Education Watch

The wrong questions are asked in the free higher education debate

Who must pay?

There is no such thing as ‘free higher education’. Someone has to pay. And the reality is that low, or no tuition fees benefit middle and high-income families.

The main brief of the The Fees Commission demands that it enquires and makes findings on the feasibility of fee-free higher education in South Africa. The problem with the brief is that it is asking the wrong question.

Firstly, there is no such thing as “free higher education”. Universities are very expensive. Rather, the issue is who pays what and when?

Secondly, international research shows a broad agreement among economists of higher education funding that government subsidies are “regressive” – that subsidies favour the rich.

Also worth noting is that the South African constitution indexes affordable, not free, education.

According to British economist Nicholas Barr public universities in OECD (Organisation for Economic Cooperation and Development) countries often argue that low or no tuition fees provide greater equality of educational opportunity. Reality, however, he points out, is the overwhelming subsidy in public universities accrues to students from middle and high-income families.

This is true of a number of non-OECD countries such as Armenia and Bolivia, as well as Brazil and South Africa.

One of South Africa’s most prominent education economists, Servaas van den Berg, states much of tertiary education spending in these countries benefits higher income groups because students are overwhelmingly drawn from high income families.

Similarly, Johan Fourie argues that “blanket university fee reduction benefits the wealthy – and slows change,” and adds “the wealthy are more likely to access tertiary education” and as such “a blanket reduction in university fees is like a subsidy for the rich (or a tax on the poor)”.

Subsidising the wealthy

In South Africa free higher education will widen, not reduce, inequality. This is because the low participation rate (currently at 20%), combined with free tuition, would immediately restrict the expansion of places.

In addition, the main problem for poor South Africans is not affordability of higher education, but that less than 5% of them qualify for entry into university. In contrast, of those whose parents earn over R600 000, 70% qualify.  

Children of the new political and business elite have the significant social, cultural and economic capital to succeed in school and gain access to tertiary education. Like most of Africa, South Africa has limited (even zero) growth and one of the most unequal and inefficient school systems on the continent. A free university system on top of this will only solidify and expand inequality.

The issue is thus not feasibility, but whether South Africa wants to adopt another self-destructive policy, widening inequality and further privilege the de-racialising rich.

The question to be addressed by the Fees Commission should have been: What is required for a sustainable higher education system with affordability for those who qualify for access?

A dramatic policy shift

Minister of Higher Education Blade Nzimande’s recent announcement about the direction of university fees marked a dramatic policy shift. He actually went beyond applying a Band-Aid by confirming the principle of fees and introduced a clear, differentiated approach to fee payment.

  • the poor from families earning below R120 000 will not pay fees but will be subsidised through loans;
  • a very wide middle class whose families earn between R120 000 and R600 000 will pay fees but will not be required to pay new fee increases for 2017 (capped at 8%) introduced by universities; and
  • the affluent middle class/rich who will be required to pay fees in addition to any increases next year.

Only about 30% of the undergraduate student population will pay for any fee increases in 2017.

In many countries, the minister’s announcement would be regarded as quite a dramatic policy change and a victory for students in the under R600 000 income bracket.

Be wary of false prophets

The argument for free education in South Africa contains three pillars: the Freedom Charter and the Constitution; increasing the proportion of GDP for higher education and taxing the super-rich.

The 1955 Freedom Charter was an expression of political aspiration, not a policy guide. The Constitution states that “the state, through reasonable measures, must make higher education progressively available and accessible” – this is what the Minister is doing.

The second demand is for a greater national budget slice to go to higher education – from 0.75% to 1%. This is far too conservative. Developmental states such as Malaysia spend 1.75%, China almost 3% and Cuba 4.5% from a very small and stagnant economy.

Successful developmental states invest heavily in higher education and charge fees – with financial aid schemes for the poor.

The third is that “the super-rich can pay”.

Nowhere in the world do the super-rich pay under a free higher education dispensation.

In the Nordic countries with quality free higher education the money comes from a combination of being some of them most equal societies in the world, unemployment being less than 5% and the tax rate is a flat 50% for everybody.

So, free higher education in these countries is paid for by virtue of the fact that everybody is working, earns a good salary, everybody pays tax at around 50% and the treasury is not raided by special interest groups.

Taking all the money from the few rich South Africans will only sponsor student loans and only for a few years.

The way forward

Internationally there is a move towards progressive graduate tax systems. The advantages being: no or minimal fees; they disconnect students from family status – poor and rich are treated the same; differentiation comes after graduation; those who earn high salaries pay more and quicker; and those who earn lower salaries pay less and over a longer period.

The conditions for such systems are:

  • high completion (graduation) rates;
  • high graduate employment;
  • good tax collection; and
  • taxes must not be stolen.

South Africa satisfies the condition of high graduate employment (highest private returns in the world) and a good tax collection system.

The biggest drawbacks are that barely 50% of the undergraduate students graduate and the raiding of the Treasury.

The issue

So, the issue is not enough money for free tertiary education, but to fix the undergraduate university and college systems; to provide vastly expanded education and training opportunities; to put in place a modern progressive graduate tax instead of an outdated loan scheme; and stop raiding the Treasury.

So, while the fees commission, and the media are looking at money, the issue is political and systemic.

South Africa desperately needs strong tertiary education institutions. It is one of the most unequal societies in the world and its economy isn’t growing.

Higher education is a social mobility mechanism. In a recent submission to the Fees Commission, I argued that poor and middle class South Africans see higher education, and particularly universities, as the only ladder into the affluent middle class.

Their perception is correct. The World Bank has found that South Africa has the highest private return to tertiary education - that means that getting a degree is a passport to employment.

And, Van den Berg has found that graduates are three to five times more likely than a school leaver to find a job.

Maintaining and building strong universities needs a combination of two things: better government funding and fee income with affordability funding support for the poor and the lower middle class.

 (This is a slightly shortened version of an article, first published on The Conversation website, by Nico Cloete, extraordinary professor, University of the Western Cape.)

by Nico Cloete

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