Depreciating value of education

By Wu Hui-lin 吳惠林  / 

Wed, May 29, 2013 - Page 8

In response to a question on his weekly radio show last week, New York City Mayor Michael Bloomberg said: “Compare a plumber to going to Harvard College — being a plumber, actually, for the average person, probably would be a better deal.”

His point was that graduates are saddled with tuition fee debt after they leave university, while plumbers, electricians and other tradespeople, who are quite well-paid, have at a comparable age already spent years working and not accruing debt.

Bloomberg added that tradespeople do not have to worry about their jobs being outsourced or becoming obsolete because of computers.

As he said: “It’s hard to farm that out, and it’s hard to automate that.”

A similar debate over the value of higher education has also resurfaced in Taiwan. A few days ago, the papers ran a story on “Dr Chicken,” Sung Keng-lang (宋耿郎), a National Chengchi University doctoral student who quit after two years in the program to become a chicken fillet street vendor.

In a speech at National Yunlin University of Science and Technology, Sung said that if he had the chance to do it all again, he would have thought more carefully about enrolling in a doctoral program. He told the student body that they should think about why they want to continue their studies, and not to pursue higher education simply to get out of military service or because they are worried about not finding a job.

However, Sung also said: “Who says someone with a PhD cannot sell chicken?”

The next day the papers said that because of the nation’s low birth rate, the Ministry of Education has set a number of targets that it wants to achieve by 2016. For example, it wants to reduce the number of vocational colleges to 153 and, by next August, expects six national universities to merge into three. It also wants the six private colleges that have fewer than 2,000 student places to either reinvent themselves or withdraw from the market.

What these three news stories indicate is that high unemployment and low remuneration among graduates of higher education has become yet another phenomenon of globalization, and that higher education qualifications are becoming increasingly devalued.

In Taiwan, in order to address the terminal depreciation in the currency of higher education degrees, the ministry has decided to merge and reduce the number of colleges and universities. This has caused a heated debate, with vocal adherents on both sides. The private universities and colleges, in particular, are up in arms about it.

The difficulty graduates have finding a job is — like the problem of the low salaries being offered to them — symptomatic of the devaluation of the “product” plied by these institutions: higher education itself. Put in terms of supply and demand economics, it is a classic example of supply exceeding demand. In other words, there is an excess supply of university and college graduates, so reducing the number of schools, classes and enrolment quotas is the right approach to tackle the problem.

The question is how many schools should be closed? How many classes axed? How many student places cut? Which schools should take away which course options? And the million dollar question is: Who should wield the axe?

As usual, the government wants that role, as can be seen from the ministry’s targets on reducing the number of universities and colleges.

What the public would like to know is how did the ministry arrive at these figures? Can it guarantee that this will solve the oversupply of graduates, high unemployment and low salaries? And how can it know for sure without conducting an in-depth study? The graduate market is extremely unpredictable, complex and forever in flux.

The best way for the education and employment markets to achieve equilibrium — where there is parity of supply and demand — is for those involved to have freedom of choice, as an accurate cost-benefit analysis can best be done by the agents themselves.

Whether one takes up a trade, sells chicken from a roadside stand or pursues further education should remain the individual’s choice, freely arrived at, as is choosing to run a school or a company. The ministry has no business getting involved. Why does it not get serious about deregulating higher education in this country?

Over the past decade or so, what has been done to deregulate higher education is not worth mentioning, as it has largely been controlled by the ministry, along the same lines as the policy of opening up the banks. Working counter to the market mechanism as it does, it is little wonder that the policy has been rejected by the market and has led the nation to the dire straits it is in, with this surplus of supply.

Far from being the needed reform, this is just more of the same from the government, which cannot keep itself from interfering and exacerbating the situation by insisting on mergers and closures.

Wu Hui-lin is a researcher at the Chung-Hua Institution for Economic Research.

Translated by Paul Cooper