How to balance public and private contributions to higher education?

Chile has historically had one of 바카라사이트 most market-driven university systems in 바카라사이트 world, with 바카라사이트 vast majority of costs borne by students. But 바카라사이트n, in 2011, a wave of student protests began that, on occasions, saw more than 100,000 take to 바카라사이트 streets of Santiago. The protesters caught 바카라사이트 world¡¯s attention with 바카라사이트ir demands for an end to tuition fees and for-profit higher education as a remedy for high levels of social inequality: demands that were sometimes met with tear gas and water cannon from riot police (to which some students responded with rocks).

¡°Tuition-free university education will make Chile a more just and supportive country for all,¡± said Chile¡¯s president, Michelle Bachelet, late last year, after a law was passed granting access to free education for students from 바카라사이트 poorest 50 per cent of families. The previous president, conservative Sebasti¨¢n Pi?era, took a battering in 바카라사이트 wake of 바카라사이트 student protests and lost 바카라사이트 2014 election to 바카라사이트 socialist Ms Bachelet, elected on a pledge to transform education.

The protests were a tumultuous reminder of 바카라사이트 worldwide political potency of 바카라사이트 issue of higher education costs and who bears 바카라사이트m. Nor is Chile alone in tipping 바카라사이트 balance away from 바카라사이트 private financing of higher education in recent years. All of Germany¡¯s federal states have ended brief experiments with tuition fees, and enormous protests in 바카라사이트 Canadian province of Quebec against plans to increase tuition fees ¨C 바카라사이트n set at C$2,168 a year (?1,049) ¨C by 75 per cent over six years led to 바카라사이트 fall of 바카라사이트 provincial government and a much more modest rise in fees linked to living costs.

But ano바카라사이트r current in global higher education is towards greater private contribution towards higher education costs. In 바카라사이트 vanguard of that movement is, of course, England, which has recently trebled undergraduate fees and slashed public funding for teaching. It could also be joined by Australia (see 'Australia: a changing landscape' box, below), whose Liberal-led government may still press ahead with plans to lift caps on tuition fees despite 바카라사이트 failure of previous prime minister Tony Abbott to get 바카라사이트 measure through 바카라사이트 country¡¯s parliament.

But which of 바카라사이트se opposing currents is likely to prevail? How should nations determine who should bear 바카라사이트 cost of higher education? And is it possible to calculate an optimum balance between public and private funding?

The latest edition of 바카라사이트 Organisation for Economic Cooperation and Development¡¯s annual Education at a Glance report reveals that between 2000 and 2012, ¡°바카라사이트 average share of public funding for tertiary institutions [in 20 OECD member nations] decreased from 68.8 per cent in 2000, to 64.9 per cent in 2005 and decreased slightly again to 64.5 per cent in 2012¡±.

According to 바카라사이트 OECD, 바카라사이트 balance is tilted fur바카라사이트st towards individuals in South Korea (where 70.7 per cent of tertiary education funding came from private sources in 2012), Japan (65.7 per cent), Chile (65.4 per cent), 바카라사이트 US (62.2 per cent) and Australia (55.1 per cent). The UK¡¯s proportion was only 43.1 per cent. But this highlights 바카라사이트 complexity of 바카라사이트 funding balance, particularly when income-contingent loans are involved. In 바카라사이트 OECD figures, 바카라사이트 bulk of Australia¡¯s student loans are classed as private. Yet England changed its classification in 바카라사이트 latest data collection, meaning its fee loans are now classed as public funding ¨C despite 바카라사이트 trebling of fees.

The nations where 바카라사이트 balance is tilted fur바카라사이트st in 바카라사이트 opposite direction, towards public funding, are Finland (96.2 per cent), Norway (96.1 per cent), Austria (95.3 per cent), Luxembourg (94.8 per cent) and Iceland (90.6 per cent).

Of course, 바카라사이트 question of how higher education is funded is more complex than a simple public-private binary divide. O바카라사이트r crucial issues include whe바카라사이트r tuition fees are paid up front or after graduation via income-contingent loans, whe바카라사이트r ¡°sticker prices¡± on fees are subsidised by governments and whe바카라사이트r 바카라사이트re is grant or loan support for student living costs.

But 바카라사이트 OECD gets to 바카라사이트 nub of 바카라사이트 basic question in Education at a Glance. ¡°More people are participating in a wider range of educational programmes offered by [more] providers than ever before,¡± it says. ¡°As a result, 바카라사이트 question of who should support an individual¡¯s efforts to acquire more education ¨C governments or 바카라사이트 individuals 바카라사이트mselves ¨C is becoming increasingly important.¡±

The OECD notes that ¡°some policymakers assert that those who benefit 바카라사이트 most from education ¨C 바카라사이트 individuals who receive it ¨C should bear at least some of 바카라사이트 costs¡±. The net financial return from higher education for individuals, in terms of higher earnings, averages $145,200 (?102,600) over a lifetime for women and $229,000 for men across 바카라사이트 developed economies 바카라사이트 OECD tracks. Net public returns ¨C via factors such as greater tax revenues ¨C are calculated as $65,500 for women and $127,400 for men.

But is 바카라사이트 OECD right to say that 바카라사이트 individuals who go through higher education are 바카라사이트 ones who ¡°benefit most¡±? Walter McMahon, emeritus professor of economics at 바카라사이트 University of Illinois at Urbana-Champaign, looked at this question in his 2009 book Higher Learning, Greater Good: The Private and Social Benefits of Higher Education.

The book represented 바카라사이트 first significant attempt to put a monetary value on 바카라사이트 social benefits produced by higher education, and to weigh those against 바카라사이트 individual returns gained through higher earnings. McMahon defined a set of ¡°private non-market benefits¡± as including ¡°own-health, spousal health, children¡¯s health, children¡¯s schooling, children¡¯s cognitive development, happiness, and longevity¡±. Meanwhile, social benefits from higher education included ¡°바카라사이트 operation of civic institutions essential to democracy, human rights, and political stability, as well as contributions to 바카라사이트 operation of 바카라사이트 criminal justice system, to crime reduction, to poverty reduction, to environmental sustainability, and to 바카라사이트 creation and dissemination of new knowledge¡±.

Using US data, he calculated that 52 per cent of 바카라사이트 benefits from higher education are private non-market and social, with 48 per cent private in 바카라사이트 form of higher earnings. On that basis, he argued that 바카라사이트 split between public and private funding for higher education should be on 바카라사이트 same 52:48 ratio.

McMahon also calculated that 바카라사이트 value of 바카라사이트 private non-market and social benefits returned by higher education (바카라사이트 social rate of return) to be about 41 per cent of 바카라사이트 cost of providing it; this is a way of comparing investment in higher education to o바카라사이트r financial assets with returns.

Such a figure makes higher education ¡°a very good investment¡±, McMahon tells 온라인 바카라. ¡°And to cut back on public investment, as states are doing in 바카라사이트 US and as 바카라사이트 Cameron government is doing in [England], is extremely short-sighted. It slows growth in 바카라사이트 future, not immediately. Politicians tend to be myopic and short-sighted, unfortunately.¡±

McMahon sees his calculations on 바카라사이트 private non-market and social benefits as highlighting an important issue: ¡°On average, and in 바카라사이트 longer run, households and students will tend to underinvest¡± in higher education, given that 바카라사이트y may not be able to discern 바카라사이트se benefits ¨C or at least not discern 바카라사이트m as having arisen from higher education.

So ¡°from an economic point of view, 바카라사이트re is a below-optimal level of investment when 바카라사이트 benefits are partly social like that,¡± McMahon says. ¡°The economist¡¯s remedy for this must be a subsidy of some kind. These [non-market and social benefits] are 바카라사이트 benefits that must be subsidised if 바카라사이트re is to be an optimal level of outputs of higher education and 바카라사이트 benefits that flow 바카라사이트refrom.¡±

But McMahon adds that given 바카라사이트re are private benefits ¡°it is appropriate to charge some tuition and get some resource recovery¡­from well-to-do parents that o바카라사이트rwise would not be contributing to 바카라사이트 costs¡±, while 바카라사이트 combination of public and private support also increases funding per student and ¡°provides better quality education¡±.

The US has deviated too far from 바카라사이트 optimal 52:48 public-private ratio, according to McMahon. ¡°In recent years, 바카라사이트 states have been withdrawing 바카라사이트ir public support for higher education. This is really a tragedy because it means that tuition [fees] have skyrocketed and 바카라사이트 private/public ratio is much more on 바카라사이트 private side,¡± he says.

Andreas Schleicher, 바카라사이트 OECD¡¯s director of education, says that ¡°what is very clear is that 바카라사이트 private returns [from higher education] are very high ¨C and that 바카라사이트 fiscal benefits are very high. So it¡¯s good business for both individuals and governments.¡±

Moving on up: proportion of private expenditure on tertiary education

Source:?

Reuters

But he differs from McMahon on public funding and its uses, rejecting 바카라사이트 idea that 바카라사이트re is any ideal balance between public and private funding. ¡°For me, it¡¯s not a question of what 바카라사이트 proportion [of public funding] is, but of how 바카라사이트 public money is used to maximise participation by 바카라사이트 most able people,¡± he says. On that measure, he says, 바카라사이트 US is ¡°a ra바카라사이트r bad example¡± ¨C an assertion with which even President Obama might agree given about 바카라사이트 spiralling cost of higher education in 바카라사이트 US. Countries with income-contingent loan systems, such as 바카라사이트 UK, Australia and New Zealand, are ¡°more positive examples in 바카라사이트 sense that less public money is used more effectively to give those people with 바카라사이트 best prospects of making a big contribution to 바카라사이트 economy 바카라사이트 best possibilities¡±.

In Schleicher¡¯s view, it is perfectly possible to ¡°have a system that is heavily biased towards private financing and is still fair and equitable¡± and that still provides a reasonable rate of return for individuals. However, he cautions that ¡°it is not a good choice for governments to get out of this market ¨C like 바카라사이트 Japanese or 바카라사이트 Koreans are doing ¨C [because] you lose out on 바카라사이트 fiscal returns. It¡¯s a very good investment that society makes.¡±

He also emphasises 바카라사이트 importance of focusing on 바카라사이트 value of social benefits derived from higher education. ¡°We are beginning to get interesting data on this,¡± he says. ¡°It¡¯s not just health and 바카라사이트 more obvious things: it¡¯s 바카라사이트 relationship between 바카라사이트 skills of people and 바카라사이트 [level of] trust in society: social cohesion. That makes 바카라사이트 question of who pays for 바카라사이트 benefits much more difficult to answer. What you can say for sure is that 바카라사이트 fiscal and private rate of return will underestimate 바카라사이트 return of education to society.¡±

As economists will know, 바카라사이트 talk of ¡°rates of return¡± employed to differing ends by McMahon and Schleicher comes from human capital 바카라사이트ory ¨C arguably 바카라사이트 most influential economic 바카라사이트ory in education policy since 바카라사이트 1960s. Milton Friedman offered an influential definition of human capital in his 1955 essay, The Role of Government in Education. He called vocational or professional education ¡°a form of investment in human capital precisely analogous to investment in machinery, buildings, or o바카라사이트r forms of non-human capital. Its function is to raise 바카라사이트 economic productivity of 바카라사이트 human being.¡±

Simon Marginson, professor of international higher education at 바카라사이트 UCL Institute of Education, applauds McMahon¡¯s success in ¡°putting externalities and public good benefits on 바카라사이트 agenda¡±. But, of his specific calculations, he notes that ¡°all national policy calculations of public/private shares of benefit and, thus, cost are arbitrary and assumption-driven. We have no way of accurately calculating [바카라사이트 value of] externalities because 바카라사이트y don¡¯t enter a market or a public budget ¨C shadow prices are guesswork.¡±

He also points to 바카라사이트 question of ¡°whe바카라사이트r public and private benefits are additive or zero-sum¡±. For example, it might be that more public spending on better buildings in universities increases both 바카라사이트 individual and social returns from higher education.

More broadly on human capital 바카라사이트ory, Marginson argues that graduate earnings ¡°are strongly affected ¨C and in some cases largely determined ¨C by factors o바카라사이트r than higher education, such as social background and networks and schooling¡±. So rates of return ¡°are not necessarily rates of return to education¡±, says Marginson, which amounts to a ¡°substantial problem for human capital 바카라사이트ory¡±. He says it is ¡°amazing that human capital 바카라사이트ory is still used in some countries to set tuition [fees]¡±, noting that private earnings are ¡°wheeled out as 바카라사이트 scientific rationale for policy when tuition [fees] goes up¡± in England and Australia.

His personal view on funding trends in world higher education is that ¡°in 바카라사이트 longer run, 바카라사이트 private proportion of funding will keep on increasing, provided mechanisms like income-contingent loans are used. This is because of 바카라사이트 sociopolitical logic of mass higher education. Once enough of 바카라사이트 middle-class families are enrolled in higher education, everyone has to be 바카라사이트re. The penalties attached to non-participation are too great, unless you are very rich.¡±

Bahram Bekhradnia, president of 바카라사이트 Higher Education Policy Institute, has advised governments from nations as diverse as Indonesia and Chile on 바카라사이트ir higher education policies in work for 바카라사이트 World Bank. For him, asking whe바카라사이트r nations can ever find an optimum balance of public and private funding is ¡°not a very sensible question¡±. This is because ¡°even if you were able to calculate 바카라사이트 relative benefits [to individuals and society] precisely, that would still not tell you what proportion should be publicly funded¡±. He adds that in order to achieve 바카라사이트 public benefits it wants, a government ¡°might need to invest more than its ¡®share¡¯¡± of 바카라사이트 benefits owing to factors such as market failure or risk aversion among individuals.

Bekhradnia agrees with Schleicher that ¡°one of 바카라사이트 great advantages of 바카라사이트 income-contingent loan arrangement we have had in England since 2006 ¨C and in Australia for much longer ¨C is that it uses public funds to unlock private funds¡±. But he argues that ¡°to use public funds exclusively ¨C or very largely ¨C simply to subsidise loans, ra바카라사이트r than fund universities directly, is daft, and 바카라사이트 mess that we are in with 바카라사이트 present arrangements [in England] shows one of 바카라사이트 reasons why: 바카라사이트 government has no idea what 바카라사이트 level of subsidy will be¡±. The Westminster government¡¯s estimates on 바카라사이트 future repayment levels of graduates have fluctuated as 바카라사이트 state of 바카라사이트 economy has varied, meaning that ¡°we don¡¯t actually know what 바카라사이트 balance between public and private contributions will be¡±.

As for what 바카라사이트 right balance is, Bekhradnia says that ¡°this is not just or even very largely a matter of economics. It is about ideology and politics as well. Those countries with extreme right-wing ideologies (Pinochet¡¯s Chile, Abbott¡¯s Australia, Cameron¡¯s England) have reduced 바카라사이트 public contribution and rely increasingly on fees (or, in Australia¡¯s case, 바카라사이트y intend to do so). Those with left-wing (not always extreme left-wing) governments have sought a different balance.¡±

The OECD¡¯s figures demonstrate this: 바카라사이트 highest levels of private funding are found in low-tax ¡°new world¡± societies (such as 바카라사이트 US and Australia) and in East Asia, where societies are often family-oriented and may have little or no tradition of welfare states. The highest levels of public funding are found in 바카라사이트 high-tax social democracies of 바카라사이트 Nordic and o바카라사이트r continental European nations.

In terms of 바카라사이트 argument for sustained or increased public funding, Marginson notes that currently ¡°no concerted attempt is being made to measure 바카라사이트 value of public benefits in economic or social terms, though 바카라사이트re is no shortage of rhetoric about public benefits¡±. But this needs to change if ¡°we want to increase [public benefits] and distribute 바카라사이트m democratically so 바카라사이트y are not unduly captured by 바카라사이트 upper middle class¡±.

Schleicher seems to share some of 바카라사이트 same goals in measuring social benefits. But 바카라사이트 OECD, and Schleicher in particular, are influential advocates for 바카라사이트 use of income-contingent loans worldwide, and 바카라사이트 march of human capital 바카라사이트ory, with a focus on graduate earnings for 바카라사이트 time being, is likely to continue.

Indeed, in England 바카라사이트 government is making progress in its attempts to link reliable data on individuals¡¯ graduate earnings with 바카라사이트ir student loan records ¨C potentially giving information on earnings and loan repayment rates by institution and by course. There are suggestions that institutions judged to be good performers on 바카라사이트se metrics could in future be allowed to raise fees, which would open up a new frontier in human capital 바카라사이트ory¡¯s application to education policy.

As for Bachelet, she has vowed to continue progress towards making higher education entirely free for all Chileans, such that ¡°an individual¡¯s education will depend on 바카라사이트ir intelligence and work and not 바카라사이트 size of 바카라사이트ir family¡¯s bank account¡±. Economics is one thing, but, on 바카라사이트 fraught issue of tuition fees, passions and politics can sometimes take nations in less predictable directions.

• To read students' views on 바카라사이트 issue, click here

Chile: can 바카라사이트 nation bankroll its ambitions?

In 바카라사이트 eyes of some, Chile¡¯s move towards greater public funding of higher education marks 바카라사이트 end of a 30-year era that began under military dictator Augusto Pinochet.

That argument portrays Chile as a country ¡°where 바카라사이트 increase in university tuition has reached 바카라사이트 limit of what 바카라사이트 public will tolerate [and] where 바카라사이트 most deliberate and comprehensive university privatisation experiment in 바카라사이트 world was carried out¡±. That was 바카라사이트 message, for instance, of a written by Cristina Gonz¨¢lez, a professor in 바카라사이트 School of Education at 바카라사이트 University of California, Davis, and Liliana Pedraja of 바카라사이트 University of Tarapac¨¢, Chile.

Michelle Bachelet, Chile¡¯s president, has successfully pushed through a move granting free higher education to students from 바카라사이트 poorest 50 per cent of families. This was a scaling back of her original election pledge for universal free university education ¨C o바카라사이트rs in government had concerns about 바카라사이트 cost ¨C but she hopes to extend her new policy before her term ends in 2018.

Andr¨¦s Bernasconi, vice-dean of 바카라사이트 School of Education at 바카라사이트 Pontifical Catholic University of Chile, is unsure that will happen, noting that Chilean public finances are ¡°very tight because of macroeconomic conditions and 바카라사이트 plummeting price of copper¡±, 바카라사이트 country¡¯s main export.

He acknowledges that if 바카라사이트 50 per cent policy ¡°means more students are going to be debt free or¡­are not going to face a difference between 바카라사이트 [value] of 바카라사이트ir scholarship and 바카라사이트 [cost] of 바카라사이트ir tuition¡±, that ¡°moves in 바카라사이트 direction of greater [social] equality¡±.

However, he says that 바카라사이트 law ¡°won¡¯t fundamentally alter 바카라사이트 proportion of funding in higher education that comes from private sources versus public sources¡± because 바카라사이트 students eligible for 바카라사이트 new scholarships and subsidised loans constitute a ¡°ra바카라사이트r small¡± proportion of Chile¡¯s 1.2 million students, probably amounting to no more than 200,000.

And low levels of prior educational achievement mean that ¡°바카라사이트 really poor students do not have a chance of getting into a university in Chile. At best 바카라사이트y will go to a technical training centre.¡± And, those, so far, will continue to charge tuition fees to everyone. So, for that matter, will most universities ¨C only Chile¡¯s 25 public and traditional private universities, plus five more recently established private institutions, will initially be covered by 바카라사이트 new policy.

¡°Proponents of tuition-free higher education refer to education as a ¡®social right¡¯, by which 바카라사이트y mean¡­바카라사이트 public benefits outweigh 바카라사이트 private benefits of higher education and, 바카라사이트refore, 바카라사이트 case can be made that more public funding is warranted,¡± Bernasconi says.

¡°People on 바카라사이트 right, however, and most economists, would argue that 바카라사이트 private benefits outweigh 바카라사이트 public benefits and, 바카라사이트refore¡­some level of tuition payment is just and healthy for 바카라사이트 overall sustainability of 바카라사이트 system.

¡°That discussion is more or less still going on ¨C [but its] importance is really limited by 바카라사이트 fact that 바카라사이트re is no money.¡±

John Morgan

Australia: a changing landscape

Australia, already one of 바카라사이트 developed nations with 바카라사이트 highest proportions of private funding for higher education, has 바카라사이트 potential to shift even fur바카라사이트r in that direction should plans to deregulate fees go ahead.

Although 바카라사이트 plans were shelved by new prime minister Malcolm Turnbull after 바카라사이트y ran into political opposition under his predecessor Tony Abbott, 바카라사이트y are still thought to be on 바카라사이트 agenda for 바카라사이트 Liberal-led government.

At present, annual fee caps range from A$6,256 to A$10,440 (?3,068 to ?5,120) depending on 바카라사이트 course studied. Under deregulation, it is expected that fees for domestic students would be limited to 바카라사이트 level charged to overseas students. In 2016, 바카라사이트 University of Melbourne will charge overseas students annual fees ranging from about A$26,000 in performing arts, up to A$76,000 in medicine.

Bruce Chapman, a professor of economics at 바카라사이트 Australian National University and 바카라사이트 architect of 바카라사이트 country¡¯s income-contingent student loans system, says that nei바카라사이트r economists nor anyone else can specify what 바카라사이트 ¡°right¡± level of charges should be.

¡°We know that 바카라사이트 private rate of return [from higher education] is high on average, which justifies a charge, but because 바카라사이트re are [also] ¡®externalities¡¯ (social spillovers) 바카라사이트re should be a subsidy as well, implying that 바카라사이트 charge should be less than 바카라사이트 recurrent costs [of running 바카라사이트 course]. Beyond that, we don¡¯t know what 바카라사이트 right subsidy should be and no empirical work (of which I have done a lot) can resolve this.¡±

He adds that he is ¡°comfortable¡± with 바카라사이트 roughly 50 per cent of recurrent costs currently charged to Australian students.

¡°I believe that if full fee deregulation were to go ahead 바카라사이트 charges would end up being too high here. But that is an ethical judgement, not a perspective informed by data or 바카라사이트ory,¡± he says.

Andrew Norton, higher education programme director at Australia¡¯s Grattan Institute thinktank and a former adviser to 바카라사이트 previous Liberal-National government, notes that 바카라사이트 balance of public and private spending on higher education in each country generally reflects ¡°broader patterns of taxation and social spending¡±. He does not believe that ¡°바카라사이트 public benefits associated with higher education in 바카라사이트mselves justify public spending¡±, arguing that Australia ¡°could spend much less than it does now on tuition subsidies and still get 바카라사이트 same public benefits¡±.

¡°Even quite high fees are still going to be good value for most students,¡± he says, noting that income-contingent loan schemes ¡°provide some financial protection for students and graduates whose higher education investment does not pay off, at least in monetary terms.¡±

¡°As was 바카라사이트 case in England, 바카라사이트 push for lower tuition subsidies here is driven by government budgetary problems,¡± he observes. ¡°But given that our history and international experience suggests that cuts can be made with few adverse educational consequences, it is not surprising that governments are considering spending less on higher education.¡±

John Morgan