Since 2009, strict austerity programmes have been applied across Europe with the intention of consolidating public budgets. More recently, both the economic effectiveness of austerity measures and the root causes of the crisis are being questioned by international experts and organisations. The short- and long-term negative effects of the measures on democratic processes and social rights standards have also come in for criticism. In 2011 and 2012, cuts in education budget were made in twenty countries for which data are available. Cuts of more than 5 % were observed in Greece, Italy, Cyprus, Latvia, Lithuania, Hungary, Portugal, Romania, the United Kingdom (Wales) and Croatia, whereas decreases between 1 and 5 % were seen in French Community of Belgium, Bulgaria, the Czech Republic, Estonia, Ireland, Spain, France, Poland, Slovenia, Slovakia, the United Kingdom – Scotland.

Mind the Gap

Recession is tough especially for youths, but it is tougher on less educated youths than on those with good education. Data have highlighted strong inequalities in labour market outcomes within generations depending on different educational levels, as well as between generations: youth have been significantly more affected by the crisis, and this impact is even stronger for lower-skilled youth. It is thus confirmed that education indeed represents an important long-term personal and social investment. This carries on in later life: unemployment is always higher amongst less well educated workers. Education cannot reverse the impact of recession on unemployment, but it can help as the second contribution of education to economic and social development.

Young people have been hit particularly hard by the crisis. Youth unemployment rates in Europe stood at 23.5% in the first quarter of 2013, more than twice the – already very high – rate for the population at large. In some countries, more than half of the young people who want to work are unemployed. Young people hold the key to Europe’s future dynamism and prosperity. Youth unemployment has a profound impact on individuals as well as on society and the economy.

In avoiding a ‘lost generation’, DIKTIO – “NETWORK for reform in Greece and Europe” has taken the initiative for the creation of a European movement, entitled “Education is an investment! Do not count education spending as part of the deficit!” in order to set education as a priority both in the EU and in each country-member, in view of the inequalities emerging within the societies facing the current financial crisis. More specifically, DIKTIO – ‘The Network’ proposes excluding the part of each country’s budget for education that is lower from the 5-year Eurozone average, from the country’s public spending deficit. Funds for this policy should derive from re-allocating budgets from European support frameworks, the European Central Bank, or even from specially designed loans and they will be linked with the completion of specific educational policy goals.

Budget and Reforms

Primary role of education is its contribution to longer-run economic growth. It has a big role to play in the success of Europe 2020, in terms of the quality of jobs and productivity growth. Our first and most important concern should be not to allow the austerity to put at risk this function of education. To ensure that recession does not have a negative impact on education, a minimum of expenditure on education should be off the fiscal balance sheet (e.g., through special EU loans/grants). It is reasonable to allow annual spending up to 5% of GDP in the last pre-recession year, or the country’s actual spending in the same year, whichever is higher. This maintains the standards in advanced countries and encourages growth in the ones below the mean. The budget increase should be linked to structural reforms and R&D investments. Each country has set qualitative and quantitative goals within EU policy 2020 that should be respected in order for Europe to become more competitive.

Data from World Bank

A consequence of the second role of education is that the best time to increase educational attainment, from the social point of view, is recession. Education is an investment: the main social cost of this investment is the foregone output of the student. The return is the higher productivity and lower unemployment of the beneficiary as much as 12% currently in Europe.

The objectives of our initiative are to combat inequality by providing equal opportunities for education and training to all young people in Europe, to ensure adequate and appropriate infrastructures and tools for high quality education in Europe in times of crisis and to enhance and safeguard growth, development and democratic institutions. Europe has to invest in education so as to enhance its competitiveness towards USA and China. This is a win-win situation for all member states of the EU, below and above the eurozone average on public expenditure for education.

Smart Growth

As the Education at a Glance 2013 report of the OECD points out, investing in education always pays off in the long run and Member States cannot afford to forget this when it comes to allocating public budgets. More than half of the GDP growth in OECD countries over the past decade is related to labour-income growth among workers with higher education.  Indeed, even as GDP across all OECD countries shrank by 3.8% during the global recession year of 2009, growth in labour income among people with higher education contributed nearly 0.4% to the GDP of these countries overall. In contrast, the contraction of labour income that year among people with a medium level of education reduced the GDP by 0.8%, while shrinking incomes among people with lower levels of education trimmed another 0.5% of GDP.

“Economic crises come and go but young people get just one chance to learn the skills that will get them a job and help them embark on a successful career. Cutting down on education investments because of a temporary economic crisis is short-sighted. It could destroy the lives of a whole generation of young people. Education spending is an investment in our future and should not be part of the government’s fiscal balance”, said the Nobel Laureate Economist Christopher Pissarides, Regius Professor of Economics at the London School of Economics.