2006; clearly parents cut down during the crisis. Possibly because of this, the overlap between different kinds of private lessons isn't as big as one might think. If you can get hold of the raw PISA 2012 data (I did) you can combine these figures to reveal that 72% of Greek high school kids had private lessons of some kind or other in 2012.

Shockingly, this included 69% of Greek kids in single-parent households. This is shocking because half of all single-parent households in Greece were, by that time, struggling to afford food. Let me repeat this in case it did not penetrate; in 2012 a good percentage of Greek single parents (38%, if you assume single parents have on average as many kids as two-parent households) were to some extent willing to prioritise paying for private lessons over food. One does not do this sort of thing on a whim; these people were no doubt convinced that private lessons were crucial if their children were to have any hope of getting out of poverty.

What about primary education?

There is one type of private education that is in particular demand among Greece's lower middle class: private nurseries, primary schools and pre-schools. As already demonstrated, the percentage of pre-primary school children going to private institutions doubled during the peak of the crisis (2011-12). As early as 2010, spending on primary and pre-primary education was already shooting up among the top 20% highest-earning households.

This is due to a combination of push and pull factors. The crisis forced more Greek women to become economically active, most of them working part time or only occasionally (on which much more detail here). This added, over exactly the years of the pre-primary boom, between 3 and 4 hours of childcare per week for the average household. This increase did not come from existing users taking on more hours, but from more families leaving their kids (especially those under 3) with nurseries. An even more important factor was the pilot operation of 801 all-day schools (see p 40 here) supported by EU structural funds. The pilot was meant to have a demonstration effect, with the Greek government taking over the cost of the scheme once it was convinced of its practicability and benefits. It did not, and the private primary education boom proved to be short-lived - in fact since 2012 the numbers have been slowly reverting back to normal as fewer and fewer people can afford nurseries, or alternatively fewer women can find part-time work.

Is it true that private schooling makes up for failings in the educational system?

There are two ways to approach this question. One is a matter of efficiency, as assessed by Koutsampelas (2015). I cite this study with apologies to the authors, who clearly are still working on the paper and don't want it used as is by other researchers until it has been finalised. They find [...] household willingness to pay €2,182 (annually, in 2009 prices) in 2009 and 2,517 (annually, in 2013 prices) in 2013 per school-age child for substituting state for private education. The corresponding figures for government cost per school-age child is €4,33915 and€ 3,70716 or 2009 and 2013 respectively, suggesting that from the consumers’ point of view the public provision of education in Greece might be inefficient.

You can check Koutsampelas' sums here. If you combine Eurostat's data with the OECD's figures on pupil numbers, the result is ca EUR3600 per pupil for primary and pre-primary and EUR4400 per pupil for secondary school as of 2012. Of course these figures are down from a peak of EUR4100 and EUR5600 respectively in 2009 and, assuming no change in pupil numbers in 2013, they would be 3300 and 3900 respectively.

The second way is to ask whether private school pupils do better than their state-educated peers, and why. The OECD's PISA assessment finds a persistent, statistically significant difference across all areas, with private schools performing better. However, the PISA 2009 assessment also found that, once the effects of pupils' social backgrounds, school independence and competition for pupils are taken into account, private school pupils actually do marginally worse. Adding 'independence' to the mix is not trivial though. Greek schools have probably the least discretion in deciding on their own curricula in the developed world (see IV.4.2. here).

Then there is the question of whether private out-of-school tuition makes up for failings of public schools specifically as opposed to those of the educational system. The answer is likely to be no. Going back to the PISA 2012 data, you can see that pupils in private schools still use private tutoring as much as public school students. When it comes to non-traditional subjects (ie not language, science or mathematics) they arguably use more private tuition.

UPDATE 15/11: PISA 2012 included three trick questions, in which pupils were invited to rate their familiarity with the made-up concepts of "proper numbers"; "declarative functions"; and "subjunctive scaling." Only ca. 3% of Greek pupils claimed to understand all three concepts well, but about 37% claimed at least some familiarity with all of them. This isn't bad by international standards. However, what is really interesting is the correlation between such 'overclaiming' and out-of-school tuition. Greek pupils that received out-of-school tuition in mathematics in 2012 were significantly more likely to over-claim (ca a quarter of a s.d.), and pupils that received 6 hours of out-of-school tuition per week or more were even more so - a full s.d above average. It could be reflex: when taught to the test, a pupil knows it's best to try some answer and show familiarity than none at all. It could be psychological pressure; a child taught on the insistence of parents may be eager to please. Or it could be confusion: a child desperate to keep track of new concepts may genuinely feel one is vaguely familiar, even if it is not.

Do poorer Greeks use private education?

The latest data we have suggest that, in 2010, and among Greek two-parent families with children, education made up ca. 5% of consumption spending. Among single parents, this went up to 10%. This generally includes all spending on education; books tend to be free but a wide range of accessories are not. Even so, private schools and tutoring are likely the major driver.

Eurostat doesn't break these figures up by income bracket and household composition at once, but there is a breakdown by income quintiles across the whole population here. This suggests that the top 20% of households by income spent 2.3 times as much on education as the bottom 20% in 2010 - but the differences are greatest for pre-primary and primary education, where the top 20% spent 6x as much. So we know that private education spending is skewed towards higher incomes - but is it the top end of the distribution driving this or the bottom end?

PISA confirms that private schooling in Greece is skewed towards higher incomes - more so than other countries, but suggests that this is mostly due to the exclusion of the very poor, not exclusivity to the privileged (see fig. 2.1 and 4.2 here). Private lessons and cram schools are, as we saw, widely used by lower income families and even charitable shadow education is becoming increasingly common. But again this is a story of the very poor missing out on a near-necessity, not the well-off enjoying a luxury: on PISA's standardised socio-economic status index non-users score a very significant 0.4 of a standard deviation lower than users.*

It's worth noting that Greek society is changing rapidly during the crisis. The findings of Koutsampelas (2015) suggests that Greek state schools are now receiving an influx of children from newly-poor, once middle-class families. This group dominates the flow out of private education to such an extent that the progressiveness of public education spending has actually increased during the crisis even though the class composition of state schools has widened to include better-off people.
The downside of this is that the government has rarely been able to budget for the increased demand for public schooling, leading to widespread teacher shortages and putting the Greek education budget under further pressure.


In Greece, attendance of private schools is rare, and falling. In fact, the crisis has pushed previously middle-class families into state education, leading to mass teacher shortages. Use of private daycare is more common and an important, if dysfunctional, contributor to labour market flexibility. But private lessons, cram schools and tutoring are extremely common, even though they too have taken a hit during the crisis. There is no suggestion that private tutoring in Greece is economically efficient; it is a bad, path-dependent solution to a poor education system. Because of this function, it's also a desperate necessity. Private schooling, on the other hand, is efficient up to a point; it does not make up for failings in public schools as such, simply for the lack of school autonomy and choice in the educational system as a whole.

The cases of private nurseries and of single parents using private tuition make me think of all the times critics have told me to put 'people over numbers' and check my figures against their (sometimes atypical, and almost always second-hand) slice-of-life anecdotes. The numbers are people, guys. The numbers are always people. Telling their story well is the same art as that of putting a tearful first-hand account into context. And if you can't be bothered to do the one, you probably can't do the other correctly either.

* [Bear in mind, PISA's index is a composite, and uses posessions, immigrant status, parents' jobs and parents' education to create a status proxy; this means it is not as variable as family income - if neither parent has become unemployed it is likely that a child's PISA status will not have changed throughout the crisis.]

PS: What if private schools do not confer an advantage after accounting for socio-economic status?

I can't know without running the OECD's regression whether school independence makes more of a difference ot the private/public performance gap than socio-economic status. But what if its impact turns out to be negligible? What would that mean? I have three pet theories.

1. Some of the Greek private school system may not be in the business of producing 'education'. It may be efficient in terms of meeting parents' actual requirements, which may not match a reasonable person's idea of 'good education.' Parents may be willing to spend money in order to ensure their kids are supervised while they work long hours; or are allowed to coast or get away with poor conduct; or are spared from mixing with 'the wrong sort' or have a chance to make their way into the elite.

2. Demand for private schooling could be compensating specifically, but inefficiently, for the lack of independence and competition among state schools. Parents may be willing to pay for a more tailored curriculum, or for non-mainstream teaching methods. This tailoring, however, may be inefficient because of Greece's fragmented geography and relative scarcity of children - which means that parents can rarely find exactly the 'alternative' education they need, and the schools may themselves struggle to find the specialist labour that they need. In other cases, parents with a demand for tailored schooling may genuinely want a good education but have preferences as to what this entails that don't prioritise academic achievement (eg they might want an education that provides religious indoctrination; or an environment that nurtures creativity).

3. Greek private schools may, by virtue of being private, have access to inferior inputs. If people who train as teachers in Greece value secure jobs more than marginal differences in pay and are willing to wait and/or relocate to get such jobs, they might prefer to pass up offers from private schools, especially if they are highly qualified on paper. Similarly, people moving into teaching (or a specific kind of teaching) after switching careers out of necessity may also be more likely to go into private schools for similar reasons. Parental effort is also an input. Parents who opt for private schooling because it helps them trade off money for working time may have less time to devote to supervising or encouraging learning.

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