Be Careful What You Vouch For

As a Chilean citizen, Jonathan Franklin has used Chile’s education vouchers to send his seven children to public and private schools of his choosing. His assessment? The voucher approach to schooling in Chile bears haunting resemblance to private prison systems. “The student is like an inmate in this system,” Franklin notes. “No one is asking the deeper questions about whether our children are getting educated. At the end of the day, it’s all about headcount.” To him, that is what you get when public education is bought and sold through markets.

 As the privatization of education gains support in the US, Chile may be the best example of the direction in which we are headed. Chile serves as a cautionary tale that free-market approaches to schooling often increase inequality while failing to improve educational outcomes.

In 1981, Chilean dictator Augusto Pinochet introduced the voucher system for education. Under this plan, the government issued publicly funded vouchers that families could contribute to tuition at primary and secondary institutions for each student. Vouchers covered the full cost of enrollment at public schools, which are institutions required to accept all students. However, families could also apply to use their voucher at most private schools, which, unlike their public counterparts, could decline admittance to any student. Private schools could also charge tuition above the voucher value, forcing families to pay the difference out of pocket.

This voucher system, inspired by laissez-faire economists from the University of Chicago, relies on the basic premise of the free market. In theory, consumers ‘shop’ for the best institutions. Schools therefore compete for students, since higher enrollment results in greater revenue. To attract more students, low-achieving schools are forced to improve or lose students and funding. 

To help parents make informed choices, Pinochet introduced standardized tests that allowed Chilean citizens to track the performance of each institution. Notably, the government made no investment to improve teaching in underperforming schools;instead, policymakers expected that competition would naturally improve test scores.

However, the studied effects of the voucher program contradict these original assumptions. After 1981, Chile’s educational outcomes stagnated. Researchers at UC Berkeley and Columbia have demonstrated that shifting spending from public to private schools did not improve education quality. In fact, they found that Chile’s voucher system failed to improve average educational achievement as a whole.

The voucher program resulted in significant structural inequities. Wealthier families benefited most from vouchers, as they could afford additional fees charged by private schools and could transport their children greater distances to higher quality schools.This resulted in what researchers called “[an] exodus of the Chilean middle class from public schools.”Between 1981 and 2013, enrollment in public institutions plummeted from 78 percent to 39 percent amongst school-age children, and funding for public schools was cut in half in the first decade of the voucher system. This drop in funding crippled public schools and led to a dramatic increase in socioeconomic segregation, since the most socioeconomically disadvantaged students were left in the weakest institutions.

In 2008, reformers moved to correct the increasing segregation and overall stagnation in performance associated with Pinochet’s voucher system. The Preferential School Subsidy Law (SEP) increased the value of vouchers for Chile’s poorest students, referred to as ‘priority students,’ by 50 percent. Schools now received funding incentives to accept the lowest-income students. Additionally, a new mandate required schools to waive any additional fee beyond the voucher amount for priority students so that they could attend private schools. Finally, schools that performed poorly faced government intervention in budget matters or, in extreme cases, loss of licenses.

"Chile’s story reminds policymakers that voucher systems can exacerbate patterns of segregation, distort educational goals, and push schools to prioritize test scores in order to compete."

Some analysts suggest these reforms were associated with improved outcomes. Harvard economist Richard Murname has found that average Chilean test scores rose after the implementation of the SEP law. Furthermore, the observed achievement gap between low-income students and more privileged students narrowed after the SEP law took effect.

Before heaping praise on the reformed SEP, however, it’s necessary to consider other developments in Chilean education. Researchers Alvaro Hofflinger and Paul von Hippel, for instance, noted substantial increases in postsecondary education of parents in this period, concluding that “at least half of the rise in test scores was due to increases in parental education.” More importantly, they demonstrated that gains in test scores could largely be attributed to a restructuring of curricula: Teachers were focused on teaching to the test, which may have raised scores but sacrificed the development of soft skills, project-based work, and conceptual understanding across disciplines.

Even more worrisome than these pedagogical changes is the revelation that a large number of schools inflated their scores by compelling low-performing—and typically more disadvantaged—students to be absent on test days. If the lowest-income and lowest performing students are excluded when performance is measured, any purported test score gains or reductions in achievement gaps are suspect.

Not only have practices within schools disadvantaged the most vulnerable students, but socioeconomic segregation has persisted, despite increased spending on the least fortunate students. In 2012, the wealthiest 25 percent of families sent 80 percent of children to private schools, while only 38 percent of Chile’s bottom quartile attended private institutions.

Thus, research subsequent to Murnane’s analysis suggests that Chile’s voucher program yielded only questionable gains in a segregated system and that market competition necessitates a focus on testing, which comes at the expense of broad learning and equitable teaching.

In economic terms, these problems are characteristic of a market failure. A study by Antoni Verger on the role of public-private partnerships in education used Chile as a case study to examine how free market ideals deviate from optimal conditions when applied to the real world. For example, a free-market model of education assumes that families select schools based on objective and traditional measures of school qualities. However, actual practice may be more complicated. When reflecting on his own experiences, Jonathan Franklin observed that “minimal information is available” on school quality. As a result, parents make decisions based on imperfect information and are more likely to fall back on biases. Franklin stated that families often select private schools for the prestige of the label “private” regardless of actual quality.

This dynamic has caused many Chileans to lose faith in public institutions as private ones gain status. Professor of Education Ernesto Trevino writes, “in a dynamic of universal competition and selection, middle-class families have no choice but to play the game…In this competitive dynamic, to attend a public school equates to losing the game.” As higher performing and more advantaged students opt into private institutions, public schools lose voucher funding and are left with an increasingly disadvantaged population, earning them the label of “low performing.” This school segregation reinforces the public perception that public sector schools are inferior, leading to a vicious cycle of increasing stigma and worsening educational outcomes for Chile’s less fortunate children. 

Because these failures still shape the voucher system, the effects of the Chilean government’s 2008 reforms have been limited. This begs the question: Given that observed market failures and growing inequality have compelled the Chilean government to increase its investment in vouchers for low-income students, would it not be more effective to invest directly in the institutions that support all students—public schools—instead of creating a system of inefficiencies and market failures through the voucher structure? In 2017, US Secretary of Education Betsy DeVos proclaimed her interest in implementing a voucher system similar to Chile’s model. It is critical for her and anyone hoping to expand voucher use to carefully examine Chile’s educational system. Although an American voucher program may play out differently, Chile’s story reminds policymakers that voucher systems can exacerbate patterns of segregation, distort educational goals, and push schools to prioritize test scores in order to compete. Policies based on efficient-market models fail to account for self-evident social forces, and it is the citizenry, particularly the most disadvantaged among them, who suffer from these errors.

Photo: “Chilean flag