In my professional development class last week, I had the opportunity to listen to several international students who were willing to stand up and speak about their educational backgrounds, as well as share their perspectives on the educational system of their native countries. Listening to my classmates talk about their experiences was an excellent reminder of just how differently other countries approach the concept of higher education. One of the most striking points is that, in many countries around the world,higher education is considered a right to which all citizens of that country are entitled. I think a lot of Americans would be shocked by the idea that students pay for little more than some nominal fees for higher education in most European countries. Of course, the cost of this publicly-funded higher education is borne by all tax-paying citizens. If you were surprised to learn this, then you might also be shocked by the income tax rate of these countries. The top income tax rate in the U.S. is about 44%, as compared to a tax rate that ranges from about 50% in many European nations to as high as 60% in Denmark. Looking at personal tax rates on $100,000 around the world, the U.S. comes in at 55th out of 114 countries surveyed.
If you look at income tax rates on the top earners ($300,000 annually), the ranking changes little, placing us 53rd out of 114 countries. The better number to look at, however, is the tax rate as a share of gross domestic product.
When we do that, we see that the U.S. sits around 27% while many European countries are in the range of 40 to 50%. Contrary to what you might think from listening to politicians, our tax rates are not that high. A consequence of this, however, is that our approach to funding social programs also differs from many (if not most) European countries, and we certainly do not take the same view of providing higher education for all. I am going to make some broad generalizations here, but my impression is that Europeans (in general) seem to view higher education as a public good, whereas the American view is that education is a private good. To quote an excellent article by Sandy Baum and Michael McPherson (January 18, 2011) in the Chronicle of Higher Education, “The concept of public goods is central to economic analysis of the role of government in the allocation of resources. Public goods are defined by two characteristics:
1) Non-excludability: It is not possible to exclude non-payers from consuming the good.
2) Non-rivalry in consumption: Additional people consuming the good do not diminish the benefit to others.”
An example of a true public good might be national defense. Our army does not protect only taxpayers, but instead protects the nation as a whole. The fact that the army protects you does not in any way diminish the protection that I receive. By this definition, education is not strictly a public good, especially in the United States. Here, people can be excluded if they are not able to pay, and certainly it makes sense that the value of a particular degree might decrease relative to the number of people that have earned that degree. On the other hand, society does derive at least some benefits from having an educated populace. Assuming that education leads to greater productivity and innovation, then we expect people with more education to have higher-paying jobs, and therefore pay more taxes. We expect them to be more likely to start new businesses, thereby creating more jobs and employing more people. We expect them to develop innovative solutions and technologies, to advance science, math, and other fields of study, to produce literature and art. In short, we expect them to contribute more to our culture and society than they might have without higher education. There is no question, I think, that education has value. To quote Jonathan Rothwell’s November 12, 2013 article entitled The Economic Value of Education, “The data are very clear that the sacrifices made by millions of taxpayers, parents, and individuals to invest in the education of others or themselves are economically worthwhile.”
Thinking about this makes me question exactly how much we actually value education as a society. In the United States, we largely seem to view education as an expense that must be borne by the individual. Naturally, this conveys an advantage to anyone born into a family with the financial means to meet the rising costs of higher education. Of course, there are some opportunities for scholarships and the like, but more often than not the only real option is the student loan.
The sheer volume of student loans in this country is staggering. Now if this trend indicated that more and more students were going to college, that would good news, of a sort. Sadly, that is not the case. The greatest influence comes from the skyrocketing cost of higher education. Everyone knows this, I think, but to put it in perspective, look at the increase in college tuition and fees relative to other typical expenses.
It is difficult to avoid hearing something about health care in the news, and how the cost of health care has increased dramatically as well. While 300% is a pretty incredible increase since the early 1980s, that still pales in comparison to the 570% increase of college tuition and fees over the same course of time! I had no idea it had increased so much. I find it almost unbelievable. Raise your hand if, like me, you have college debt that you will be paying off for years to come. I can only imagine what it will cost when my daughter is of an age to attend college. I hope she is either a genius or a superstar athlete.
Here is what I see as one of the most significant problems that we must confront with regards to college tuition: skyrocketing tuition rates can only serve to widen the gap between the “haves” and the “have nots” in our country. As more people earn undergraduate degrees and graduate-level degrees, it becomes more and more challenging (if not impossible) for those without such degrees to compete in the workforce. It is difficult to imagine most of these people becoming innovators and entrepreneurs when they must struggle just to survive and meet basic needs like food and shelter. This is why I question our commitment to education in this country. I think that perhaps what we are really doing is paying lip service to the notion that education is valuable and important. I think the reality is that we are promoting a system that strongly favors those of a higher socioeconomic status by making higher education less and less accessible to those of lower socioeconomic status. The reality is that more and more students are graduating from college with an enormous handicap in the form of crushing debt. We should want a nation made up of educated individuals. We should want to give people the means to be productive members of society. I think anyone you asked would say that they want these things, yet that is not what we actually do. We say that education is important, and we say that it is a priority, but we do not actually make it a priority. I think that, if we really meant what we say, we would take steps to promote that which is in our best interest as a society: we would be making higher education available to everyone and treating it is a right that we are all entitled to, as citizens of this country.
I welcome feedback and discussion on this point. Do you think that we value education in America? In upcoming posts, I intend to explore the reasons for increasing college tuition rates.
Thanks for reading!