What's causing social segregation in our schools?

According to the Australian Education Union, research shows that over the past 25 years students from low income families have become increasingly concentrated in Australia's public schools, especially at the secondary level, while those from high income families have become increasingly concentrated in private schools.

A Report of this AEU-sponsored research (The Social Make-up of Schools, April 2013, by Barbara Preston) uses census data for 2011. It is one of a series that have examined census data for several characteristics of students' families, including income. The main income groupings used are three bands of low, medium, and high, defined in such a manner that the numbers of students in each of the three groupings are about equal. The top of the low income band in 2011 was $64,999; the bottom of the high income band, $130,000.

The research does not explore causation of this segregation, although its Report cites a 1984 article arguing that the rationale for Commonwealth funding of schools would lead to the 'residualisation' of public schooling. Consistent with that argument, the AEU claims that social segregation exposes a failure of funding arrangements to deliver resources where most needed. It then goes on to support the Gonski proposals to invest heavily in public schools now having this higher concentration of disadvantaged students.

Yet such proposals pose a catch-22. Strengthening public schools to better serve their disadvantaged students also strengthens their ability to retain them, thus reinforcing social segregation.

Public subsidies for private schooling have obviously helped families to withdraw their children from public schools. But why have high income families responded more strongly when these subsidies appear to favour schools for low income families?

Two influences are worth exploring: growth in incomes; and costs of exiting public schools.

Over the 25 years to 2011, real GDP growth per capita rose by 59%, leading to a significant increase in families' disposable incomes. They spent this increase on more cars, TVs, better housing, health, ... and education. But the legislators of public schools never anticipated that they might have to compete in an education 'market'. Hence, this school sector was not as well equipped for dealing with increasingly affluent families who wanted to buy 'more' education for their children.

Reinforcing this growth of an education market was a coincidental redistribution of income towards higher income groups. AEU's data reveal stronger relative income growth of high income families between the census years 2006 and 2011: the upper income limit of Australian low income families grew by 25%, while the lower limit of its high income families grew by 47%. The Australian Bureau of Statistics confirms this recent spurt in income inequality and tracks its more modest beginnings from about ten years earlier.

In recognition of this increasing capacity and willingness of high income families to withdraw their children from public schools, several State governments have already acted to reform the management culture of the public education system. Time will tell whether their measures prove effective.

Regarding costs of exiting the public school system, high income families faced the highest absolute costs - the highest fees - partly in response to their preferred private schools receiving less generous (means tested) government subsidies. AEU's data suggest, however, that higher incomes trump higher exit costs in these families' decisions to favour private schools.

The more interesting contest between exit costs and income capacity is the one for lower income families: whether these can take full advantage of the more generous levels of private school subsidies intended for them.

Since 2001, the Federal Government has means tested its private school subsidies, not according to a family's income, but according to the fee-paying capacity of each school's 'community' – determined crudely by its students' home addresses. If students come from preponderantly wealthy neighbourhoods, their school might qualify for as little as 13.7% of average government school recurrent cost (AGSRC). If they come largely from the poorest neighbourhoods, their school might qualify for as much as 70% of AGSRC.

For the purposes of judging whether low income families could afford subsidised fees to cover private school recurrent costs in 2011, this article proposes a rough proxy for such fees: in this case, 2011's AGSRC ($10,583), minus a 60% rate of Federal subsidy ($6,350), minus the average State/Territory subsidy ($2,220); that is, about $2,000 per student over K-Year12.

While the above AGSRC value underlying this fee estimate falls well short of other conceptions of Government school recurrent costs, the fee value so derived represented 3% of AEU's defined upper income boundary for low income families in 2011. Families with progressively lower incomes in this band, or with more than one child, faced exit costs that loomed progressively higher – reaching towards 10% of their income, or beyond.

Several hypotheses contributing to student segregation emerge from this brief review:

• Many low income families faced significant costs to exit public schools, likely exceeding their capacity to pay, especially in the case of the poorest, partly explaining public schools' high retention rates for their children.
• Most high income families could easily outbid their low income neighbours when competing for places in the same private schools; many also had the extra resources to deal with even higher exit costs when reaching for the more expensive ones.
• Families with fewer children could more easily overcome exit costs and enrol their children in private schools, thus creating yet another form of segregation, at both ends of the income spectrum, but one apparently not highlighted yet with research data.

The phenomenon of social segregation in our schools, whether pre- or post-Gonski, deserves to have these and other likely causes subjected to more rigorous investigation.

In the meantime, it is hard to ignore the role of policy: its contribution to segregation from offering low income families subsidies for private schooling that are significantly smaller than those offered to all families for public schooling.