Across 30 Nations, Public Spending on Higher Education Pays Off, Report Says

September 08, 2009

The full impact of the global economic crisis on higher-education systems is still unclear, but as national economies struggle to recover their footing and unemployment levels remain high, "the incentives for individuals to stay on in education are likely to rise over the next years," says a new report from the Organisation for Economic Cooperation and Development.

The report, "Education at a Glance 2009: OECD Indicators," is the latest in an annual series that analyzes data on the education systems in the group's 30 member countries, which include many European democracies, as well as Australia, Canada, Japan, Korea, Mexico, New Zealand, Turkey, and the United States.

This year's report, based on data up to 2007, was already being prepared as the scope of the economic crisis became apparent last year. Because of this timing, "we cannot assess the impact of the crisis on education," said Andreas Schleicher, head of the OECD unit that produces the Education at a Glance series. "But what we can say is that this publication allows you to look at the relationship between employment and education, and long-term earnings and education."

In periods of economic difficulty, the "opportunity costs" for opting to remain in higher education versus joining the work force are low, he said, adding that with those costs now at historic lows, demand for higher education will continue to grow.

Benefits of Public Spending

The series examines all levels of education, from early childhood up, but this year's report focuses especially on higher education, in part because of the economic climate, said Mr. Schleicher. The authors wanted to know if spending public money on higher education, particularly during a downturn, was "the right choice," he said. Based on an analysis of the pubic-sector costs of providing a university education, the answer was yes.

On average across the OECD, the net public return on the cost of providing a university education for a male student is in excess of $50,000. "In virtually every country, the public benefits of higher education outweigh the costs," Mr. Schleicher said. "The traditional wisdom was that higher education benefits individuals most, but this was the first time we looked at public costs and public benefits in conjunction."

Especially in the United States, where tuition levels are on average much higher than in other OECD countries, universities have had to cope with sharp endowment losses, curtailed government spending, and families less able to afford tuition.

Perhaps encouragingly, the report says that countries that charge relatively high tuition but also offer generous public subsidies, such as Australia, the Netherlands, New Zealand, and the United States, do not show lower levels of entry to higher education than other countries. Their participation rates—84 percent in Australia, 58 percent in the Netherlands, 72 percent in New Zealand, and 64 percent in the United States—are well above the OECD average.

U.S. Loses Ground

Graduation rates are more worrying. "What counts at the end of the day is completion rates," Mr. Schleicher emphasized.

The American rate of 36.5 percent is below the OECD average of 39 percent, and the United States has rapidly lost ground against other countries. In 1995, the United States ranked first in completion rates; today it occupies the 14th spot.

"What that tells you is that a number of other countries have been much more successful in expanding their higher-education systems," said Mr. Schleicher. "The United States has fallen so far behind in higher-education completion, and private costs have become so high, that some people are suggesting that tuition has become a barrier to extending participation."

Another trend the report emphasizes is the growth in international student mobility. Of the more than three million university students enrolled in institutions outside their country of citizenship in 2007, just four countries—Britain, France, Germany, and the United States—received nearly half.

The United States remains the destination of choice for more foreign students than any other country, with 20 percent of the global total, but that figure represents a decline from 25 percent in 2000.

"The deterioration of the United States' market share," the report notes, "may be attributed to the comparatively high tuition fees charged to international students in a context of fierce competition from other primarily English-speaking destinations offering similar educational opportunities at a lower cost."