edupreneurs. However, as states continue to
The education market can be divided into
provide alternatives to traditional govern-
five major submarkets: kindergarten through
ment-run schools through charter schools,
12th grade (K12), early education and child
voucher programs, and tax credits, the
care, postsecondary education, corporate and
opportunities for edupreneurs and the ease
government training, and consumer products
of entry into this market should increase. For
and services. As Figure 2 shows, the size of the
instance, Merrill Lynch estimates that, in 10
for-profit sector varies by submarket. For
years, 10 percent of all publicly funded K12
instance, while the for-profit industry
schools will be privately managed.4
accounts for the entire $13 billion products
and services market, it receives only 5 percent
This paper will provide a snapshot of the
of the total dollars spent on K12 education.
contributions of noteworthy for-profit com
-
Private-sector companies are becoming
panies in the K12 and postsecondary educa-
involved in all aspects of K12 education,
tion markets. Policymakers can draw two sig-
from managing K12 schools and creating
nificant conclusions from this analysis: First,
teacher-training programs to developing
a private, customer-driven educational sys-
textbooks and supplemental learning materi-
tem would offer a wider range of services and
als, but K12 education is nonetheless the
products than does the government-run sys-
K12 education is
most difficult sector of the education indus-
tem. Second, the current system impedes
the most difficult
try for companies to enter. Government-
progress in education by erecting barriers to
funded competition and regulations make it
entry to the education marketplace. Policy-
sector of the edu-
difficult for companies to make a profit.
makers should level the playing field for
cation industry
Those obstacles increase risk for potential
edupreneurs by adopting policies, such as tax
for companies to
investors, thereby depressing the amount of
cuts, universal tuition tax credits, and vouch-
capital that would otherwise be available to
ers, that would return spending power to
enter. Government-
funded competi-
Figure 2
tion and regula-
Publicly funded and Nonprofit Education Compared to For-Profit Education
(billions of dollars)
tions make it dif-
ficult for compa-
nies to make a
$400
18.5
For-Profit
profit.
Publicly Funded and Not-for-Profit
$350
$300
8
$250
$200
339.5
$150
19
229
$100
11.5
13
$50
79
22.5
$0
K-12
Postsecondary
Training
Child Care
Products
Source: Michael T. Moe, Kathleen Bailey, and Rhoda Lau, The Book of Knowledge: Investing in the Growing
Education and Training Industry, Merrill Lynch & Co., Global Securities Research & Economics Group, Global
Fundamental Equity Research Department, Report 1400, April 9, 1999, p. 23.
3