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Chapter B
Financial resources invested in education

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

B1 Expenditure 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

GDP allocated to educational institutions

With 6.1% of its GDP allocated to educational institutions in 2006, Canada devoted more than the 5.7% average estimated by the Organisation for Economic Co-operation and Development (OECD) (based on the member countries for which comparable data were available) (Table B.1.1). Iceland and the United States, among others, devoted more of their GDP to educational institutions than did Canada (7.8% and 7.6%, respectively), while estimates for several other OECD countries, including France (6.0%), New Zealand (5.9%) and the United Kingdom (5.8%) were similar.¹

Table B.1.1 Public and private expenditures1 on educational institutions as a percentage of GDP, by level of education, Canada and jurisdictions, 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 2006, more than double that proportion was invested in Yukon and Nunavut: 9.0% and 13.1%, respectively. The proportion of provincial GDP exceeded the Canada level average in Prince Edward Island (8.2%) and Nova Scotia (8.0%), where both figures were slightly higher than the OECD’s overall average, as well as its estimate for the United States (7.6%). Estimates for several other provinces—Manitoba, New Brunswick, Saskatchewan, Quebec, Ontario—were also higher than the 6.1% Canada average, while the estimate for British Columbia (6.0%) mirrored it. In Newfoundland and Labrador (4.6%), as in Alberta (4.3%), the proportion of GDP allocated to education was below the national figure.²

Chart B.1.1 Public and private expenditure on educational institutions as a percentage of GDP, by level of education, 2006

Primary, secondary and postsecondary non-tertiary education

In the OECD countries overall, more than half of the expenditure on educational institutions was for 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, 59% (3.6% of 6.1%) of the national wealth invested in education in 2006 was spent on these types of education, less than the 63% average for the OECD countries overall (3.6% of 5.7%).³

In all provinces and territories, over half of the money spent on education in 2006 went towards primary, secondary and postsecondary non-tertiary education (Table B.1.1, column 2 as a percentage of column 9). Saskatchewan’s figure matched the 59% average for Canada, while proportions for Ontario and Manitoba (60.3% and 67.1%, respectively) exceeded it. Calculations for the remaining provinces reveal proportions below the Canadian average, ranging from 51.2% in Prince Edward Island to 56.7% in British Columbia. Seventy percent or more of the spending on education in Nunavut (74.0%) and Yukon (72.2%) was for primary, secondary and postsecondary non-tertiary education; in the Northwest Territories, two-thirds was spent on this sector (66.2%). These higher proportions in the North are expected, given it has few tertiary schools.

Share spent on tertiary education

In 2006, 42.6% (2.6% of 6.1%) of the share of the GDP that Canada invested in education was allocated to the tertiary sector (Table B.1.1, column 6 as a percentage of column 9). This means that, among the OECD countries, Canada, along with the United States (40.8%), allocated the largest share of education spending to tertiary education.

In Prince Edward Island, 48.8% (4.0% of 8.2%) of the money spent on education went towards tertiary education (Table B.1.1; Chart B.1.1). The figures for Newfoundland and Labrador (47.8%), Nova Scotia (46.3%), Quebec (44.3%) and Alberta (44.2%) were also above the average for Canada (42.6%). In Saskatchewan (40.9%), British Columbia (43.3%) and New Brunswick (43.5%), spending on tertiary education mirrored the Canada-level average. The corresponding estimates for Ontario and Manitoba were 39.7% and 32.9%, respectively, for 2006. With few schools at the tertiary level, the proportions for the North were, as expected, well below the average for Canada, at one-third or less.

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 spending 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.⁴ Non-instructional educational institutions are entities that provide advisory, administrative or professional services to other educational institutions but do not enrol students themselves.

The financial data for Canada were drawn from seven Statistics Canada surveys⁵ and exclude expenditure related to debt service. GDP data are provided by the System of National Accounts Branch. All data for Canada, the provinces and territories refer to the 2006 financial year. The OECD averages (for the 2007 financial year) are based on the UOE data collection on educational systems, conducted jointly by three international organizations (UNESCO, the OECD and Eurostat) and administered by the OECD in 2009.

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

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B2 Distribution of expenditure on education

Context

This indicator outlines spending on education services and resources, identifying the proportion of budgets allocated to current and capital expenditures. A breakdown of current spending—compensation of teachers, other staff and other expenses—is also presented.

The distribution of expenditures may 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

Current expenditure

The proportions of education expenditure allocated to current spending were relatively high in Canada in 2006 (most recent data available): 92% for primary, secondary and postsecondary non-tertiary education, and 94% for tertiary (Table B.2.1; Charts B.2.1.1 and B.2.1.2). These figures are fairly similar to the average proportions reported by the Organisation for Economic Co-operation and Development (OECD) for its member countries: 92% and 91%, respectively.^6,7 Current expenditure reflects spending on school resources that are used each year for the operation of schools.

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

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

In the primary, secondary and postsecondary non-tertiary category, the share allocated to current expenditure was below the 92% for Canada in Ontario (90%), Northwest Territories (90%), Nunavut (90%) and Yukon (85%). For tertiary, spending allocated to current expenses was below Canada’s 94% in British Columbia (91%), Saskatchewan (90%), Alberta (89%) and Prince Edward Island (84%) (Table B.2.1; Charts B.2.1.1 and B.2.1.2).

According to recent data from the OECD, the relative share of current expenditure varied considerably from one country to another: from 84% in Luxembourg to 98% in Portugal, Austria, Chile and Mexico at the primary, secondary and postsecondary non-tertiary level, and from 80% in Spain to 95% or more in Belgium, Finland, Denmark, Sweden, Chile, Mexico and the United Kingdom at the tertiary level.

Chart B.2.1.2 Distribution of total expenditure by educational institutions for tertiary education, 2006

Compensation of staff

Current expenditure may be subdivided into three broad categories: compensation of teachers; compensation of other staff; and other current expenditure (teaching materials and supplies, regular maintenance and cleaning of school buildings, preparation of students’ meals, and rental of school facilities). For primary, secondary and postsecondary non-tertiary education, the compensation of staff (78%)—particularly teachers (62%)—accounted for the largest proportion of current expenditure in Canada in 2006, a situation mirrored in all other OECD countries (Table B.2.1; Chart B.2.2.1). At the tertiary level in Canada, 63% of current expenditure was devoted to compensation of all staff; 37%, to compensation for teachers (Chart B.2.2.2).

Chart B.2.2.1 Distribution of current expenditure by educational institutions for primary, secondary and postsecondary non-tertiary education, 2006

Chart B.2.2.2 Distribution of current expenditure by educational institutions for 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 territories with the exception of Yukon (Table B.2.1; Charts B.2.2.1 and B.2.2.2). The proportion in primary, secondary and postsecondary non-tertiary varied from 61% in the Northwest Territories to 84% in Nunavut; for tertiary, figures ranged from 55% in the Northwest Territories to 72% in Yukon.

Capital expenditure

In Canada in 2006, 6.5% of education expenditure for tertiary education was allocated to capital expenditure; the OECD average was 9.3%. For primary, secondary and postsecondary non-tertiary, the corresponding figures for Canada and the OECD were 7.6%. (Table B.2.1; Charts B.2.1.1 and B.2.1.2). Capital expenditure reflects spending on assets that last longer than one year and includes spending on the construction, renovation and major repair of buildings.

With the exception of Prince Edward Island, Saskatchewan, Alberta and British Columbia, the proportion allocated to capital expenditure was generally greater for primary, secondary and postsecondary non-tertiary education than for tertiary education.

Definitions, sources and methodology

This indicator shows the proportion of budgets allocated to current and capital spending at different education levels. Expenditures are based on accrual and cash (or fund) accounting, depending on the data source(s) used by the provinces/territories. It also shows the proportion of current expenditure allocated to compensation of teachers and of other staff, along with other current expenditure.

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

The data for Canada reflect the 2006 financial year, and figures were drawn from seven Statistics Canada surveys:  the Elementary-Secondary Education Statistics Project; the Survey of Uniform Financial System - School Boards; the Survey of Financial Statistics of Private Elementary and Secondary Schools; the Financial Information of Universities and Colleges Survey; the 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. Information for OECD member countries, and the OECD averages, refer to data for the 2007 financial year and are based on the data collection on educational systems conducted jointly by three international organizations—UNESCO, the OECD and Eurostat—and administered by the OECD.

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

Notes

1. The international data presented in this report reflect the figures available from the OECD at the time of writing; however, the OECD may have made further final adjustments that could not be reflected here. For more detailed information on the latest international statistics, please refer to Education at a Glance 2010: OECD Indicators, available on the OECD’s Web site: www.oecd.org.
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 1.5 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.
3. Canada classifies expenditure by education level in a way that differs slightly from that of most other countries; that is, 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. This should not affect comparability, however, since expenditure at the elementary and secondary levels is dominant.
4. Business enterprises or other institutions providing short-term courses of training or instruction to individuals on a one-to-one basis are excluded.
5. Elementary-Secondary Education Statistics Project; 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.
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. The international data presented in this report reflect the figures available from the OECD at the time of writing; however, the OECD may have made further final adjustments that could not be reflected here. For more detailed information on the latest international statistics, please refer to Education at a Glance 2010: OECD Indicators, available on the OECD Web site: www.oecd.org.