Washington, D.C., 3/5/08—The new Organization for Economic Cooperation and Development report “Going for Growth 2008” (available at www.oecd.org) confirms that Americans work more hours than Europeans. “As the saying goes, Europeans are lazy, but Americans are crazy”, said Jørgen Elmeskov, Acting Chief Economist at OECD.

The difference comes from the fewer hours that European women work, largely because of high marginal tax rates. European and American males tend to work roughly the same number of hours per week.

The report found that investing in efficiency in primary and secondary schooling could provide big payoffs. More user choice, more information about the performance of individual schools, outcome-based budgeting arrangements, greater managerial autonomy, efficient school size, and avoidance of early streaming lead to higher efficiency.

If all schools in OECD countries, including the United States, performed at the best national level, they would improve by 10% in efficiency, measured by Programme for International Student Assessment (PISA) scores. If American schools would perform at the best international standards, Elmeskov noted, the improvement in efficiency would be above 20%.

Even the long-held view that Americans have superiority in terms of graduation rates has been shown to be a consequence of the greater number of gradations in American academic degrees. He termed the actual comparative U.S. performance “middling”.

Commenting on the report from an American perspective, Peter Orszag, Director of the Congressional Budget Office, underlined the dramatic slowdown in the quantitative rise in American educational levels, which have previously boosted economic growth. Now the need is to achieve qualitative improvement in education, he said.

Of special importance, in his view, was the need to shift from a focus on teacher education before starting work to a focus on improvement and evaluation after teaching one or two years. The quality of teachers seems to provide more benefits than other factors, he argued, so it is critical to find out who the good teachers are and how to improve their quality.

Orszag also stressed the centrality of escalating healthcare costs as a source of inefficiency. He said that wasted healthcare expenditures represent 5% of GDP. Other efficiency problems tend to cost around 1% of GDP at most. Employees don’t realize that their takehome pay is greatly reduced by employers’ healthcare costs.

Dramatic regional variations exist in the cost of healthcare, according to Orszag. The best performing American regions offer better healthcare at lower cost than in other countries. The entire system could reduce costs by 30% without reducing the quality of outcomes if the less efficient regions adopted the same practices as the most efficient ones. In addition, too much attention has been devoted to narrow financial incentives in healthcare, whereas ease, simplicity, and salience of health services play a much larger role in attaining efficiency.

According to Elmeskov, even though this problem is currently biggest in the US, two-thirds of OECD countries see healthcare costs that are not related to aging or demographics as the largest prospective long-term component of budgetary overruns. But he said that no country can serve as a model. “Whenever a country becomes a model, then shortly after it begins to malfunction.”

Kenneth J. Dillon


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