Don’t Let Numbers Fool You

By Phillip Hartman

Recently released numbers on education spending indicate that household spending has increased by 3 trillion won to 39.9 trillion won in total last year.

The increase has lead some to claim public education is losing its competitiveness. But don't let the numbers fool you. The private education industry is in for big changes. A critical look at the numbers reveals an entirely different story about the future of private education in this country.

To begin with the figure of 39.9 trillion won is an aggregate number of both public and private spending. Private spending stood at 20.9 billion (National Statistic Office) and had increased 4.3 percent from 2007. But the same numbers indicate that public spending increased by 11.3 percent, nearly three times as fast. That doesn't show private education trouncing public education, but the other way around.

Furthermore, a far more telling statistic of the future of private education in this country is the participation rate. Rather than increasing, the total number of students enrolled at private educational institution actually decreased 1.9 percent from 2007. An increase in spending, but a decrease in participation doesn't support cram school expansion, but consolidation and bankruptcy.

There's already a glut of cram schools in the market and now these schools are fighting over a dwindling number of students. No longer can the industry ride on the growth of participation as it had earlier in the decade. The next decade will lock cram schools in a vicious battle to be differentiated enough to maintain their market share.

Increases in private spending was also concentrated in households earning between 5 million won and 7 million won monthly an average of 3.5 percent, while spending didn't increase at all in households earning 2 to 3 million a month. This doesn't paint a picture of households getting crushed by rising private education costs, but of the wealthy opting for more up-market education.

A final piece of the puzzle here is inflation. The private education market, particularly its English component, is very sensitive to the exchange rate. The strength of the Korean won is critical in recruiting native speakers and Korean-Americans, as a strong won makes a job in South Korea more attractive than one back home.

Last year, when the won stood at parity with the U.S. dollar, teachers were earning between $1,900 and $2,500 a month, which has dropped to around $1,400 a month in many cases, or little more than minimum wage in the United States.

While private institutions have tried to control wage costs as much as possible by rotating staff frequently, wages have still climbed roughly 5 percent to 15 percent over the past year. Only the public education market can still offer 1.8 million won a month and expect applicants.

And even cram schools that don't hire foreigners suffer from a high exchange rate, as many of them support a fleet of school buses that devour gasoline imported from abroad.

The idea that private education is on cloud nine is a complete distortion of the facts. The reality is private education is falling behind public education and is locked in a competitive battle over a shrinking number of students.

Students have more money to spend and are looking for a more up-market product and this has lead the growth of the industry, but schools that fail to adapt to market conditions are going to lose out and one shouldn't be surprised to see bankruptcies increase in the near future.

The writer has worked in Korea for three years at EWAS Uijeongbu, Gyeonggi Province, and LCI Kid's Club Gangdong. He can be reached at johannphilipe@hotmail.com.