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Boost the economy by improving the lives of deprived students

By Richard Holden  October 25, 2018

​What if we had an opportunity to double the size of the tourism industry, or to quadruple the size of the beef industry, or to boost the economy by more than any of the presently proposed tax switches?

What if we could do it while permanently improving the lives of disadvantaged young people?

We surely wouldn't let it slip away.

Yet we do every day while we fail to address the gap in school achievement between rural, regional and remote children and their city counterparts.

Some of these measures are expensive, some are almost free. All have been shown to have a high return in the US.

In a report for the UNSW Gonski Institute on Education launched on Monday, Jessie Zhang and I estimated the size of the gap. We also document its causes, and outline what the research in the US and Europe tells us about ways to narrow it.

Over the past decade education research has undergone a transformation with the use of large-scale randomised controlled trials to determine what works.

It isn't easy because correlations can be misleading. If, for instance, we discover that women who eat more fish during pregnancy tend to have children who perform better in primary school, we may be tempted to conclude it's the Omega-3 fatty acids that do it.

But women who eat a lot of fish tend to be wealthier. It might be that extra wealth – and the educational resources it affords – is driving the better performance.

Who knows? Increasingly, the social scientists who construct randomised trials do.

Using techniques from pharmaceutical and other trials they are getting good at zeroing in on actual causes and ignoring mere correlations.

What works the most, according to US studies, are high-dose-small-group tutoring, balanced incentives for students, managed professional development for teachers, smaller class sizes, and a culture of high expectations.

Some of these measures are expensive, some are almost free. All have been shown to have a high return in the US.

There are good reasons to believe they could be highly effective in rural, regional and remote Australia.

It would be worthwhile conducting our own randomised controlled trials in our own cultural and educational environment to be sure.

In our report we translate the differences in school achievement to the differences in human capital and eventually lifetime earnings.

This puts the economic benefit of closing the urban/non-urban gap at $56 billion – about 3.3% of gross domestic product.

Massive though that number is, it is both narrow and an underestimate. It focuses purely on how better skills can translate into better wages.

It doesn't consider how the benefits of better skills can spread and multiply throughout the economy. Nor does it consider the benefit of revitalising country towns, or the benefits of better physical and mental health.

Most of all, it doesn't capture the truth that bridging this achievement gap would provide a world of expanded opportunities for millions of young Australians and give them the chance to live out their full potential.

Bridging the urban/non-urban achievement gap is easier said than done, but the potential benefits from it to both the economy and the lives of Australians who would become more able to achieve their full potential are too big to ignore.

Richard Holden is a professor of economics at UNSW Business School. A version of this post appeared on The Conversation.

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