Chile: An Invaluable Case Study for School Vouchers

Trump’s Secretary of Education, Betsy DeVos, has been pushing to expand the school choice system in the United States ever since she stepped into office. However, DeVos’s efforts to create a federal voucher system have been the subject of intense political polarization and were rejected by Congress in 2017 and 2018. School choice consists of vouchers, which are government-funded grants or tax credits that a parent can use to pay for their child’s education at a private school. They are based on Milton Friedman’s idea that increased competition in the education market would lead to better schools. 

Vouchers have been implemented in the United States in a small number of cities such as DC and Milwaukee, but not a large enough scale to truly understand the full effects of the voucher system. To gain a better understanding of the consequences and results of such a system, it is critical that we look to Chile, a country in which school choice has been implemented on a nationwide level. Studies of the voucher system in Chile show that an unregulated voucher system leads to unimproved test scores and greater achievement gaps between the rich and the poor. Only through heavily regulating their voucher system did Chile improve its academic achievement levels.

From 1973 to 1990, Chile was ruled by a military dictator, Augusto Pinochet. Though Pinochet was known for committing a number of human rights violations, he also implemented a series of economic policy reforms with the help of a group of University of Chicago economists who studied under Milton Friedman. One of these economic policy reforms was the implementation of a nation-wide school voucher system in 1981. With a government voucher, parents in Chile could pay for a year of education at a private school––religious or non-religious, for-profit or non-profit. When the system was first implemented, the financial value of the voucher did not depend on income, and private schools that participated in the program could select which students to admit based on merit.

Following the implementation of the voucher system in 1981, the share of students in public schools fell from 78% to 50%. This occurred because students used vouchers to attend private schools, thus causing many public schools to shut down. Contrary to Friedman’s idea that the voucher system would improve schools, student achievement did not improve, and the achievement gap between low-income and middle-income families grew. Segregation between low- and high-income families also increased as the two groups began to attend two different sets of schools. 

 This general system remained in place until 2008 when former president Michelle Bachelet implemented a series of reforms to the voucher system to help restore equity in education. In 2008, the Chilean government under Bachelet passed the Preferential School Subsidy Law (SEP), which recognized that it costs more to educate students from low-income backgrounds. Under this law, vouchers for “Priority students,” which are students in the bottom 40th percentile, were allocated 50% more money than those given to other students. In addition, schools that served a large proportion of “Priority students” would receive bonuses in funding from the government. To qualify for higher-valued vouchers and bonuses, schools had to agree that they would not charge “Priority students” tuition, would not select students based on academic merit (which would put low-income students at a disadvantage), and would participate in a government-administered accountability system. This system held schools responsible for their use of financial resources and for improving students’ test scores. 

With these new regulations on the voucher system, data has shown that students’ test scores increased and income-based achievement gaps declined.  The improvements are presumably because of the increased financial resources provided to schools that serve low-income students and the government accountability system, which required schools to increase test scores and to use their funds responsibly. Notably, however, segregation between low- and high-income students did not decrease within the first five years of the SEP implementation.

There are two main takeaways from Chile’s experiment with a nation-wide voucher system. First, the failed voucher system in Chile after its initial implementation in 1981 shows that a free-market education system does not work without any additional regulation by the government. Milton Friedman’s idea of creating competition in the education market to improve schools might make sense in theory, but it fails in practice. The 2008 reforms by Michelle Bachelet transformed the voucher system of 1981 into a highly regulated system that counters Friedman’s belief that an unregulated education market would improve school quality by itself. These reforms improved student outcomes and decreased the achievement gap. However, the success of Chile’s post-2008 voucher system following 2008 cannot be used to justify DeVos’ plan, as it hardly resembles Friedman’s original proposal.

The second takeaway comes from the specific reforms that Bachelet made to the voucher system in 2008 that ultimately increased test scores and helped close the achievement gap. These reforms included a heavier focus on “Priority students” by increasing the value of the voucher for these students, prohibiting schools from charging these students, and prohibiting schools from selecting students based on academic merit. Another contributing factor to the success of the reforms was the government accountability system that drove schools to increase test scores and practice financial responsibility in their educational spending. These two specific aspects of the 2008 reforms ––increasing funding for low-income students and increasing the accountability of schools–– are changes that can be made to any education system, regardless of whether it uses school vouchers. Thus, the United States should learn from the success of the 2008 Chilean reforms and incorporate the objectives of increased funding for low-income students and increased accountability in order to reduce inequality and improve its schools.

As long as Betsy DeVos remains the Secretary of Education, school vouchers will remain a polarizing debate in the United States. What has been made clear by the nation-wide system implemented in Chile is that the free-market system that Friedman envisioned (and that DeVos supports) fails to improve school quality. Additionally, the improvement in test scores after the 2008 reforms to the voucher system should not be viewed as an unequivocal testament to the efficacy of vouchers, but, rather, a testament to the equality-minded reforms that were made. Therefore, whatever form of education reforms that the US undertakes should aim to focus on increasing funding for low-income students and increasing government accountability of schools to improve school quality. The voucher system experiment in Chile provides invaluable evidence of the results of a nation-wide voucher system, and the United States should use this evidence to shape the future of its educational reforms. 

Pallavi Sreedhar