Is higher education an out-of-control, money-making juggernaut?

Latest data from OECD raises questions about growth of per-student spending in some countries, but by no means all nations

September 29, 2018
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Is higher education a bloated and inefficient money-generating machine that sucks in funding while schools and further education are forced to survive on meagre scraps?

To many people working to further the cause of universities, such a statement will seem like a gross exaggeration or simply wrong. But nevertheless it is a charge that has been levelled at UK institutions in particular in recent years.

And the latest figures published in the Organisation for Economic Cooperation and Development’s Education at a Glance data set bring up the question of whether it is an accusation that can be raised across the industrialised world.

According to the 2018 edition of the statistics, between 2010 and 2015 spending per student increased by 5 per cent at the primary, secondary and post-secondary non-tertiary levels across the OECD, but by 11 per cent at the tertiary level.

This is an unweighted average (so does not take into account the size of different systems) and masks wide variation between nations.

But looking at individual countries, it is striking that the growth in tertiary education spending per student is outstripping school and further education in a number of important higher education nations, including the US, Australia and Sweden.

The UK is not included because of a lack of data, but statistics from the Institute for Fiscal Studies have shown that spending per student in higher education has surged above other areas of education since fees were tripled in 2012.

Even in countries where the trend is the other way around, the only large developed country where per student spending in schools grew at a much faster rate was Germany.

A major caveat to the figures is that at tertiary level they include research, but looking at some other OECD data that take this out confirms that the US, UK and Australia – all systems with large elements of private financing for higher education – spend the most per student.

So does having a system where individual students can be charged significant sums for the cost of a university education mean that higher education will unfairly suck in more funding than schools?

Andreas Schleicher, the OECD’s director for education and skills, said that there is an issue in higher education where the link between the cost and the return on investment is imperfect for a number of reasons.

“The pressure to provide value for money is certainly much greater for schools than for universities,” he said.

“In the university sector, there will always be the temptation to charge students (directly or indirectly) for the economic value of a degree over their working life. That figure will be well beyond the value that universities actually add, because it includes value created through selection and many other factors.”

The more that private funding is an element in the system, the more that this gap between the added value and the actual price may show itself, Mr Schleicher added.

So does this mean that better value for money is provided by countries where per-student spending on universities is not outpacing schools?

Answering this properly would require being able to measure the actual learning gain from a degree, a nut that nobody has yet cracked.

But it may help to examine the case of Germany, a major developed nation that has seen per-student funding for tertiary education fall – seemingly, according to the data, because admissions have been outstripping spending increases.

Dieter Dohmen, director of the Berlin-based Research Institute for the Economics of Education and Social Affairs, said that the picture is complex, especially since research funding was included in the OECD figures.

But in general “funding volumes have not kept pace with student numbers” for several reasons, including that the German Länder – the regional states responsible for higher education funding – “have not fully compensated the universities” after scrapping tuition fees.

“Less money for more students” could be seen as efficiency from a certain point of view, he added, but it could mean, for example, that “buildings and classrooms are often not in a good shape” or that “funds to cope with digitalisation may be missing”.

Probably, the ideal situation is somewhere in between per-student funding spiralling out of control and letting it deteriorate. But the figures show that establishing this “perfect” balance is no easy task.

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