This is an archived article.

July 22, 2010

Improving productivity could deliver ‘new money’ for public schools

Given the bleak outlook for financing public education, schools face a grim future of struggles amid static — or worse — declining resources. How then might states and school districts find “new money” in the context of a sluggish economy with depressed revenues and built-in cost escalators?

The answer, say two UW researchers, lies in productivity gains.

“Improvement in productivity in other [labor-intensive service] economic sectors may hold important lessons for understanding how the education system can become more efficient and effective,” state professors Paul Hill and Marguerite Roza, at the UW’s Center on Reinventing Public Education. Hill is director of the center and Roza one of its senior scholars.

In their new white paper, Curing Baumol’s Disease: In Search of Productivity Gains in K-12 Schooling, Hill and Roza cite the successes of other labor-intensive service organizations that have raised productivity in the face of competition for workers and rising costs.

The reference to Baumol is William Baumol, who in the 1960s observed that costs rise in labor-intensive services that must compete with other parts of the economy for workers because such services cannot cut staff. The phenomenon of rising costs without commensurate increases in output, has been labeled Baumol’s cost disease.

Public schools in most areas of the United States are caught in the vise of declining funding — as states and school districts must deal with depressed revenues — and rising costs: contractual pay increases for teachers and staff, and in some places pressures to reduce class sizes.

Hill and Roza discuss several areas in which labor-intensive businesses have improved productivity: information technology, deregulation, redefinition of the product, increased efficiency in the supply chain, investments by key beneficiaries, production process innovations, carefully defined workforce policies, and organizational change.

Observing that public education largely has been resistant to improving productivity and that reform efforts have focused upon improving student performance with little attention paid to costs, Hill and Roza offer a five-step agenda for finding the cure for Baumol’s disease-afflicted public schools:

1. Systematically consider strategies employed by other labor-intensive industries for their relevance to education.

2. Zero in on learning systems outside schools to surface alternative production processes that may yield greater productivity.

3. Understand the key cost drivers in the current schooling model, and examine the impact on each of proposed alternatives.

4. Prototype test new models.

5. Create a policy agenda for identifying and reproducing the most promising ways to increase productivity.

To those who might object that such a research and development project seems frivolous in this time of tight budgets, Hill and Roza say, “If depressed revenues are instead used as a rallying cry for innovation, the current fiscal crisis could ultimately strengthen public education by opening the door to improved processes that have the potential to do more with less.”

Curing Baumol’s Disease: In Search of Productivity Gains in K-12 Schooling can be downloaded at