For-profit but whose profit?
Research by Petter Berg, 5th year PhD student at The Department of Economics, was prominently featured this week in Dagens Nyheter. In the article, Petter walks the interviewing journalist through his research and findings. After analyzing data from around 200,000 individuals in Stockholm County who attended school between 1995 and 2008, Petter found that students who attended for-profit independent schools tend to earn less over their working lives compared to similar students from municipal schools.
According to Berg, quoted by DN, the main explanation lies in cost-cutting practices. For-profit schools often reduce expenses by hiring fewer qualified teachers, who are more expensive. During the study period, only 48% of teachers in for-profit upper secondary schools were licensed, compared to 79% in municipal schools. This difference in teacher quality appears to largely explain the negative impact on students’ future earnings. While for-profit schools also tend to have larger class sizes—around 30% bigger—this factor does not seem to significantly affect long-term income outcomes.
Despite these weaker results, for-profit independent schools have continued to grow since the school reform of the 1990s. Berg explains this through market logic: schools compete to attract students and therefore focus on factors that are appealing in the short term, rather than those that necessarily improve educational quality. For example, many independent schools are located in central, attractive areas. In fact, nearly half are situated within five kilometers of central Stockholm, compared to only 20% of municipal schools.
In addition, independent schools are more likely to offer popular academic programs, particularly social sciences. They have a significantly higher share of students enrolled in these programs, which are broad and widely preferred by students. Together, location and program offerings account for about 80% of the market share of for-profit schools, while the remaining share is partly explained by the fact that municipal schools are often more selective and harder to get into.
In the article, Petter shares that an attractive location was a decisive factor in his own choice years ago, resulting in him attending a for-profit highschool.
