The value of third level education and who should pay for it

Mass student protests took place in Dublin last week (see photos here) over expected increases in fees and cuts to maintenance grants in the forthcoming budget. Students feel betrayed by the apparent unwillingness of the Minister for Education, Ruairi Quinn of the Labour Party, to stand by his pre-election pledge not to raise fees or cut grants for third level students. The protestors also rightly question the wisdom of the proposed measures, given the likelihood that they could end up costing the government money as hard-pressed students are forced out of college and on to dole queues. Roughly one in four young people (17-25 year olds) in Ireland is unemployed, while the figure is more like one in three for young men (see here, here and here). The alternative to the dole queue is, of course, emigration. According to the CSO, 76,000 people left Ireland in the year to April 2011. Almost all of those leaving were aged 15-44 (see here).

Forcing young people out of education and on to dole queues - or on to planes - represents a personal tragedy for the young people and their families who are directly affected. It is also clearly not in the long-term social or economic interests of the country. However, the question inevitably arises as to how we should fund the third level sector in this country. Should free third level education - funded by the state - be offered to all those who wish to attend (and meet some basic minimum academic requirements)? Or should students themselves be asked to pay for their education through some kind of fee system? There appears to be an ideological (or at least political) aversion amongst the current government to the idea of fees based on the full economic cost of a third level education. However, the current approach of creeping fees (or "student contributions" to use the euphemism favoured by politicians) and cuts to maintenance grants, represent highly regressive mechanisms for plugging the funding shortfall. They also guarantee that only those who can afford the fees (and other associated costs of attending college - cost of living, books, foregone income etc.) will pursue third level education. Not only is this morally wrong, it is also economically inefficient - the most talented and those who are determined to make the most of their education are not afforded the opportunity to do so in such a system.

This matter of public funding for third level education is particularly pressing, given the government's current financial difficulties. A simple short-term solution would be not to repay these bonds, thus alleviating the need for such severe austerity in the forthcoming budget. However, even such a dramatic u-turn in government policy would not address the wider issue of the long-term sustainability of a third level sector that, because of Ireland's youthful demographics, will have to cope with large increases in the demands on its services over the coming years - that is, if we expect to continue offering third level courses to a large proportion of the population. Out of a population of almost 4.5 million in 2011, 1.25 million are aged 19 and under, with a particularly large cohort born in the last 5 years. Over the coming years, the college-age population cohort will increase considerably (see CSO figures here).

The protestors and their student leaders were understandably coy during the week about proposing any alternative to raising fees as a means of funding third level education. The USI president was right, however, in pointing out the limitations - particularly in the Irish context - of an Australian style system of student loans repaid through income tax (which appeared to be the preferred approach of the Fine Gael party - now in government - during its time in opposition). For one thing, such a system would only exacerbate the short-term funding crisis, as it would (presumably) involve removal of the existing "non-tuition" fees and would not see any returns to the exchequer until graduates began earning sufficiently high incomes to pay the implied graduate tax. Given youth unemployment rates, this could be quite a wait. There is also the issue of the international mobility of Irish young people and Ireland's history of emigration. Returns (societal or economic) to any investment in education, are dependent - at the very least - on people remaining in the country.

Any debate on the appropriate way to fund education must also consider the value of education, both to the individual and to society. A number of recent analyses have begun to question the value - from the student's perspective - of the enormous investment involved in attempting to acquire a third level qualification (e.g. this New York Review of Books article). In the US, where students pay extremely high fees, young people graduating from university are leaving with worse job prospects and higher debts than ever before (see this Mother Jones article). Worse again, many leave before graduating - with a heavy debt burden and no qualification to show for it.

Over the medium to long-term we must consider what role the third level sector should play in our society, and what sort of graduates (and in what numbers) will be needed or desired in future. Will churning out large numbers of undergraduate degrees, masters and PhDs deliver the hallowed 'Knowledge Economy' of so many political speeches and government documents? As Paul Krugman argued back in 1996 - in what already seems like a highly prescient piece of futurology - "when something becomes abundant, it also becomes cheap. A world awash in information will be a world in which information per se has very little market value."

Much has been made recently of rising income inequality in rich countries - the US in particular - in part thanks to the issues raised by the Occupy movement. Many economists have - mistakenly it seems - linked rising income inequality to the proliferation of technology, leading to higher returns to education. In fact, most of the rise in inequality appears to have been driven by the runaway increase in incomes for the top 1% (see here). For everyone else - including the majority of college graduates - real incomes have not risen over the last 20 or 30 years. The Occupy slogan "we are the 99%" appears to have captured the reality of modern income inequality.

So perhaps the debate ultimately comes back to a question about what kind of society we wish to live in. Certainly, if we wanted to we could decide that a third level education represents a basic right of all citizens and as such should be funded by the state. This would have to be paid for - through taxation of one kind or another, or reduced spending elsewhere - but is certainly not beyond the realms of possibility, as politicians might conveniently argue.

Education is undoubtedly a fundamental right. But should that extend to third level education? Education is also a public good - an investment (as opposed to a cost) to which the returns from a societal point of view far outweigh the benefits to the individual. As such, there is plenty of justification for public investment in education. However, the scientific evidence indicates that the greatest returns to investing in education accrue to investment in early childhood (see here). This is also likely to be the most progressive form of educational investment - given that a child's prospects for educational attainment appear to be determined from a very early age. It is worth noting that the free fees for third level system in Ireland does not appear to have had much of an impact on the participation rates for different socio-economic groups.

So while there is no denying the desirability of significant public investment in education, to the extent that this is constrained by available resources, it should be concentrated on early childhood interventions. The question, then, is whether a free fees third level system is a luxury we can no longer afford, or a social programme we would be poorer without.