Recently, Great Britain has been rocked by violent student protests. The students are upset about the recent plans to immediately triple public university tuition. The financial times reports that:
Weeks of protests in London at increases to university tuition fees have seen the UK coalition government cross the Rubicon. The student demonstrations represent the first direct and violent opposition it has faced. And while the administration has come through undeflected – if perhaps shaken – it should learn some lessons.
These protests have been characterized by some as being a tantrum by spoiled middle class students. The Lex editorial in the FT called the reform more "complicated that cruel" because lower income workers would be given loans to cover their tuition. The amount that would need to be reimbursed would decrease if the students make less than they expected coming out of college.
So is the Financial Times correct? Is the reform both economically and morally sound? I am not so sure. First on the economic front: Most economists suggests that growth is extremely important as a means of escaping financial ruin. More growth means more tax revenue which can only help restore Great Britains finances. Since the Solow's ground breaking work in the 1960s(see my previous blog post), we have known that per capita Growth comes from three places. Increased accumulation of physical capital (factories etc), human capital (skills and training) and finally through knowledge capital (innovation and technological advances). Because of diminished returns and depreciation of human and physical capital) only knowledge capital leads to long term higher growth rates. A solid University system helps to develop two of the three vehicles of higher growth: developing human capital, by giving workers the skills that they need, and the all important knowledge capital, developing new innovations. By increasing the price of college tuition the government could have a negative effect on growth and thus exacerbate Great Britain's shaky economic situation.
On another level, this debate is a moral one and gets to right and left wing values between socialized good versus individual responsibility. People on the right might claim that the British Education system is still much less expensive than that of the United States. The high tuition rates in the United States puts the burden on families to determine how important higher education really is. If they are led to believe that education is really as important as the economists say, they would find a way to pay for it. Either by saving or going into debt. The higher revenues they receive would easily allow them to cover their debts. As a result of individual responsibility, willingness, as well as business acumen, growth would not be seriously affected.
There are serious problems with this argument. First, while the United States system may be great for those who choose to use it, there is a growing rift between those Americans who have been to college (usually upper class kids following the legacy of their parents) and those who have not (mostly poor kids who have no family history in higher learning). As the chart via Ezra Klein shows, only 28% of the population have a college degree. The United States is falling behind many other countries in terms of graduation rates in recent years.
These reforms hurt the poor doubly because they go into effect immediately. This means that many poorer families are not given enough time to build up their savings necessary to pay for the higher tuition. Without the necessary saving many will be forced into the governments college tuition debt scam. This program is filled with smoke and mirrors: the decision to increase debt financing and to give debt relief to students who make less money after college, should be taken with a grain of salt. The purpose of this policy is increase revenue on the backs of students. This debt relief program cannot be overly generous because that would defeat the purpose of the bill which was to raise revenue.
The students are right to demonstrate. They are not spoiled brats, the FT editorialists are.
Weeks of protests in London at increases to university tuition fees have seen the UK coalition government cross the Rubicon. The student demonstrations represent the first direct and violent opposition it has faced. And while the administration has come through undeflected – if perhaps shaken – it should learn some lessons.
These protests have been characterized by some as being a tantrum by spoiled middle class students. The Lex editorial in the FT called the reform more "complicated that cruel" because lower income workers would be given loans to cover their tuition. The amount that would need to be reimbursed would decrease if the students make less than they expected coming out of college.
So is the Financial Times correct? Is the reform both economically and morally sound? I am not so sure. First on the economic front: Most economists suggests that growth is extremely important as a means of escaping financial ruin. More growth means more tax revenue which can only help restore Great Britains finances. Since the Solow's ground breaking work in the 1960s(see my previous blog post), we have known that per capita Growth comes from three places. Increased accumulation of physical capital (factories etc), human capital (skills and training) and finally through knowledge capital (innovation and technological advances). Because of diminished returns and depreciation of human and physical capital) only knowledge capital leads to long term higher growth rates. A solid University system helps to develop two of the three vehicles of higher growth: developing human capital, by giving workers the skills that they need, and the all important knowledge capital, developing new innovations. By increasing the price of college tuition the government could have a negative effect on growth and thus exacerbate Great Britain's shaky economic situation.
On another level, this debate is a moral one and gets to right and left wing values between socialized good versus individual responsibility. People on the right might claim that the British Education system is still much less expensive than that of the United States. The high tuition rates in the United States puts the burden on families to determine how important higher education really is. If they are led to believe that education is really as important as the economists say, they would find a way to pay for it. Either by saving or going into debt. The higher revenues they receive would easily allow them to cover their debts. As a result of individual responsibility, willingness, as well as business acumen, growth would not be seriously affected.
There are serious problems with this argument. First, while the United States system may be great for those who choose to use it, there is a growing rift between those Americans who have been to college (usually upper class kids following the legacy of their parents) and those who have not (mostly poor kids who have no family history in higher learning). As the chart via Ezra Klein shows, only 28% of the population have a college degree. The United States is falling behind many other countries in terms of graduation rates in recent years.
These reforms hurt the poor doubly because they go into effect immediately. This means that many poorer families are not given enough time to build up their savings necessary to pay for the higher tuition. Without the necessary saving many will be forced into the governments college tuition debt scam. This program is filled with smoke and mirrors: the decision to increase debt financing and to give debt relief to students who make less money after college, should be taken with a grain of salt. The purpose of this policy is increase revenue on the backs of students. This debt relief program cannot be overly generous because that would defeat the purpose of the bill which was to raise revenue.
The students are right to demonstrate. They are not spoiled brats, the FT editorialists are.
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