GDP could stand £70 billion higher when the schools reopen but part of the swing will be exaggerated by measurement issues

August 31, 2020

There are quite a lot of different impacts on the economy that are likely to follow from the reopening of schools next month. The most recent GDP figures show the education sector as one of the most affected of all sectors of the economy even though the figures are somewhat misleading because they do not take home schooling into account. In addition, parents who are home schooling have less time to work at their jobs and are obviously less likely to return to their offices or other places of work if they want to. Once the schools reopen it is likely that as many as 5% more employees will be able to return to their workplaces.

 

Education accounts for 7.2% of GDP. There is no official split between schools and higher education but a study carried out in 2017 for Universities UK calculated that higher education contributed 1.2% to GVA which will be equivalent to their share of GDP. So it can be inferred that schools contribute 6.0% directly to GDP. The decline in economic activity in the UK education sector was from an index reading of 104.6 in 2019 to 65.0 in Q2 2020, a fall of 37.3%. If this fall was equally shared between schools and other educational sectors, the contribution of school closures to the fall in measured GDP over that period was 2.2 percentage points.

 

It can therefore be calculated that a return to full operation in schools will raise measured GDP by 2.2% But the GDP statistics do not take account of home schooling and so both exaggerate the decline in GDP and its likely subsequent rise when the schools reopen. According to the ONS, 87% of children of school age received some home schooling during lockdown. These children received on average 13 hours of schooling per week. This compares with an average of 25 hours of schooling received when schools are open.  A crude calculation therefore suggests that home schooling would have compensated for 45% (0.87 x 13/25) of the lost schools output. So the real decline in GDP in education from shut schools should have been calculated as 1.2% and the real rise in educational output when schools reopen should be same amount. More importantly, the extent of home schooling has not been distributed evenly, with wealthier and better educated parents having more resources available to educate their children at homes than poorer and less well educated parents. So the children who are already disadvantaged will have had that disadvantage enhanced. It is important that when the schools reopen public policy addresses this issue.

 

There are 6.9 million households with children of school age of whom slightly more than 4.6 million have both parents working. This represents 25.1% of all households in the UK. According to the ONS, 61% of parents with dependent children claim that their ability to work has been affected by the need to provide home schooling and childcare during lockdown. The proportion rises with income so the impact on productivity is likely to be more than proportional. However, it does appear that most of the impact on work has been shifting of working patterns – time use data indicates that actual reduction in working hours during lockdown as a result of home schooling for those doing jobs has been about 5% as a result of parents doing more of their work in the evenings.

 

Assuming that a return to school would allow these lost hours to be worked, we estimate that GDP would be boosted by 0.8% through parents’ increased output. In addition, previous Cebr work has suggested that about half of those working at home would like, if possible, to return to working at their normal workplace. Applying this share to the number of parents whose work is affected by having to home school and allowing for two parent households suggests that if the schools reopen this could boost the number returning to their place of work by 5% of employees. Based on earlier estimates by Cebr on the impact of people returning to work in London, this would imply a boost to spending in London’s hospitality sector (sandwich bars, pubs, clubs and restaurants) of £30 million a month.

 

It is likely, therefore, that the return to work will boost GDP substantially. If all the effects are added up, measured GDP could be 3.3% higher, roughly £70 billion a year. If we correct for the effects of home schooling on measured GDP, the actual rise will still be 2.3%.

 

For more information, please contact:

Douglas McWilliams dmcwilliams@cebr.com phone: 07710 083652