Question

Joseph Stieglitz, Nobel Laureate in Economics, has argued that the US should pay for higher education from the general tax coffers. Thus, he proposes a free for citizens higher education that will cost $300 billion. Given the unemployment rate of 9 %, huge CA deficits, competitiveness that is slipping and increasing debt levels for the government, comment on his recommendation.

Answer 1

Right now if a person is paying $100,000 (just an assumption, the actual amount is much higher) as a fee in the college for higher education he is going through the following:

• A student to get a higher education has to go through high debt. This is reducing the burden on the students and high-interest rates on those loans are also decreasing the consumption capacity of the student. If the loans are not there the student will generate extra demand form that money.
• Higher salary expectation: If the student has invested a considerable amount in his education he will also expect a higher amount of return. This increases the salary expectation in the market and erodes the competitiveness. We are stuck in a situation where there is unemployment but people are not ready to work for lower wages because they see education as an investment and want higher returns.
• Only commercial education: If a student has to pay a high cost for attaining education. She will choose only those courses where the employment chances are high. There are many other courses which are important for the economy but no one pursues them because the return is low. It creates the mismatch in supply and demand in the high paying jobs whereas other supporting studies like humanities don't get much attention. If the government pays for studies people will choose the subject which they really like and love to excel not the education which pays more. Increasing the whole productivity of the economy.

A government-funded or just government supported higher education will reduce the burden and increase the consumption in the economy, increase the competitiveness and reduce the unemployment debt on the government will increase but the gains in return are very high.