Client: Haridus- ja Teadusministeerium

Period: 2011

School failure is the failure of the student to achieve the minimum standard of cognitive skills deemed necessary for productive participation in the labour market and society in general, and at the same time the failure of the school system to provide services leading to successful learning.

The concept is regularly simplified to the failure to complete some minimum level of education. In the European Union, this minimum standard of education is considered to be the completion of upper secondary education. The objective of this study was to assess the costs stemming from failing to meet this standard.

The cost of discontinuing studies is analysed via the concept of alternative cost. We compare two different situations – one of them is a real situation where a person’s studies discontinued before receiving secondary education and the other is a hypothetical situation where studies would not have ended. If larger gains result from the acquisition of additional education (higher salary, better health, or less pressure on the state budget because of the smaller consumption of social benefits), then this reflects the costs of school failure.

We measured costs related to following topics:
• Income (wage income);
• Tax income (inflow of direct taxes);
• Costs and benefits related to health (life expectancy and health quality);
• Costs related to crime (administrative costs and damages to victims);
• Costs related to unemployment insurance, unemployment support and social benefits.

The results showed that if it would be possible to bring an average person with primary education to the level of an average person with secondary education then the society would gain 78 000 € from per each person. Thus, if costs of a remedy giving these results will remain below 78 000 € for each person then the application of such a measure is beneficial from society’s point of view.

Most of the benefits form higher education come from better health, higher salary and larger amounts of direct tax inflow resulting from that.

If we look at purely financial gains then the incomes of people with secondary education compared to people with primary education are on average 23 000 € higher across the lifespan. For the government it means ca 15 000 € more revenue. Therefore, it is a profitable activity to invest into secondary education even from a purely financial point of view.

The paper was commissioned by the Ministry of Education and Research.