Thanks to some serious policy bungling in the UK, higher education is all the rage at the moment. As this column has pointed out time and again, higher education and health care are the two exceptions to the rational demand theory. Both are driven by emotional factors and some investments in higher education are now taking the shape of an asset bubble.
While a misguided choice architecture has now forced the British Government to revise their higher education fee schedule, the sector holds broader concerns for the future. There is a serious mismatch between demands for certain skills by industry and supply by universities. There is a global glut of entry-level Accountants, alongside Business and Arts graduates. The employment landscape has shifted dramatically with a dispersion of demand coming from skilled technical and engineering jobs (in the mining and manufacturing sectors as an example, which do not require a university education) and highly skilled engineering professions within electrical and civil disciplines. Scientists (both life and physical) are perhaps the most important graduates in society who go unrewarded.
The global glut of non-technical graduates (for the lack of a better word to group these individuals) has seen a dramatic plunge in starting salaries in real terms for most white collar professions. When coupled with increasing tuition, higher education beyond a handful of global universities, is looking extremely unattractive at the moment. Most graduates over the last two years are either unemployed or “under” employed according to statistics provided by the Organisation for Economic Co-operation and Development (OECD). This is felt even in Australia, which by most measures is the best performing advanced economy in the world. Surveys show 30% unemployment amongst all graduates, while a further 35% report being underemployed. This result is attributed to the patch-work Australian economy, where non mining related companies are struggling to keep their businesses open.
Glut
When a glut of highly indebted graduates with the wrong kinds of skills is unleashed on a struggling world economy, the results aren’t pretty. The solution to this problem won’t come from the higher education sector on count of the perverse incentive structures in place for these providers. A recent study in Australia showed that a handful of the most popular courses by international students drove most of the profit and cross subsidises the entire university system. These courses were management, business studies (commerce) and information technology. The most popular courses (read: profitable for providers) are becoming inversely correlated with job opportunities, and offer decreasing benefits to society.
If the state of higher education was not bad enough, the Programme for International Student Assessment (PISA) in their latest assessments of secondary schools points to an increasingly widening gap between regional performances within countries. While Sri Lanka and India are not part of the study, a similar study was conducted in India where the results showed a stark dispersion in results for mathematics. According to the study, more than half of Indian school children are functionally illiterate and innumerate. While a similar study in Sri Lanka would be most revealing, it wouldn’t be too dissimilar given the discrepancies of teaching and facilities between the provinces. One count on which it would be different is the far superior access and equitability in the primary and secondary school systems available to Sri Lankan citizens, when compared to India.
The low average level of educational achievement in India may come as a surprise. In the U.S., the median income of households headed by an Indian-American was $83,000 in 2007, well above that of East Asians ($61,000), and non-Hispanic whites ($55,000). And despite comprising less than 1% of the population, 8% of physicians and surgeons in the U.S. are Indian-American.
While excellent higher education has made a strong contribution to India, poor policy in primary and secondary education presents a major policy challenge. The challenge for Sri Lanka is the reverse. The foundations of primary and secondary education have been strong thanks to the “Kannangara” revolution of the fifties. But support for quality higher education has been far less convincing
Parents
Parents faced with this unappealing mix of options have increasingly tended to opt for overseas migration as an alternative solution. But the PISA (Program for International Student Assessment) test holds some major disappointment for would be migrants. The performance of students who were born overseas (first generation migrants) tends to be worse than locals, and more worryingly those trends persists well in to the second generation. Singapore and UAE are the only exceptions, given the transient nature of most migrants to both countries. Australia is an anomaly given the large transitory East Asian population. Overseas migration has the potential to lead to unintended consequences and leave families worse-off.
The Sri Lankan government has a duty and citizens have a right to demand better access to quality higher education. Part of that solution may lie in abolishing free higher education. Taxpayers should not be funding the betterment of a handful of individuals, who by and large may not contribute to the betterment of the country or her people. This is no different to bribing public officials or politicians. Instead a need-based scholarship system and inflation adjusted student loans remain the best way forward. The pettiness displayed by the government towards academics is farcical. These are the handful of individuals who have returned to the country to contribute, when they had far more attractive financial options. Most others have not had the courage of their convictions nor see the need to contribute to the system that created them. This is simply the reason why higher education needs a price.
Meanwhile, most parents have made higher education into a bigger concern – and by extension a bigger problem – than it needs to be. As highlighted in these columns previously, higher pay associated with higher education is becoming less evident, beyond a certain threshold which is in decline. Some people are better off going straight to work, than spending four years in a university, especially if the said discipline has very low thresholds to entry. The most prudent higher education strategy comes down to the individual capabilities of a child, where some successful outcomes may lie in unstructured disciplines without any higher education. Sportsmen and women along with those in creative arts are the two most obvious examples.
Doing the right thing
Part of a successful higher education strategy is also a financial strategy on behalf of the child, where unconventional disciplines require a financial plan for the child that would see them for the first 10 years of their adult life. Contrary to popula assumption amongst most parents, successful higher education has nothing to do with how better your child is compared to someone else’s. Instead, it’s about doing the right thing for your child, based on their ability and intrinsic motivations. Having some help from the government, at a price, would be most helpful.
(Kajanga is an Investment Specialist based in Sydney, Australia. You can write to him at kajangak@gmail.com). |
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