January 29, 2004

Performance incentives in Dutch education: What can we learn from recent experiences abroad?

CPB: Bonus voor instelling met weinig voortijdig schoolverlaters

Press release
Veel jongeren verlaten het onderwijs zonder een diploma. Dit voortijdig schoolverlaten wordt dikwijls gezien als het grootste knelpunt in het Nederlandse beroepsonderwijs. Ter bestrijding van deze uitval zou de overheid intensiever gebruik kunnen maken van prikkels voor instellingen. Een voorbeeld is prestatiebekostiging.

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Dick Morks

The government can directly stimulate institutions through the funding system, for instance by linking funding to the number of graduates. Accountability is a more indirect incentive, resulting from choice of school by students and their parents ('voting by the feet'). Finally, incentives can be introduced in the payment system of teachers, for instance in the form of individual performance pay.

The use of performance incentives requires performance measurement. For the education sector it is not straightforward to establish the performance of institutions and teachers, as students not only learn in the class room but also outside (e.g. in social relationships). The 'production process' in the education sector thereby deviates from that in most other sectors. A suitable performance indicator measures the value added of the school / teacher to the educational outcomes of the students, and is hard to manipulate. The United Kingdom, the United States, and Israel have experimented recently with various payment systems for teachers and schools. These experiments have shown that incentives work, but also that you get what you pay for. Manipulation of performance-indicators can be a problem.

What can we learn from this, departing from the Dutch situation and the possibilities to measure the performance of institutes and teachers? A more intensified use of performance-based funding in the Netherlands seems worthwhile, but not without risk. Attention can be focused on reduction of drop-outs in lower and middle professional education (the so-called BVE-sector). This is commonly considered to be the greatest weakness in the education sector. The current funding model for the BVE-sector partly depends on the number of graduates. The bonus payment system could then focus on the number of drop-outs relative to other institutions, taking account of socio-economic characteristics of the students.

Rankings of the performances of schools can give a high-powered incentive to improve educational quality. Recent studies have shown, however, that these rankings are unreliable, even when they are constructed using state-of-the-art techniques. Accountability entails more than rankings. Informing the public on the results at schools, for instance by developing so-called quality charts, provides an incentive to schools to improve their performance. In the current Dutch context the information on performance of schools to the public can be improved. No quality charts are available for institutions in the BVE-sector and the higher education sector. Developing quality charts for these sectors can strengthen the accountability-incentives.

Little is known about the effects of individual performance pay in the education sector. The experiment carried out in Israel has convincingly shown that educational performance increased. This suggests that individual performance pay can be a promising instrument in the Netherlands. Within the current policy context, which is aimed at strengthening institutional autonomy, it is up to the management of schools to decide upon the use of individual performance pay.

This publication is in Dutch.


Erik Canton
Dinand Webbink

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