Please read
the preceding post about profit and subsidy as it will make this discussion clearer.
Disclaimer:
I work in a UK university and the university I work for is subsidized by the
government. The current fee regime does not pay the full cost for some degree
programmes (medicine, physical sciences, etc.) despite the current burden on
the students. UK Universities are mostly
not for profit organisations (with a few exceptions). In keeping with the
preceding considerations, I think there should be salary controls in State
subsidized businesses, even not for profit ones.
This and
the previous discussion arose from concerns about my students, particularly
those from lower income backgrounds. As a group they leave University heavily
in debt. In my field entry level jobs can pay under the threshold for
repayment. This can mean a long term debt that could triple the cost of the
university education or require eventual write off of the loan. It will
probably fall heaviest on female graduates who achieve higher results at all
levels until entering the workplace where they earn less and areis more likely to
take career breaks to raise children.
As
mentioned in an earlier post, the cost of fees and the debt service may well
exceed the increased earnings expected by obtaining a university education. I
am unconvinced that a poor student attending University on the back of loans
gains any economic benefit from their degree. For students who can pay upfront,
I am convinced there is economic benefit. There are “intangible” benefits of an
education, but these may be lost on a person heavily in debt.
Who gets
economic benefit from the degree of a student from a poorer background? I don’t
think the student does. Let’s list some
beneficiaries:
1) Universities benefit because they
get the money up front and for certain subjects they get an additional payment
from the government.
2) Employers benefit. Although the
earning difference between degree holding and non-degree holding workers has
declined, UK businesses still hire graduates and pay them better. Presumably
they do this because the productivity of University graduates is higher.
3) University associated industries
benefit. These include providers of housing, books, food, etc. Most university associated
accommodation stock in the UK is now privately managed.
4) The government (although this is speculative)
probably benefits through higher tax receipts due to higher productivity and
more competitive industries. This may be from increased corporation taxes, VAT,
and taxes on dividends.
5) Private buyers of student loan debt
(when this is done) will benefit if they can collect the debt. It is likely
that the government will lose out on such a sale.
I am sure
there are more economic beneficiaries, but the problem here is that the low
income student may not benefit at all.
Let’s wind
forward in the direction higher education funding has been going and consider a
not unlikely scenario. Consider a future in which there is no state support for
University Education. In this future, students must pay the full cost of their
education. Consider a future in which the fee controls are further relaxed and
the cost of attendance increases to what Oxford proposed a few years back (£16K
or more).
All of the
beneficiaries listed (1-5) should think long and hard about this.
Universities need to speak more truth to power
about the unfairness of poorer students not being clear beneficiaries of their
own education and think about the amounts being given to senior managers and
how they facilitate university associated industries to extract money out of
students.
Employers profiting
from staff with skills they did not invest in need to think about the world
their advocacy is creating. Why should they benefit from increased productivity
while hard-working students from poorer backgrounds may not? Why should you get
benefit of something you invested nothing in? Why should students and their
families subsidise your business? Yes, supply and demand is involved in these
considerations, but so is the legal and political framework which determines
the way cost, profit and loss are calculated. Like the tobacco industry, do you
think you make “profit” when you pay only a small fraction of the total cost of
doing business? If you refuse to pay that cost, why shouldn’t your taxes
increase or minimum wage requirements change?
If you are
a university associated industry, how do you become less parasitic and more
efficient to provide better less costly goods and services? How to you become a
productive industry that improves the opportunities for your customers rather
than banking on someone else’s long term debt which will squeeze off their
opportunities and freedom to take risks and innovate?
Is the government
creating a world that rewards educational attainment in a fair way? As
government support for students is removed, how is a meritocracy created when accident
of birth (the wealth of your parents) determines long term benefit? How can
the government create a model that allows those educating themselves to benefit
from that education rather than a host of others?
Why should
buyers of student loan debt get a loan portfolio at a discount? Why can’t this
be offered directly to the students? Why should taxpayers be stuck with the
bill, while you profit?
