Monday, November 15, 2010

OECD: spend more on higher education to increase jobs and tax revenues

The OECD have done a report on who participates in education, how much is spent on it and how education systems operate across different countries.

One interesting finding should inform the higher education debate.

At present, the total cost per student of full time higher education is $43,208 for a male student and $32,610 for a female student (including direct costs and also foregone taxes on earnings - the figure for male students is higher because women earn on average 78% of what men earn).

However, the total public benefit from a student is $138,526 per male student, and $114,899 per female student (made up of extra income taxes from higher earnings, "social contribution" and reduced unemployment payments).

So the net present value is $95,818 per male student, and $82,289 per female student. This is higher than the OECD average of $86,404 and $52,436. Further education generates similar value of $73,267 per male and £109,394 per female. The internal rate of return
on higher education is 10.4 and 10.1, and on further education is 13.6 and 22.2.

Therefore, the argument that the state "can't afford" to fund higher education is exactly and totally wrong - this is a money maker, not a money loser and borrowing to spend on higher and further education is a fantastic deal for the taxpayer. To improve the public finances, we should support greater spending on higher and further education, not massive cuts.


At 11:23 am , Anonymous James Alexander said...

"total public benefit from a student"

I linked to the report, and can't see that in the lists of tables. Can you link or reference to it? Its an interesting and difficult concept, and especially interesting and difficult to monetise it - scepticism is in order. But first, where exactly are the OECD calculations? Then we can see what they're worth.

At 11:30 am , Blogger donpaskini said...

Here -,3343,en_2649_39263238_45897844_1_1_1_1,00.html

then click on Indicator A8, and it is table 8.4

Agree that there are uncertainties, but n.b. that they already exclude any non-income tax payments to the state from graduates, so could underestimate total public benefit.

At 9:08 pm , Anonymous economist said...

I'm not arguing against state subsidy of HE, but isn't enough for the argument you are trying to make to show something has positive social benefits, you also need to show state subsidy is necessary to realise them.

Given the high private returns to HE there is a prima facie case that people have sufficient incentive to obtain degrees without state subsidy (apart from ensuring there are no upfront costs). If so, state subsidy would then have no positive benefits but just be a transfer of resources to graduates. Or what state subsidy could do is encourage study by individuals for whom the private (and social) returns are low or negative e.g. enrolment in arts courses at new universities. That might have intrinsic value, but wouldn't boost government income.


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