Charter schools and the aspiring classes

There is significant research concluding that the ever-spreading charter schools in the U.S. are markedly improving pupils’ performance. Charter schools are free to attend, open to all children and publicly funded but independently run – the most similar comparison close to home being the Free Schools Programme in England. Since the first charter school law passed in Minnesota in 1991, almost seven thousand have opened with two and a half million children now being educated in a charter school.

Previous studies have looked at lottery estimates. These compare how charter applicants perform when admitted to a charter school with how they would have performed had they attended a state school as the randomness ensures there are no systematic differences between those selected and not selected. But these studies do not account for pupils who never applied to a charter school and ended up attending one. Or for pupils attending charter schools for which demand is weak.

A new discussion paper (pdf) by Atila Abdulkadiroglu, Joshua D. Angrist, Peter D. Hull, and Parag A. Pathak does just this by testing the treatment effects of charter school attendance on middle-schoolers that are part of the new takeovers in New Orleans and Boston.

Takeovers see traditional state schools closed and then re-opened as charter schools. Students enrolled in schools designated for closure are eligible to be ‘grandfathered’ into the newly-opened charter schools. This means that they are guaranteed a place.

What this new paper finds is that highly disadvantaged students have experienced substantial gains in their achievement after enrolling in takeovers passively. It was previously believed that urban charter lottery applicants enjoy an unrepresentatively large benefit from charter attendance because they are either highly motivated or uniquely primed to benefit from the education these schools offer. Now we have both estimates from grandfathering and lottery-based research that weigh against this view.

These successes have also prompted similar approaches to be explored in Michigan, Pennsylvania, and Tennessee despite the controversy caused by the proliferation of charter takeovers in New Orleans, Boston and elsewhere.

Charters Without Lotteries: Testing Takeovers in New Orleans and Boston is one report of what is becoming a substantial compilation of literature on why charter schools are working. They are some of the top-performing schools in the country with a higher percentage of charter school students accepted into a college or university. They are raising the bar of what is possible and should be expected in public education.

Teachers in charter schools are given the freedom to innovate and have more powers to explore the best practices. The schools can adopt themes and focus on specific fields like STEM subjects, performing arts or meeting the special needs, for example, of autistic children.

How charter schools are quickly extending choice to the poorest is exciting. And crucial. It is not widely recognised that choice already exists – but for the wealthiest. The most privileged can not only afford private schools but through the state school catchment system the housing market is the market for schools. An accepted way of boosting real estate is by improving schools as families want to buy houses in areas with good schools. School choice gives the poor a way to access the already existing market.

The disadvantaged are on the rise and benefiting more than ever from state education as a result of what is the best prominent educational movement in the U.S right now.

Debating the death of capitalism

I took part last Friday in a debate at Durham University Union on the motion that “This house welcomes the death of capitalism.” I opposed it, of course, arguing that capitalism has not died, is not dying, and probably will not die. I argued that two of its central elements went with the grain of human nature: investment and exchange. I suggested humorously that the first caveman who fashioned a bone hook invested time he could have spent happily hunting mastodons in order to gain greater rewards in future. This is like the child who chooses two chocolates tomorrow rather than a single chocolate today, or the investor who forgoes the pleasures that spending £100 might bring in order to have £105 to spend next year.

Investment is one way in which people better their lot. Another, I said, was exchange. When the caveman swaps one of his bone hooks for a fur offered by a hunter, both gain something they value more in exchange for something they value less. Each gains value and wealth is created. It was these two elements, I remarked, that had enabled capitalism to generate unparalleled wealth for humanity, the wealth that has lifted billions out of starvation and subsistence, and has paid for medicine and sanitation, the arts and education. It has doubled life expectancy within a century, and has meant that far fewer children die in infancy, or mothers in childbirth. Capitalism survives because of what it enables us to achieve.

I dealt with two things that capitalism is not. The first is cronyism, where big business gets into bed with government to secure special measures that enable it to exploit the public instead of competing fairly for their custom. The second is fraud, where bankers illegally fiddle interest rates, where Enron swindles its shareholders out of billions, or where Bernie Maddoff steals from his clients. This is not capitalism; it is criminality, and both of these practices need vigilance to thwart them.

People have asked “What will come after capitalism?” I replied, “Capitalism,” pointing out that after each crisis it is modified so the same mistakes are not repeated. It evolves and learns, as humans themselves do. We should not applaud its death, I said, but celebrate its continued life.

The students came down on the side of capitalism by defeating the motion.

There is no such thing as pensions tax relief

Once again we’ve the sight of a politician not grasping reality when planning a raid on other peoples’ money:

Ms Reeves said: “It cannot be right that those on high incomes paying 40 per cent tax only have to save £600 to generate £1,000-worth of pension savings, while those on middle and low incomes have to save £800 to generate the same amount.”

“Replacing tax relief with matched contributions, or a system that was even more progressive, offering higher relief to those on lower incomes than those on higher incomes, should be explored.

“At present, the pensions tax relief rewards those who already have the highest savings and can most afford to save.

“This seems to be a very inefficient use of the £20bn spent on pensions tax relief and is in urgent need of attention.”

There is no such thing as pensions tax relief. There is however something that is pensions tax deferral.

Tax relief would be that you do not pay tax on money put into a pension and also do not pay tax on the pension when it is received. You are relieved from taxes that is. This is not what happens. Instead, you do not pay tax on the money put into a pension: but you do pay the normal income tax on the pension once it arrives. This is not tax relief: this is tax deferral.

Two points flow from this. The first is that we’ve actually got to call this what it is: it’s delaying what tax is paid, not abolishing it. The second is that the costs of this are nothing like what the claim is. Because we do indeed collect income tax upon pensions. And whatever that amount is must be offset against whatever amount anyone wants to claim is deferred. The net amount could go either way, we simply don’t know.

Incomes in retirement are usually lower than during a working life and so the tax collected might be less than that deferred as a result of lower tax rates. Or, perhaps, the investment pot has grown so that the income tax collected in the, say, 20 years of retirement is greater than the tax deferral granted in the 40 years of working. We simply do not know the answer there (maybe someone does, but we do not). But until we do know that we cannot have any clue at all about whether tax deferral actually leads to a loss of Treasury revenue or not. It will affect the timing, obviously, but the amount?

What is being done here is to look only at the cost of the deferral upon revenue and to ignore the income that results from said deferral. And if this is the way that we’re going to discuss public policy then God Help Us All.

Are benefits a subsidy to workers or employers? Yes

There’s an interesting claim out there that benefits are just a subsidy to low wage employers. They can get away with paying low wages because we taxpayers then top that up. Alternatively, we might think of benefits as being subsidies to those people who, for whatever reason, have incomes lower than we think they ought to be. There’s an answer to which of these is true, that answer being: yes.

Jeremy Warner is one this subject here:

Much the same process is evident today in the growth of Britain’s low-wage, low-productivity economy. There is little incentive for employers to improve their productivity, and therefore their wage levels, when labour is subsidised to the degree it now is from general taxation.

By the by, the tax credit system – enormously expanded and enhanced under Gordon Brown – has created a kind of client state of those partially or entirely dependent on the government for their way of life. It has locked in votes as well as disrupted the normal market process by which the general standard of living is raised.

We would make a slightly different point. Whether benefits subsidises the employer or the employee depends upon which benefit. More specifically, a benefit that is paid because of low income, regardless of whether someone is in or out of work, is a subsidy to the recipient. And it’s also an anti-subsidy to the potential employer. It raises the reservation wage (the amount that must be offered to get someone to come into work). However, a benefit that is paid conditional upon being in work will end up as being a subsidy to that employer: for it lowers again that reservation wage.

Here in the UK we really only have one major work conditional benefit, working tax credits. Those really are a subsidy to low wage employers. The impact of the rest of the benefit system is to raise wages.

The interesting out come of this is that if you want wages for the low paid to rise then you should almost certainly be arguing for the abolition of working tax credits. Not that this would increase the incomes of the poor but it would stop that subsidy of low wage employers.

America’s only socialist opposes Americans trading with socialists

Bernie Sanders running for President was always going to provide some amusement. But we didn’t think it was going to come quite so soon after America’s only declared socialist in Congress made his announcement.

Sanders is against eh idea that America should sign the trade deals that Obama is urging that America does. And as Tyler Cowen has pointed out the country most likely to benefit from said trade deals is the at least nominally (and very poor, there’s a connection there) socialist country of Vietnam. It’s thus possible to note that:

Note his position the the US needs to “fundamentally change our trade policies, so that corporations don’t shut down in this country and move to China or Vietnam or other low-wage countries.”

Yes, the socialist candidate for US president is talking about keeping American jobs from migrating to the “socialist” countries of China and Vietnam.

Politics: it’s a rum manner of trying to run the world, isn’t it?

We would also like to note that this blog post was created on International Workers Day, May 1.