“Free” Education of Azerbaijan

Many of the social, economic and political problems of Azerbaijan can be explained by a multitude of factors. In my opinion, above all, we must recognize the impact of the dysfunctional education system. Therefore, I decided to dedicate my next couple of posts to the national education policy.

In this first post, I am going to take a look at the general education, which host pupils from the age of 6 till 17. Graduates of these schools are supposed to be ready to make a choice between continuing their education in universities (or other similar institutions of mid – higher education) or begin their independent life. The reality is that often they are incapable of doing both. The system prepares students whose only intention in pursuing a bachelor’s degree is to get a diploma, regardless of their personal interest in the field, or if there is demand for that particular specialty in the labor market. It puts students in undergraduate classes that they do not care and jobs in which they are not productive. It also prepares students who may be experts in trigonometrics, or can recall the whole table of Mendeleyev, or know exact date of a battle in 16th century but fail to make a simple logical analysis (I will dedicate a brief but separate post about the curriculum issue later).

The deficiency of the public education system is not limited to academic performance. The overall atmosphere in these facilities is also toxic. Just last year we observed a schoolgirl, Elina, being bullied to such an extreme extent that she took her own life by committing suicide in a public school in Baku. The situation in urban schools of relatively poorer surroundings, as well as rural areas can only be described as a disgrace for country rich in natural resources. One surely wonders, where did we go so wrong?

Azerbaijani government provides “free” education at public schools. As of 2018, there were 4,411 public schools in comparison to just 28 private ones. There is no doubt that the private schools are giving a far superior education, but their accessibility is limited only to a narrow class of students whose parents are able to bear the colossal cost of these elite schools. On the other hand, a clear majority of pupils, more precisely, 99.2% are getting state-financed education.

It is true that there are some public schools with superb indicators operating in the country, but they constitute a severe minority. In this post, I will first discuss why I think public schools are this ineffective, followed by a discussion for a potential solution.

WHAT IS WRONG WITH PUBLIC EDUCATION?

I am aware that this is an unpopular and politically incorrect statement, but it is true nevertheless: in order to achieve decent education, the laws that govern the world of business should also apply to education. It is unpopular because we are regarding general education as a human right, and it should be a human right. Every single citizen, regardless of his/her parents’ financial possessions should be able to get a pre-determined amount of minimal education for the sake of democracy and living in a stable society. Yet the perception that we can achieve this goal, as well as high-quality education, by state financing and driving out every single financial incentive from the educational system is blatantly wrong and destined to failure.

If the thousand years of human history has taught us one thing, it is the inevitable truth that in a free market economy with certain amount of regulation (against fraud, false advertisement and etc.), individuals who solely pursue their own financial goals protect the interests of both the customer and the producer. No agency created by the government or an international NGO can achieve that level of protection under most of the cases. A barber who competes with other barbers for the service of haircutting has the motivation to offer the best service at the most affordable rate in order to gather as many clients as possible. Then the question arises, why are we not using this strong financial impetus in our benefit when it comes to education? After all, isn’t a student/parent a customer and a school the provider of a service?

The reason why the opinion of private education is so disfavored is because it is way easier for politicians and public figures to advocate for “free education for all”. It sounds more humanist and wonderful, while in practice it results in inadequate education of the lower classes and an ever-increasing gap between the wealthy and the poor, both in material and in intellect. It is ironic, but not unforeseen, that a state policy aimed at helping the poor actually does vice-versa. In my opinion, the “free education” policy rather harms the well-being of the lowest classes of the Azerbaijani society.  The underlying reasons are straight-forward:

  1. Lack of Financial Stimulus

Under a public education system, schools “earn” their income from the central government, which usually does not have necessary information about the quality of the service provided by the said school. To what extent can an official in Baku be knowledgeable about the quality of education in a distant village of Azerbaijan? He/She may be able to gather minimal information with the help of many people employed for this cause but consider the enormous cost of hiring this people. That funding instead could have been gone to financing education itself. And when the link between the offered service of schools and the allocated funds from state budget disappears, the school managers have no incentive but his/her own goodwill to provide high quality education. Relying solely on the goodwill of the people on management positions, on the other hand, is not a proper strategy when it comes to a vital matter such as educating the young generation.

     2. Bureaucracy

I touched upon this issue briefly on the preceding paragraph but let me go into further details. By all means, education is a complex service. Whilst the private market would be able to take on that complexity without much effort (we will discuss this later), the public system requires hefty amount of resources for the same cause. For controlling our education, we got Ministry of Education, Institute of Education, education departments in each region, and of course countless offices of municipalities and local executive authorities that deal with education. This multi-level army of bureaucracy is draining much of the funding which the taxpayers pay in delusion that their funding will end in their children’s education. In reality, a large portion ends up in pockets of bureaucrats that do not contribute a bit to the quality of the educational system. As the people in management, they are also one of the prime obstacles for reform in educational system, since an adequate reform would surely render their services unnecessary and cost many of them their jobs.

    3. Politicization of the Education

A less spoken problem of free education, particularly in countries that have not achieved decent level of democracy, is the politicization of the education. Any person who have studied at a public school in most of the CIS countries is well aware of that: history classes glorifying certain figures whilst bashing others, poems dedicated to great leaders bringing justice to the world, text-books filled with quotes of certain politicians and etc. I will not go into greater detail here as the point is very self-explanatory: free public education has always been manipulated by the ruling politicians of fragile democracies in order to serve their own political interests.

WHAT CAN WE DO? 

Broadly speaking, we need to do two things first: bring elements of private market into the public education system and give a substantial role to the parents (rather than government agencies and etc) when it comes to managing the schools. Before going into details, let me note that at the initial stages the following actions should cover the relatively large schools (for example, those with more than 1,000 students) in Baku and the regions.

  1. More Parental Control over Education

I talked about the problem of bureaucracy and here is the solution: get rid of the unnecessary agencies and institutions that deal with the quality of education by allowing parents to be involved more in the decision-making processes of schools. Broadly speaking, parents are the ones which have the utmost interest in the child’s education. It is true that a small fraction of them might not be as engaged or knowledgeable as the others, but when we look from the top, it is assured that the collective interest of parents will always be more beneficial to the students than the collective interest of government bureaucrats. We can also contribute to this objective by giving a greater management role to the local municipalities, since the parents are more likely to have a say on the affairs of municipalities than the central government and will therefore feel more empowered on the question of education.

        2. Voucher System

The second part of the solution, which is the more complex one, is to institute a voucher system. Long story short, voucher system means that the families with pupils will get vouchers equal to a certain amount, let’s say 700 AZN per children of school age (the real amount of this voucher can be equal to general education expenses minus costs of maintaining the most important governmental educational agencies, divided by number of pupils involved in schools). The voucher would only be allowed to be spent at schools for the child’s education. Any parent who wishes to change his/her child’s school, can do so freely with the help of the voucher, including changing to private schools[1]. Under this scheme, public schools would be able to charge tuition fees within certain boundaries. The minimum limit would be the value of the voucher itself and the maximum can be determined by law. Let’s say for our example, the public schools would be able to charge annual tuition fees between 700 AZN and 1,400 AZN.

If the tuition fee charged by the school is equal to 700 AZN, then the parents do not need to make any additional payments. If the tuition fee is above 700 AZN, say 1000 AZN, then the parents can provide the 300 AZN from their own funds.

When the family has more than 1 child in general education, let’s say 3, then they would get three equal but separate vouchers. Each voucher would be specific for one child, meaning that parents cannot put together multiple vouchers in order to send one of their children to a better school with the help of the others’ vouchers. Under no circumstances, the vouchers can be exchanged for anything other than general education.

How would the voucher system contribute to our current failing education system? Well, firstly, all of the schools will now be involved in direct competition with each other, since losing a pupil would also mean losing funding. That will be a strong motivation for the public-school managers to provide the best quality service they can. It would also re-enforce the increased role of parents by giving them the option to send their kids to public or private school of their own choosing with an easy process.

Secondly, we will be able to get rid of many bureaucratic agencies with the help of the voucher system. In essence, parents sending their children to a specific school sort of “vote” for that school. They believe that for the price, the quality of the education offered is satisfactory. The schools that do not meet the natural standards of the parents will undeniably face financial difficulties, which can force the municipalities to take action on the matter. All of a sudden, the same procedure that was previously and supposedly carried by a horde of bureaucrats is conducted via “votes” of parents. The great characteristic of the latter method (parental “votes”) is that it levies no extra cost on the taxpayers, unlike the former method of mass bureaucracy.

Thirdly, the plan would save a significant portion of the funding for education. The savings would primarily be derived from salaries of bureaucrats whose service we will need no more. Additionally, further savings can be made from ceasing inefficient and unnecessary expenditures. A good example here can be different tools and equipment bought for chemistry and physics classes in public schools, which are simply used for taking photos for satisfying bureaucratic reports than actually contributing to the teaching process. It is not uncommon to see school administration to forbid students to even touch this equipment. Under a voucher plan, the management will no longer need to provide misrepresented reports to the bureaucracy, which would mean that the funding for unnecessary capital and salaries can be transferred to salaries of pedagogical staff. Essentially leading to an increment in the average wage of the teachers in schools, which will act as a motivation for more worthy people to become teachers of future.

Voucher plan would also allow schools in cities to specialize in order to attract specific groups of students. Some schools may primarily focus on humanitarian subjects and prepare highly qualified undergraduate students for law, economics or business while others can focus on technical subjects and feed the higher education institutions with engineers and chemists. The financial feasibility of the voucher system would surely act as a boost to the strides towards more specialization in education.

FINANCIAL ASPECT

One of the most cited arguments against a potential voucher system in general education is that it would result in mass school closures due to financial problems. Does this argument carry any factual support in the case of Azerbaijan?

According to the state budget of 2019, Azerbaijani government has spent 1,289,076,843 AZN for the general education[2]. Considering that there were 1,567,016 students involved in general schools (both public and private)[3], that means per student the state has spent 822.6 AZN. At the moment, a significant portion of that funding is lost in bureaucracy for salaries, maintenance of offices, supervisory activities and so on. Voucher plan would eliminate much of these redundant expenditures. We would still need a ministry of Education and local offices, but their competence would be much more limited than today. With less competence to these agencies, comes the possibility of saving much-needed education funding, which can be re-directed towards the voucher system.

Let’s assume that once we start implementing the voucher system, the regulatory institutions such as Ministry of Education will still be allocated 113,765,361 AZN, which would leave 750 AZN worth of funding per student by the state budget. 750 AZN per student might not look like a lot, but don’t forget that schools in Baku and many others in urban areas generally have more than 1,000 students. I have gathered data on 100 public schools in Baku and found that 60% have more students than 1,000, some even going as far as having 3,500.

For public schools, the biggest cost by far is the salaries of the pedagogical stuff. Under a voucher system, the income of the school would be dependent on the number of students and the expenditures would primarily be derived from number of teachers. Therefore, the important factor that determines the financial sustainability of a school is the ratio of students to teachers. For the calculations below, I will assume that the salaries of the teachers would constitute 80% of the total costs of the school (in reports that I found, this number varies between 70 to 90%). Once we know the average salary of a schoolteacher in Baku (which equals 682 AZN[4]), we can calculate a couple of indicators. By using this simple analogy, I aimed to approximate how many public schools of Baku would be financially sustainable at its current form under a voucher system.

I gathered data and constructed a scatter plot of 100 public schools of Baku. The horizontal axis represents number of students whilst the vertical axis represents the estimated amount of profit (P), calculated by the following simple formula[5]:

dustur1.png

where S represents number of students

and T represents number of teachers

Graph 1: Public Schools Profitability in Baku

Graph1.png

Source: Author’s own calculations

The graph tells us a couple of things. First, we observe that some of the schools are financially profitable whilst other are not. To be exact, 43 schools lie above the 0$ break-even point. With a small amount of savings, a number of schools (those that are just below the horizontal axis) can also shift upward and make profit. Secondly, there is a clear positive relationship between the profitability of schools and their size. That is also understandable, since more students means larger classroom sizes, which in turn takes the average cost per pupil down – an effect called economies of scale.

On the other hand, I need to mention one thing in order to avoid a potential misinterpretation. Readers may conclude that schools such as #53, #26 and #67 are financially profitable because they have large classrooms, which in turn would mean low levels of education. Yet, based on my examples, we cannot make such a one-way relationship between the size of the classrooms and the school performance. Last year, a news agency shared their list of top schools in Baku[6], which included school #53 (the dot representing this school lies above the horizontal axis with estimated profit of 590,000 AZN) as well as school #20 (which lies clearly below the horizontal axis with a estimated loss of 400,000 AZN). The presence of a top school operating with a clear profit demonstrates that the students to teacher’s ratio does not always determines the performance of the school. The school #53 shows us that other schools can also organize their service in a more efficient way and can yield high results with good financial performance.

From financial point of view, the 43 schools which are above the break-even point (horizontal axis) will not be a problem once the voucher system is in place. There are more or less 10 schools that are just below the horizontal axis, meaning they can generate profit if they save just a little bit. What about the other schools with clear deficit?

THE FINANCING OF “INEFFICIENT” SCHOOLS

Among the schools that I have analyzed, at their current form, some of them would not be financially sustainable under a voucher plan. In general, I can categorize them in three groups:

  1. First, we have schools that make less “profit” because they are located in areas with low density of population. These include schools in far districts of Absheron.
  2. Secondly, we have schools that lose money because the quality of education offered is low, which forces parents to register their children in alternative schools.
  3. Lastly, we have some schools which lose money not because the quality of education, but rather due to inefficient management. The underlying reason can be incompetent management of the pedagogical staff, or perhaps the incapability of the physical building.

The schools that fall under group A cannot be expected to generate enough revenue to cover their expenses, regardless of their competitiveness, under a voucher plan. Therefore, they can be aided by the state budget in the form of education subsidies. Since these are schools in low population density areas, they will have relatively small number of students, meaning that the subsidies would not put much pressure on the budgetary funds.

In order to understand groups B and C better, take a look at the map that I created below, which shows schools around central Baku. The ones with green color indicate schools that turn up “profit” whilst the red represent financial loss under a voucher plan.

Map 1: Public Schools around Baku and their profitability

mapimage.jpg

Source: Author’s own representation

For instance, let’s look at three schools that are located in vicinity of each other in a region of Baku known as “Yeni Yasamal”. If you look at the west side of the map, close to “Inşaatçılar” metro station you will find schools #13, #38 and #52. All three schools are located in a walking distance of approximate ~550 meters from each other. The closeness of the distance indicates that majority of the parents in the area can easily (with a little corruption, of course) choose which school their child can go to. What this implies is that the schools serve approximately the same segment of the population. Yet, interestingly, whilst schools #38 and #52 make a net loss, school #13 turn up a profit. The fact that school #13 turns up profit means that the other two schools fall either within the categories of B or C. Long story short, they either lack in efficiency or quality in respect to school #13. Similar “groups” of other schools can be found all around Baku, such as schools #258 (profit), #36 (loss) and #47 (loss) in Hasan Aliyev str., schools #21 (loss) and #53 (profit) in Yasamal, school #39 (loss), #45 (loss) and #82 (profit) in Narimanov m/s and etc.

Unlike the schools belonging in Group A, those who are in Groups B and C would operate with a loss due to their own failure in one matter or another. For that reason, unlike Group A, we should not be contemplating about any sort of state subsidies for B and C. On the contrary, we should let forces of free market as well as the involvement of municipalities and parents to solve the issue. What can they do? Well that depends on what is the underlying reason behind the financial unsustainability of the school. For example, if there is a clear surplus of teachers, private incentives will force the management to lay off a few and make the school more efficient. If the physical facilities are the problem, then the municipality either can contribute directly or can ask from the central government for additional investment in fixed capital.

What I am trying to say is that unless the amount of population that the school serves is not limited by a small number, then under a voucher plan with greater parental/municipality control, the schools will be able to achieve financial sustainability with maintaining the current education expenditure level of the state budget.

CONCLUSION

It is no secret that the current system of general education in Azerbaijan is unavailing. Public schools offer inadequate services whilst affording private schools is not a possibility for the most parents. Much blame can be put on the policy of the government, which aims to provide “free” education to all. In reality, it provides neither free nor quality education. Taking private market incentives out of the system meant that most of the public schools are inefficient, corrupt, under-funded, and politicized. The multi-level bureaucracy that supposedly helps our educational system is a severe drain of resources allocated for education without any significant positive return. In essence, the education policy of government in pursuit of “free” education is the prime cause of the increasing financial and intellectual gap between the wealthy and the poor in the country.

In order to solve this issue, I believe that we need to take two broad measures: (1) to give greater control to the parents and municipalities in management of schools and (2) to institute a system of vouchers. At the initial stage, the plan should only cover the large schools in urban areas. Starting this plan would ensure that the public schools are pursuing to offer the most quality education at the most affordable rates. The parents/municipalities can effectively replace most of the governmental agencies overseeing education and save a hefty amount that can be used for more efficient causes, such as higher salaries for teachers.

One might argue that a voucher plan would put a lot of pressure on the state budget, but that is not the case. My data and calculations indicate that ~40% schools in Baku would be financially sustainable right away. The majority of the other ~60% can also show a similar financial performance in presence of private market incentives. Although the government would still have to provide educational subsidies to school serving low populations areas, the overall financial result would be positive regardless due to enormous amount of savings arising from elimination of a large bureaucracy.

FOOTNOTES

[1] In practice, parents are still able to change the school of their children today, but that usually requires a substantial amount of bribe to the management of the school and the bureaucracy of the education. Additionally, parents wishing to send their children to private schools are discouraged (although at a very marginal level compared to tuition fees of the private schools at the moment) since apart from the tuition fee of the private school, they get no benefit from the allocated funds of the state budget towards schooling.

[2]https://static.president.az/media/W1siZiIsIjIwMTgvMTIvMjIvOHd1NmkxaTUzaV9RQU5VTl9CVURDRV8ucGRmIl1d?sha=ab18e8fc118dff25

[3] https://edu.gov.az/az/page/418/7331

[4] https://aztehsil.com/news/10172-baki-mekteblerinde-muellimlerin-orta-ayliq-emek-haqqi-682-manatdir.html

[5] The reason why I multiplied the nominator by 10 and denominator by 8 is due to my assumption that the cost of pedagogical staff is approximately 80% of the total costs of the school.

[6] https://oxu.az/society/274006

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