Charter Schools IV: Profit

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Synopsis

A look at the profit arguments in favor of charter schools.

While being a charter school is distinct from being a for-profit school, one argument in favor of charter schools is because they, unlike public schools, can operate as for-profit businesses. While some might be tempted to assume a for-profit charter school must automatically be bad, it is worth considering this argument.

As one would suspect, the arguments in favor of for-profit charter schools are essentially the same as arguments in favor of providing public money to any for-profit business. While I cannot consider all of them in this short essay, I will present and assess some of them.

One stock argument is the efficiency argument. The idea is that for-profit charter schools have a greater incentive than non-profit schools to be efficient. This is because every increase in efficiency can yield an increase in profits. For example, if a for-profit charter school can offer school lunches at a lower cost than a public school, then the school can turn that difference into a profit. In contrast. A public school has less incentive to be efficient, since there is no profit to be made.

While this argument is reasonable, it can be countered. One obvious concern is that profits can also be increased by cutting costs in ways that are detrimental to the students and employees of the school. For example, the “efficiency” of lower cost school lunches could result from providing the students with less or lower quality food. As another example, a school could not offer essential, but expensive services for students with special needs. As a final example, employee positions and pay could be reduced to detrimental levels.

Another counter is that while public schools lack the profit motive, they still need to accomplish the required tasks with limited funds. As such, they also need to be efficient. In fact, they often must be very creative with extremely limited resources (and teachers routinely spend their own money purchasing supplies for the students). For-profit charter schools must do what public schools do, but must also make a profit—as such, for-profit schools would cost the public more for the same services and thus be less cost effective.

It could be objected that for-profit schools are inherently more efficient than public schools and hence they can make a profit and do all that a public school would do, for the same money or even less. To support this, proponents of for-profit education point to various incidents of badly run public schools.

The easy and obvious reply is that such problems do not arise because the schools are public, they arise because of bad management and other problems. There are many public schools that are well run and there are many for-profit operations that are badly run. As such, merely being for-profit will not make a charter school better than a public school.

A second stock argument in favor of for-profit charter schools is based on the idea competition improves quality. While students go to public school by default, for-profit charter schools must compete for students with public schools, private schools and other charter schools. Since parents generally look for the best school for their children, the highest quality for-profit charter schools will win the competition. As such, the for-profits have an incentive that public schools lack and thus will be better schools.

One obvious concern is that for-profits can get students without being of better quality. They could do so by extensive advertising, by exploiting political connections and various other ways that have nothing to do with quality.

Another concern about making the education of children a competitive business venture is that this competition has causalities: businesses go out of business. While the local hardware store going out of business is unfortunate, having an entire school go out of business would be worse. If a for-profit school goes out of business, there would be considerable disruption to the children and to the schools that would have to accept them. There is also the usual concern that the initial competition will result in a few (or one) for-profit emerging victorious and then settling into the usual pattern of lower quality and higher costs. Think, for example, of cable/internet companies. As such, the competition argument is not as strong as some might believe.

Those who disagree with me might contend that my arguments are mere speculation and that for-profit charter schools should be given a chance. They might turn out to be everything their proponents claim they will be.

While this is a reasonable point, it can be countered by considering the examples presented by other ventures in which for-profit versions of public institutions receive public money. Since there is a school to prison pipeline, it seems relevant to consider the example of for profit prisons.

The arguments in favor of for-profit prisons were like those considered above: for-profit prisons would be more efficient and have higher quality than prisons run by the state. Not surprisingly, to make more profits, many prisons cut staff, pay very low salaries, cut important services and so on. By making incarceration even more of a business, the imprisonment of citizens was incentivized with the expected results of more people being imprisoned for longer sentences. As such, for-profit prisons turned out to be disastrous for the prisoners and the public. While schools are different from prisons, it is easy enough to see the same sort of thing play out with for-profit charter schools.

The best and most obvious analogy is, of course, to the for-profit colleges. As with prisons and charter schools, the usual arguments about efficiency and quality were advanced to allow public money to go to for-profit institutes. The results were not surprising: for profit colleges proved to be disastrous for the students and the public. Far from being more efficient that public and non-profit colleges, the for-profits generally turned out to be significantly more expensive. They also tend to have significantly worse graduation and job placement rates than public and non-profit private schools. Students also accrue far more debt and make significant less money relative to public and private school students. These schools also sometimes go out of business, leaving students abandoned and often with useless credits that cannot transfer. They do, however, often excel at advertising—which explains how they lure in so many students when there are vastly better alternatives.

The public also literally paid the price—the for-profits receive a disproportionate amount of public money and students take out more student loans to pay for these schools and default on them more often. Far from being models of efficiency and quality, the for-profit colleges have often turned out to be little more than machines for turning public money into profits for a few. This is not to say that for-profit charter schools must become exploitation engines as well, but the disaster of for-profit colleges must be taken as a cautionary tale. While there are some who see our children as another resource to be exploited for profits, we should not allow this to happen.

 

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Tags: charter school, education, mike labossiere, profit

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