The Indonesian government’s decision to grant more autonomy to universities and reduce subsidy for higher education has been under fire ever since the policy was introduced. The majority of the public, further fueled by mainstream media, seems to be enchanted with the notion of subsidized universities, believing it would bring equality to a segregated community and increase overall welfare. Perhaps it is time to disenchant this seemingly noble idea of higher education subsidy and try to analyze the impact of such policy objectively.
Proponents of a blanket subsidy for higher education hinge their arguments on erroneous conventional wisdoms: that there are hordes of poor students that do not enter college because they cannot afford the tuition fee; and that putting more and more individuals through college will increase overall public welfare. As most conventional wisdoms, these ideas are appealing and popular but are not necessarily correct. Let’s take a closer look.
First, evidence shows that there is only a very small fraction of the poor that graduate high school and thus is eligible to enter college. The number of poor people going to school decreases significantly as the level of education increases. In Indonesia today, there are nearly 90 percent of children coming from the two poorest income quintiles graduate from primary school, but only approximately 60 percent of the same group continues to junior secondary school. The number keeps decreasing until only about one out of ten young people age 16 to 18 years old from the two poorest quintiles graduate from senior high school and is eligible to enter college. Of this number, probably only half would decide to continue to college.
Now unlike what most people would like to believe, the main reason the number of poor people decreases with level of education is not because they cannot afford the tuition fee, but rather because the poor cannot afford the opportunity cost of education. Going to school means forfeiting income; and for poor households, this is a big deal. Six years of primary school means six years of lost income—twelve years of basic education means twelve years of lost income. That is the main reason why only a small fraction of the poor would decide to go to college, even if we make the fees exceptionally low.
It doesn’t take a mathematical genius to figure out that a blanket subsidy for higher education would benefit mostly students from well-off families. The very poor don’t go to college; the middle and upper classes do. Subsidizing higher education won’t make universities become less exclusive; it will only make the exclusive pay less.
Furthermore, the idea that massive expansion of higher education would lead to higher level of general welfare also needs to be re-examined. True that the private benefit of higher education is significantly large; on average, a college graduate makes about twice as much as their high school graduate counterparts over a lifetime. It does not follow, however, that having more and more individuals going to college leads to higher level of welfare for all.
What we need to understand is that education is a “positional good”—one whose value depends on whether you have more of it than other people—and is not just about acquiring knowledge and skills in absolute terms per se. The reward you reap from your education does not solely come from the skills and knowledge you receive, but also depends greatly on whether you’re somewhere “at the top.” The catch is, it’s impossible to have everyone at the top.
To put it simply, an ambitious expansion of tertiary education would lead to a decrease in value of a college diploma. We’re already beginning to see the signs today. Some occupations that only required high school diploma just a couple of decades ago—security, sales promotion, taxi drivers—are now beginning to require some college degree. In the worst case scenario of tertiary education expansion, one can only hope to get a job, any job, if they had gone to college. This would not help the poor; indeed it would suffocate them for then they would have no choice but to forfeit income and spend even more money to go through college if they expect to get any decent job at all.
We should all pause for a moment before blindly demanding the state to heavily subsidize higher education. Such policy is indeed a “feel good” policy—one that gives us the illusion that we’ve done something good when in fact we would only be giving money to the middle and upper class families, and would very likely hurt the poor in the long run.
A better—though perhaps less politically appealing—policy is to focus on basic, including preschool, education. Participation in quality early childhood education has been strongly correlated to higher level of success in adult life, while the opportunity cost borne on poor families is very low (since toddlers can’t work for money anyway). Meanwhile, we are still falling behind in terms of primary education quality and secondary education participation.
With regards tertiary education, yes we should still strive to attain capable and willing individuals from the lower economic brackets to continue to higher education, but a blanket subsidy is not the way to do it. Instead, we should expand targeted subsidies through scholarships, financial aids and establishing affirmative action in universities for individuals from lower socio-economic background.
Public policies are supposed to benefit the society as a whole and provide the most assistance to its most vulnerable members. A large subsidy on higher education is neither a prudent public policy nor a good spending of public funding. It is imperative that the Indonesian public understands this lest we end up pressuring the government to spend our own tax money to help rich children get richer and add more burden to the poor in the long run.
* An edited version of this article was featured in The Jakarta Post