Chapter B
Financial and human resources invested in education

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B1. Expenditures on education as a percentage of GDP
B2. Distribution of expenditures on education

B1. Expenditures on education as a percentage of gross domestic product (GDP)

Context

This indicator provides a measure of the proportion of national wealth that is invested in educational institutions by linking public and private expenditures with gross domestic product (GDP).

Expenditure on education is an investment that can help foster economic growth and enhance productivity. It contributes to personal and social development and reduces social inequality. The allocation of financial resources to educational institutions is a collective choice, made by government, business, and individual students and their families. It is also partially driven by the size of the school-age population and enrolment in education, as well as the country's relative wealth.

Observations

The proportion of national wealth invested in educational institutions varied greatly from one country to another in 2006 (in 2005 for Canada), from 2.7% in Turkey to 8.0% in Iceland (Table B.1.1). With 6.2% of its GDP allocated to educational institutions, Canada devoted more than the average of 5.7% registered in the Organisation for Economic Co-operation and Development (OECD) countries for which data are available. This placed Canada seventh behind Iceland (8.0%), the United States (7.4%), Denmark (7.3%), Korea (7.3%), New Zealand (6.3%) and Sweden (6.3%).

Table B.1.1 Public and private expenditures on educational institutions as a percentage of gross domestic product (GDP), by level of education, 2006

The financial commitment to educational institutions also varied from one province or territory to another (Chart B.1.1). While 4.3% of Alberta's GDP was invested in educational institutions in 2005, more than double that proportion was invested in Yukon and Nunavut: 9.0% and 13.4%, respectively. The proportion of provincial GDP invested by Prince Edward Island (7.8%), Manitoba (7.6%) and Nova Scotia (7.5%) was slightly higher than the figure for the United States (7.4%). The proportions in Quebec and Ontario were 6.9% and 6.2%, respectively, and the figures from New Brunswick (6.8%), Saskatchewan (6.8%) and British Columbia (6.4%) fell in between. In Newfoundland and Labrador (5.1%) and the Northwest Territories (5.6%), as in Alberta (4.3%), the proportion of GDP allocated to education was below the average for OECD countries (5.7%)—and also below the average for Canada (6.2%). The situation in Alberta presents an example in which the low relative proportion of GDP devoted to education cannot be attributed to low amounts allocated to educational institutions; instead, it is due to relatively high provincial wealth: Alberta's per capita GDP is more than one and a half times that of Ontario's, but the amounts invested in education depend more on the number of students in the system than on the relative wealth of the province: on a per capita basis, the two provinces invest nearly the same amounts in education.

Chart B.1.1 Public and private expenditure on educational institutions as a percentage of gross domestic product, all levels of education, 2006

In the OECD countries overall, more than half of the budget allocated to educational institutions is invested in primary, secondary and postsecondary non-tertiary education (Table B.1.1). This is not surprising, since primary and lower secondary education is compulsory and enrolments in upper secondary education are generally high. In Canada, 58% (3.6% out of 6.2%) of the national wealth invested in education in 2005 was allocated to these types of education, less than the average of 65% for the OECD countries.¹ With 3.6% of its GDP allocated to primary, secondary and postsecondary non-tertiary education, Canada rests in the middle of the OECD countries.

All provinces and territories allocated over half of their education budgets to primary, secondary and postsecondary non-tertiary education in 2005 (Table B.1.1, columns 2 and 9). In Prince Edward Island, Newfoundland and Labrador, Nova Scotia, Quebec, and British Columbia, the proportions were below the 58.1% figure for Canada. Alberta's figure matched that for Canada, while the proportions for the remaining provinces were above the national average, ranging from 58.8% in New Brunswick to 65.8% in Manitoba. Seventy percent or more of the budget dedicated to education in Nunavut, the Northwest Territories, and Yukon was assigned to primary, secondary and postsecondary non-tertiary education, as expected considering there are few schools at the tertiary level in Canada's territories.

In 2005, 42%² (2.6% out of 6.2%) of the share of the GDP that Canada invested in education was allocated to the tertiary sector (Table B.1.1, columns 6 and 9). This means that, among the OECD countries, Canada allocated the largest share of education spending to tertiary education. Comparable figures for the United States and Korea were 39% and 34%, respectively.

All Canadian provinces exceeded the OECD average with regard to the share of the education budget allocated to tertiary education. Prince Edward Island allocated 49% (3.8% out of 7.8%) of its education budget to tertiary education; Nova Scotia, 47%, Quebec, 45%, and Newfoundland and Labrador, 45%. British Columbia (44%) was above the average for Canada, while Alberta, with 42%, was equal to the Canada average. The proportion of the budget allocated to tertiary education in New Brunswick (41%) and Saskatchewan (41%) was above that registered in the United States (39%). The figures in Ontario and Manitoba were 39% and 34%, respectively.

Definitions, sources and methodology

This indicator shows expenditure (public and private) with regard to educational institutions as a percentage of gross domestic product (GDP), by educational attainment and for all categories of education combined.

Expenditure on educational institutions includes expenditure on both instructional and non-instructional educational institutions. Instructional educational institutions are entities that provide instructional programmes (e.g., teaching) to individuals directly in an organized group setting or through distance education.³ Non-instructional educational institutions are entities that provide advisory, administrative or professional services to other educational institutions but do not enrol students themselves.

The data refer to the 2006 financial year (2005 for Canada) and are based on the UOE data collection on educational systems that is conducted jointly by three international organizations—United Nations Educational, Scientific and Cultural Organization (UNESCO), the OECD and Eurostat—and was administered in 2008 by the OECD. The financial data for Canada are drawn from six Statistics Canada surveys⁴ and exclude expenditure related to debt service. GDP data are provided by the System of National Accounts Branch.

Note: The corresponding OECD indicator is B2, What proportion of national wealth is spent on education?

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B2. Distribution of expenditures on education

Context

This indicator provides information on education expenditures by identifying the proportion of budgets allocated to current and capital expenditures.⁵ A breakdown of current expenditures is also presented.

Comparing the way in which OECD countries distribute their education expenditures among different categories gives an idea of the organization and functioning of educational institutions. This distribution is likely to be influenced by a number of factors, including compensation for teachers, the generosity of pension plans, the size of the non-teaching staff, and the different needs for infrastructure.

Budget allocation can affect the quality of services, the condition of equipment, and the ability of the education system to adapt to changes in enrolments. Both budgetary and structural decisions taken at the system level have repercussions extending into the classroom: they influence the nature of instruction and the conditions in which it is provided.

Observations

The relative share of current expenditure varied considerably from one OECD country to another in 2006 (in 2005 for Canada): from 84% in Luxembourg to 98% in Portugal at the primary, secondary and postsecondary non-tertiary level (Table B.2.1, column 1), and from less than 80% in Turkey to more than 95% in Belgium, Denmark, Finland, Mexico, and Sweden at the tertiary level (Table B.2.1, column 7).

Table B.2.1 Distribution of total and current expenditures on educational institutions, from public and private sources, by level of education, 2006

The proportions of education expenditures allocated to current expenditures were relatively high in Canada in 2005: 93% for primary, secondary and postsecondary non-tertiary, and 92% for tertiary (Table B.2.1, columns 1 and 7, respectively). Both of these figures slightly exceed the average proportions for the OECD countries (92% and 90%, respectively).⁶ 

In the primary, secondary and postsecondary non-tertiary category, the share allocated to current expenditure was below the 93% for Canada in Ontario (91%), British Columbia (90%) and Yukon (90%). For tertiary, this proportion was below the figure for Canada (92%) in British Columbia (88%), Alberta (88%) and Prince Edward Island (82%) (Table B.2.1, columns 1 and 7; Charts B.2.1.1 and B.2.1.2).

Chart B.2.1.1 Distribution of total expenditures on educational institutions for primary, secondary and postsecondary non-tertiary education, 2006

Chart B.2.1.2 Distribution of total expenditures on educational institutions for tertiary education, 2006

Current expenditure may be subdivided into three broad categories: compensation of teachers, compensation of other staff, and other current expenditures (teaching materials and supplies, regular maintenance and cleaning of school buildings, preparation of students' meals, and rental of school facilities). The compensation of staff, particularly teachers, accounts for the largest proportion of current expenditure in all OECD countries (Table B.2.1, column 5, and Chart B.2.2). The proportion of current expenditure allocated to compensation of all staff varied from one OECD country to another in 2006: from 61% in the Czech Republic to 92% in Mexico at the primary, secondary and postsecondary non-tertiary level. At the tertiary level (Table B.2.1, column 11), figures ranged from 50% in the Slovak Republic to 80% and over in France, Iceland, and Spain. In Canada, 77% of current expenditure at the primary, elementary and postsecondary non-tertiary level was allocated to compensation of all staff in 2005; at the tertiary level, the figure was 63%. Both of these figures were below the respective averages for OECD countries (80% and 68%).

Chart B.2.2 Distribution of current expenditures on educational institutions for primary, secondary and postsecondary non-tertiary education, 2006

As was the case for Canada overall, the proportion of current expenditure allocated to compensation of all staff employed in education was larger for the primary, secondary and postsecondary non-tertiary category than for the tertiary category in all provinces and in the Northwest Territories and Nunavut (Table B.2.1, columns 5 and 11, and Chart B.2.2). The proportion in primary, secondary and postsecondary non-tertiary varied from 60% in the Northwest Territories to 83% in Newfoundland and Labrador and Prince Edward Island; for tertiary, figures ranged from 57% in the Northwest Territories to 75% in Yukon.

In 2006, most OECD countries allocated a larger proportion of their total expenditure on education to capital expenditure in tertiary education (9.7%); this compares with 8.0% for primary, secondary and postsecondary non-tertiary education (Table B.2.1, columns 8 and 2; Charts B.2.1.1 and B.2.1.2). This difference is largely due to more diversified and advanced teaching facilities at the tertiary level, as well as the construction of new infrastructure necessitated by increased enrolments at this level.

In Canada, 8.1% of education expenditure for tertiary education was allocated to capital expenditure in 2005; the OECD average was 9.7%. By comparison, 7.4% of the budget for primary, secondary and postsecondary non-tertiary was allocated to capital expenditures versus 8.0% for the OECD countries (Table B.2.1, columns 8 and 2; Charts B.2.1.1 and B.2.1.2). With the exception of Newfoundland and Labrador, New Brunswick, Ontario, and the three territories, the proportion allocated to capital expenditure was generally greater for tertiary education than for primary, secondary and postsecondary non-tertiary. (Yukon, the Northwest Territories and Nunavut have few institutions at the tertiary level.)

Definitions, sources and methodology

This indicator shows the proportion of budgets allocated to current and capital expenditures at different education levels.⁷ It also shows the proportion of current expenditures allocated to compensation of teachers and of other staff, along with other current expenditures.

The distinction between current expenditures and capital expenditures is taken from the standard definition used in national income accounting. Current expenditures refer to resources used each year by institutions as they carry out their activities. Capital expenditures refer to assets that last longer than one year, including spending on new or replacement equipment and construction or renovation of buildings. Neither takes expenditures relating to debt service into account.⁸

The data refer to the 2006 financial year (2005 for Canada) and are based on the UOE data collection on educational systems conducted jointly by three international organizations—UNESCO, the OECD and Eurostat—and administered in 2008 by the OECD. As with Indicator B1, the financial data for Canada are drawn from six Statistics Canada surveys.⁹

Note:  The corresponding OECD indicator is B6, On what resources and services is education funding spent?

Notes

1. The fact that Canada classifies expenditure by education level in a way that differs slightly from that of most other countries—expenditure on pre-elementary education is grouped with expenditure at the elementary and secondary levels, while expenditure on postsecondary non-tertiary education (essentially technical and vocational training) is grouped with tertiary-type B expenditure—should not affect comparability, since expenditure at the elementary and secondary levels is dominant.
2. When combined with the 2005 figure of 58% (3.6% out of 6.2%) of national wealth invested in primary, secondary and postsecondary non-tertiary education in Canada, the 42% (2.6% out of 6.2%) for tertiary education totals to 100%. However, the corresponding figures for the provinces/territories may be affected by rounding; that is, the two figures may not add to 100%.
3. Business enterprises or other institutions providing short-term courses of training or instruction to individuals on a one-to-one basis are excluded.
4. Survey of Uniform Financial System - School Boards; Survey of Financial Statistics of Private Elementary and Secondary Schools; Financial Information of Universities and Colleges Survey; Survey of Federal Government Expenditures in Support of Education; Provincial Expenditures on Education in Reform and Correctional Institutions; and Financial Statistics of Community Colleges and Vocational Schools.
5. Current expenditures comprise spending on school resources used each year for the operation of schools. Capital expenditures cover spending on assets that last longer than one year and include spending on the construction, renovation and major repair of buildings.
6. In Canada, however, expenditures for postsecondary non-tertiary education are aggregated with those for tertiary-type 5B education. This is not expected to have a substantial effect on ratios or data comparability, considering the minimal relative weight of this expenditure.
7. Expenditures are based on accrual and cash (or fund) accounting, depending on the data source(s) used by the provinces/territories.
8. Some Canadian data sources include debt servicing, which may lead to different results.
9. Survey of Uniform Financial System - School Boards; Survey of Financial Statistics of Private Elementary and Secondary Schools; Financial Information of Universities and Colleges Survey; Survey of Federal Government Expenditures in Support of Education; Provincial Expenditures on Education in Reform and Correctional Institutions; and Financial Statistics of Community Colleges and Vocational Schools.