A Conceptual Framework: Public and Private Benefits of Higher Education Jamie P. Merisotis, President The Institute for Higher Education Policy

A Conceptual Framework:Public and Private Benefits of Higher Education

Jamie P. Merisotis, PresidentThe Institute for Higher Education Policy

www.ihep.com

Common Benefits and Common Responsibilities

• Financing of higher education is a topic that transcends national boundaries

• Role of higher education in economic and social development is growing

THE INSTITUTEfor Higher Education Policy

Concerns about financing are related to a variety of goals

• Massification of higher education

• Improved educational equity for historically disadvantaged populations

• Enhanced educational quality


Investment in higher education

• Investment in higher education has tangible benefits that are both public and private

• Public policy dialogue of investment must continue to reinforce these dual benefits


Why should an articulation of public and private benefits

matter?

• In the absence of understanding benefits selective investment becomes possible

• When policymakers and the public do not realize the benefits, other public policy priorities may gain more support for funding


Other important reasons

• Scrutiny of higher education is increasing

• Calls for accountability combined with concern about tuition and payment mechanisms have realigned the public dialogue

• These concerns necessitate the need to catalog the benefits of higher education


Characterizing higher education’s benefits

• Attempts to characterize benefits are likely to be imperfect and incomplete

– Imperfect because methods of classifying benefits as public or private are inexact

– Incomplete because efforts to measure or describe them are sometimes difficult


Four categories of benefits

• Public economic benefits

• Private economic benefits

• Public social benefits

• Private social benefits


Specific private economic benefits

• The following chart compares the ratio of average annual earnings of tertiary graduates with those with less than a tertiary degree

• The resulting analysis shows that the earnings premium of university-level graduates is particularly high



Below upper secondary education

Non-university tertiary education University-level education

M+W Men Women M+W Men Women M+W Men WomenNorth AmericaCanada 87 84 75 110 108 113 156 148 163 United States 68 67 62 119 118 126 174 167 176

Pacific AreaAustralia 89 105 87 111 118 105 142 161 139 New Zealand 82 82 79 106 98 102 165 163 146

European UnionDenmark 83 86 85 104 108 110 133 139 130 Finland 93 91 93 126 127 126 187 190 174 France 80 86 78 128 132 137 175 183 168 Germany 78 88 82 111 107 116 163 158 154 Ireland* 85 77 62 123 121 123 183 171 187 Italy 77 74 74 x x x 134 142 120 Netherlands 77 85 68 124 126 131 162 153 158 Portugal 68 66 67 x x x 183 180 174 Sweden 89 88 87 109 111 112 151 154 144 United Kingdom 75 73 73 132 114 151 179 153 195

Other OECD countriesCzech Republic 66 72 75 x x x 158 154 149 Norway 82 84 77 123 125 124 149 149 150 Switzerland 67 75 70 145 124 134 157 141 156

Country mean 79 81 76 119 117 122 162 159 158

* 1993 data.Source: OECD Database.

by level of educational attainment and gender (1995)Relative earnings of persons aged 25-64 with income from employment (upper secondary education = 100)


For example...• In Canada the earnings of those with an

educational level below upper secondary are 87% of those with a university-level education

• The earnings of those with a university-level education are 156% of those with an upper secondary education

• In Germany the percentages are 78% and 163% respectively


Private economic benefits

• The next chart examines the employment and unemployment rates of those with varying levels of education

• The employment rates of those with a university-level education are higher than for other groups, while their unemployment rates are lower



Gender

Upper secondary education

Non-university tertiary

education

University-level

education

Upper secondary education

Non-university tertiary

education

University-level

educationAustralia M 89 92 93 5.9 4.5 2.9

W 66 76 83 6.1 5.4 3.6 Austria M 95 95 95 2.0 0.6 1.9

W 75 89 88 3.2 1.1 2.7 Belgium M 92 95 94 4.8 3.9 3.0

W 70 87 83 11.0 3.4 4.8 Canada M 85 87 91 8.5 7.5 4.9

W 70 77 82 8.9 7.2 5.2 Czech Republic M 96 x 98 1.5 x 0.6

W 89 x 95 2.8 x 1.1 France M 90 94 92 7.4 4.1 5.5

W 71 84 79 12.2 5.3 7.5 Germany M 91 96 94 5.9 3.3 4.2

W 70 83 82 9.1 6.7 5.2 Ireland M 90 94 93 6.3 4.2 3.1

W 55 75 81 9.0 4.8 2.8 Italy M 92 x 93 4.0 x 4.0

W 66 x 81 9.4 x 8.3 Korea M 96 x 96 1.5 x 1.5

W 49 x 49 1.0 x 0.9 New Zealand M 93 91 92 2.7 5.0 2.9

W 69 74 77 4.2 3.4 3.8 Poland M 84 88 97 9.6 8.1 1.9

W 70 86 92 14.1 5.7 2.1 Spain M 87 90 91 10.1 7.9 7.3

W 51 55 77 26.6 26.7 13.3 Turkey M 93 x 91 3.2 x 2.0

W 33 x 67 9.7 x 2.3 United Kingdom M 88 93 96 7.5 4.1 2.8

W 70 84 84 6.5 3.1 3.3 United States M 87 91 95 5.4 3.8 1.9

W 72 82 81 5.2 3.4 2.6 Country mean

M 91 92 94 5.5 4.9 3.1 W 68 81 82 8.2 5.7 4.2

Source: OECD Database.

Employment/population ratios Unemployment rates

Employment/population ratios and unemployment rates for 30-44 year-olds by level of educational attainment and gender (1995)

For example...

• Data from Poland shows that the unemployment rate for those with a university-level education is 1.9%

• For those with only an upper secondary education the rate is 9.6%

• For those in Australia the rates are 2.9% and 5.9% respectively


Private social benefits

• We next examine the variations in health behaviors and experiences of the U.S. population according to educational attainment

• As the level of education increases so does the likelihood of behaviors and experiences considered healthy


Question 1-3 years of HS 4 years of HS 1-3 years of college 4 or more years of college

Exercise or playsports regularly 29.7% 37% 48.5% 55.8%

Told more than once that they had highblood pressure 21.5% 15.7% 12.8% 12.4%

Smoke cigarettesdaily 37.4% 29.6% 23% 13.5%

Source: National Center for Education Statistics, The Condition of Education, 1994.

Health Characteristics of Adults by Educational Attainment, 1990


For example...

• The research shows that as the level of education increases so does the proportion of those who exercise or play sports regularly

• Additionally, the proportion of smokers declines as educational attainment increases


Public social benefits

• The next chart addresses participation in civic activities in the U.S. according to level of education

• Those with higher levels of education exhibit higher participation rates


Selected characteristics

Member of organization (community

group, church, etc.)

Participated in ongoing

community service activity

Voted in a national or

state election in the past 5

years

Contributed to a candidate,

political party, or political

cause

Worked for pay/volunteered for a candidate, political party,

or political cause

Attended public

meeting Total 58.7 38.7 74.4 14.8 5.6 28.3Highest education level Less than high school diploma 44.8 19.2 51.3 6.8 3.3 12.7 High school diploma or GED 53.7 36.7 71.7 12.3 4.4 26.2 Some college/voactional/technical 59.5 46.3 84.9 16.3 5.0 34.5 Bachelor's degree 74.2 51.2 91.3 23.1 10.0 38.4Graduate/prefessional school 85.3 54.2 89.7 28.4 9.8 43.7


Performed activity in the previous 12 months

Percentage of adults who reported participating in civic activities, by type of activity and selected characteristics: 1996


For example...

• While the national average for ongoing participation in a community service activity is 39%, it is 51% for those with a bachelor’s degree

• 91% of bachelor’s degree recipients voted in a national or state election within the past five years, compared to 74% of the total population


Public economic benefits

• The final chart shows the rates of participation in the main U.S. welfare program by level of education over a 25 year period

• Higher levels of education are equated with lower welfare participation rates


Years of school completed

Year Less than 9 years 9-11 years 12 years 13-15 years 16 years or more

1972 11.5% 9.7% 3.2% 1.5% 0.4%1973 11.7% 10.3% 3.3% 1.7% 0.6%1974 15.0% 11.7% 3.3% 2.0% 0.8%1975 11.3% 11.0% 3.3% 1.5% 0.3%1976 10.9% 12.2% 3.5% 2.1% 0.4%1977 11.7% 12.0% 3.9% 2.1% 0.3%1978 10.8% 12.7% 3.6% 2.5% 0.4%1979 12.4% 12.8% 3.8% 2.1% 0.6%1980 11.8% 12.7% 4.4% 2.5% 0.4%1981 11.5% 13.6% 4.6% 2.7% 0.5%1982 9.6% 14.1% 4.3% 2.1% 0.3%1983 11.4% 14.7% 4.3% 2.5% 0.3%1984 13.2% 14.9% 4.2% 2.4% 0.8%1985 11.8% 14.0% 4.4% 2.6% 0.4%1986 11.8% 14.1% 4.5% 2.4% 0.3%1987 13.2% 12.5% 4.5% 2.5% 0.3%1988 11.5% 13.8% 4.2% 2.1% 0.2%1989 8.8% 13.4% 4.1% 2.4% 0.4%1990 8.9% 15.1% 4.7% 2.5% 0.5%1991 11.4% 16.0% 5.5% 3.1% 0.5%1992 9.9% 17.1% 5.6% 3.7% 0.5%1993 9.6% 16.2% 6.3% 3.7% 0.4%1994 8.3% 14.3% 5.8% 4.4% 0.4%1995 9.1% 12.4% 5.2% 4.1% 0.3%1996 7.4% 12.4% 4.3% 3.4% 0.4%


Percentage of Persons Ages 25 to 34 Who Participate in AFDC orPublic Assistance, by Years of Education Completed: 1972 to 1996


For example...

• Over the entire period the participation rate for those with 16 or more years of schooling was less than 1%

• An unexplained rise in participation occurred in the 13-15 years of schooling category beginning in 1991, but has since started to decline


Impact

• This brief tour of public and private benefits reminds us that

– a broad range of benefits are derived from investment in higher education

– despite the evidence, there is limited capacity to define the consequences of not investing in higher education


Consequences of diminishing public support

• Growing social and economic disparities• Increasing public expenditures on social

welfare programs• Inability to compete in a technological society• Stagnant or declining quality of living• Decreasing health and life expectancy• Diminishing civic engagement


In summary

• This discussion has shown that the public, private, social, and economic benefits of higher education are vast and important

• These benefits should be borne in mind by policymakers and the public as they struggle with the complexities of financing higher education


Documents

A Conceptual Framework: Public and Private Benefits of Higher Education Jamie P. Merisotis, President The Institute for Higher Education Policy