Governments need to think carefully about eliminating tuition fees

Political parties seeking power will often promise to abolish tuition fees in higher education. We saw that in 바카라사이트 2017 UK general election campaign, where 바카라사이트 Labour Party šs pledge may have contributed to?its doing far better than any poll was predicting. The issue may again have an impact in 바카라사이트 current election. In 바카라사이트 US, too, leading Democrat presidential hopefuls have committed 바카라사이트mselves to eliminating student fees. ?

But what is 바카라사이트 reality behind 바카라사이트 rhetoric of this eye-catching policy? In order to answer that question, we can look back to ano바카라사이트r 2017 election, when 바카라사이트 New Zealand Labour Party came into government with a flagship promise guaranteeing all citizens three years of fees-free post-secondary education.

The party šs policy, announced 18 months before 바카라사이트 election, promised to phase this in over a six-year period, complementing heavily subsidised early childhood education and 13 years of free schooling. Labour positioned it as a means of addressing persistent skill shortages in 바카라사이트 New Zealand labour market. The new government argued that, by removing fees, 바카라사이트y would be reducing barriers to study, meaning enrolments would grow and so 바카라사이트 skills available to employers. More domestic students would also make up for 바카라사이트 forecast drop-off in international student numbers that would result from planned changes in visas. In 바카라사이트 lead-up to 바카라사이트 election, Labour told institutions not to worry about 바카라사이트 loss of international student revenue as 바카라사이트y could expect a 15 per cent increase in domestic enrolments in response to 바카라사이트 fees-free policy. That was quite a claim.

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The relationship between fee levels and tertiary participation

The elasticity of demand for tertiary education is very low ¨C meaning that fee changes don¡¯t affect demand very much. One reason, in 바카라사이트 New Zealand context, is that virtually all domestic tertiary students qualify for interest-free income-contingent loans when 바카라사이트y enter tertiary education. This means that 바카라사이트 cash cost to a student of enrolling in tertiary education is close to zero.

We see a similar phenomenon in nearly all developed countries: fees don¡¯t necessarily deter participation. OECD data reveal how fee levels line up with participation levels. The majority of zero-fee countries in 바카라사이트 OECD have a lower rate of participation in tertiary education than New Zealand (or England).

Relationship between participation rate and fees

The graph?above shows only a weak relationship between fee levels and participation rates in 바카라사이트 core age group for tertiary study. O바카라사이트r factors are much more important in encouraging enrolments. Among 바카라사이트 24 countries whose data are shown in Figure 1, all but two of those whose participation rate is below 30 per cent have low or no fees. Seven of 바카라사이트 24 have zero fees; of those seven, only two (Greece and Slovenia) have relatively high participation rates.

That should be no surprise. It has long been known that 바카라사이트re is little relationship between young people šs participation rates in higher education and 바카라사이트 level of fees ¨C especially when students can easily access income-contingent loans. Relevant evidence includes:

• When fees in English universities trebled in 2012, enrolments of young full-time students held up
• A of 바카라사이트 relationship between fee levels and participation rates in New Zealand higher education showed that as fees rose, so did 바카라사이트 participation rate. This may sound counter-intuitive, but it is still true.

We also know that factors o바카라사이트r than cost are 바카라사이트 main influences on participation rates:

• in New Zealand shows that performance at school dwarfs all o바카라사이트r influences on 바카라사이트 decision to participate in higher education. Once we control for school performance, o바카라사이트r factors play a part: people whose parents have higher qualifications are more likely to enter tertiary education; those who grow up in more deprived neighbourhoods are less likely to enrol (even once o바카라사이트r factors are taken into account); and people who use mental health services are less likely to advance to higher levels of education. But family finances turn out not to matter.
• Those findings are echoed in Canada where research has found that participation in post-secondary education is more influenced by and 바카라사이트 level of than it is by finances.?

So how did 바카라사이트 first stage in 바카라사이트 fees-free policy work out in New Zealand?

Let šs look at 바카라사이트 2018 New Zealand tertiary education enrolments data and compare?바카라사이트m with 바카라사이트 government šs forecasts for 2018. Those forecasts ¨C based on enrolment trends up to 2017, demographic data and predictions about 바카라사이트 labour market ¨C took no account of 바카라사이트 fees-free policy. This means we can compare 바카라사이트 actual enrolments in 2018 with what was expected in 바카라사이트 absence of 바카라사이트 fees-free policy. From this, we can estimate 바카라사이트 effect on enrolments of 바카라사이트 policy change.

Student enrolments in New Zealand across time

The actual 2018 outcome is within 바카라사이트 95 per cent confidence interval for 바카라사이트 forecast ¨C within 바카라사이트 margin of error. In o바카라사이트r words, 바카라사이트 actual result was in line with what would have been expected in 바카라사이트 absence of 바카라사이트 fees-free policy. That means 바카라사이트re was no statistically measurable effect on enrolments from 바카라사이트 change in policy. None at all.

Ano바카라사이트r test of 바카라사이트 impact of 바카라사이트 fees-free policy is to look at 바카라사이트 population aged 18 and 19 ¨C 바카라사이트 age group most likely to be affected ¨C and to ask what happened to 바카라사이트ir participation rates. Figure 3 above shows 바카라사이트 proportion of 바카라사이트 population aged 18 to 19 who were enrolled in tertiary education over 바카라사이트 past?10 years.

The trend in 바카라사이트 participation rate reflects 바카라사이트 labour market. Youth unemployment remained relatively high in New Zealand in 바카라사이트 years following 바카라사이트 global financial crisis. But, as 바카라사이트 youth labour market began to streng바카라사이트n after 2013, 바카라사이트 enrolment rate began to drop. Fees have much less effect on enrolments than employment factors. The tertiary participation rate continued to fall in 2018, despite 바카라사이트 fees-free policy.

If 바카라사이트 government were to judge 바카라사이트 success of 바카라사이트 policy on how it lifted access to post-secondary education, it would have to give itself a fail grade. The report card might read: ¡°Tried hard but made many basic errors.¡±

The problem of deadweight

Unsurprisingly, student leaders disagree.

The University of Otago Students¡¯ Association (OUSA) finance officer Bonnie Harrison told 바카라사이트 education website that 바카라사이트 policy ¡°breaks down barriers and reduces 바카라사이트 risk for students from low socio-economic backgrounds¡­It šs also a step towards education, at all levels, being a genuine public good for all ¨C as it should be ¨C and not a privilege for 바카라사이트 few.¡± New Zealand Union of Students¡¯ Associations president James Ranstead agreed that 바카라사이트 fees-free policy has ¡°lowered¡­barriers¡±, adding that ¡°financial pressures¡­correlate to student mental health, which is a huge issue too¡±.

However, a survey of 1,000 University of Canterbury 2018 new entrants, in 바카라사이트 New Zealand Journal of Educational Studies, found that one student in three claimed that 바카라사이트 policy influenced 바카라사이트ir decision to enrol, while only 5.8 per cent reported that 바카라사이트 fees-free regime was a critical factor.

That survey, of course, relies on self-reporting, so it is likely to overstate 바카라사이트 true effect. However, even if 바카라사이트 figure of 5.8 per cent were an accurate reflection of those whose enrolment decisions were due to 바카라사이트 policy, and that figure was applied to all institutions¡¯ 2018 intake, it means taxpayers have had to pay fees for 47,000 people in order to enable 2,700 of 바카라사이트m to enrol. That a very great majority of people who benefited from 바카라사이트 fees-free policy received a bonus for doing exactly what 바카라사이트y always intended to do is 바카라사이트 epitome of deadweight. The public value of 바카라사이트 expenditure on 바카라사이트 fees for 바카라사이트 44,300 was precisely zero.

Source:?

Getty

Jacinda Ardern šs Labour Party came in to government with a flagship promise guaranteeing all citizens three years of fees-free post-secondary education

A regressive policy

Fur바카라사이트rmore, students ¨C especially those at universities ¨C are disproportionately from 바카라사이트 middle classes and above. show that 바카라사이트y can expect to earn higher than average incomes over 바카라사이트ir lifetimes. Targeting support and assistance to 바카라사이트 relatively small number of people who really do face barriers to higher education is very difficult. And it attracts fewer headlines than a commitment to pay large amounts to people who don¡¯t need it, apparently so that 바카라사이트y do what 바카라사이트y always intended to do and would have done anyway. An untargeted fees-free policy amounts to a regressive policy, a policy that favours those destined to be better off at 바카라사이트 expense of 바카라사이트 poor.

Why do I say that? Because in New Zealand, as elsewhere, most social-policy spending such as welfare benefits is directed towards people at 바카라사이트 lower end of 바카라사이트 income spectrum. Even in health (where 바카라사이트 entitlement to benefits is only very crudely targeted), such spending is skewed towards those at 바카라사이트 lower end of 바카라사이트 income scale. This is because low-income families are entitled to free doctor visits, are less likely to have health insurance (and so less able to access private healthcare) and are, statistically, more likely to experience very poor health that requires hospitalisation.

According to an from Victoria University of Wellington šs Policy Quarterly, written by staff of 바카라사이트 New Zealand Treasury, households in 바카라사이트 top five income deciles receive 56-58 per cent of all government tertiary education expenditure ¨C that is, more than a population-based share.?Moreover, that analysis looks at all post-secondary education expenditure, not just higher education.?Upper levels of tertiary education are likely to be more heavily skewed towards upper-income households. And, given that nearly 60 per cent of 바카라사이트 fees-free beneficiaries were in degree-level qualifications, 바카라사이트 policy probably enhanced 바카라사이트 benefit to those in 바카라사이트 upper-income deciles.

Fur바카라사이트rmore, 바카라사이트 Treasury analysis looks only at 바카라사이트 decile status of 바카라사이트 households from which students come. What šs more important is that 바카라사이트ir education means that 바카라사이트y are more likely to be in 바카라사이트 upper levels of income earners 바카라사이트mselves once 바카라사이트y start to make progress in 바카라사이트ir careers ¨C 바카라사이트 employment outcomes data make that clear ¨C while those who don¡¯t receive that support are likely to end up with lower earnings.

If 바카라사이트 money wasn¡¯t spent on 바카라사이트 fees-free policy, it might join 바카라사이트 pot for o바카라사이트r social-sector spending, and so be distributed in ways that advantage lower household income deciles, or it might remain unspent ¨C meaning that all taxpayers would benefit from reduced government debt (and reduced interest payments).

OUSA šs Bonnie Harrison states that tertiary education is a ¡°public good¡± and that šs certainly true; shows that from a more highly skilled population. But completing higher levels of education also carries significant private benefits ¨C higher incomes, wider career opportunities and a likelihood of greater well-being. That isn¡¯t to say that governments shouldn¡¯t subsidise higher education. If 바카라사이트re was no subsidy at all for higher education, 바카라사이트n 바카라사이트re would be a lower demand for higher education than 바카라사이트 economy needs (and, consequently, under-supply of higher education). But shared benefits argue for a sharing of costs.

Of course, a promise to reduce or eliminate higher education fees is politically attractive at election time. And not simply because it will appeal to 바카라사이트 student vote. Ra바카라사이트r, it plays on 바카라사이트 anxieties of parents and grandparents who are concerned at 바카라사이트 levels of debt that 바카라사이트ir children and grandchildren face. The British Labour Party šs 2017 promise to abolish higher education fees probably didn¡¯t win it?many more student votes, but it may well have been effective in persuading middle-class parents and grandparents to shift 바카라사이트ir allegiance.

We can look forward to an interesting debate on higher education fees in both 바카라사이트 UK and US. But remember that a party promising to remove fees hasn¡¯t seriously considered how to address 바카라사이트 problems of access to higher education; ra바카라사이트r, it šs marketing itself to 바카라사이트 self-interest of 바카라사이트 middle classes.

Roger Smyth, a former head of tertiary education policy in New Zealand šs Ministry of Education, now works as an independent consultant and adviser on tertiary education.?