Question

Assume that you are an economic policy adviser, and the government has asked you to prepare a report on the issues to consider in the provision of tertiary education. In particular, you are asked whether the government should fully subsidise tertiary education, partially subsidise tertiary education, or move to a full-fees system where students pay the full cost of their education. Discuss the factors that you should consider.

Answer 1

The issue draws attention to the multi dimensional aspect of policy making in relation to the effects on individuals and on the economy as a whole. Firstly, it has to be noted that basic primary education is utmost need and constitutes a necessity to be provided by government whicb has to be subsidised to raise literacy rats. However the issue of tertiary education is related to human skill formation with long run implications. The income brackets of population entering or opting for tertiary education in different parts of the world are heterogeneous and thus it deserves close scrutiny whether the aspirants are unable to afford rhe education at tertiary level while fulfilling orher basic requirements. In US for example the local people are relatively more in a favorable position to fund their education withoit subsidies compared to underdeveloped countries. Thus in an underdeveloped country subsidy needs to be provided for tertiary education to promote human capital and raise long run welafre of people. However the extent of coverage depends on the budget condition of the government. If there is unsustainable budget deficit then suvaidy ahould be partial and properly targeted. Moreover, even in cases where the population can afford the education often tgey face trade off whether to invest in education or other avenues. In such a situation even in an economy like US the government has to provide partial or full subsidies. Thus budget deficits, income of peole, human capital formation, long-term growth are factors which need to be considered before deciding the actual subsidy given.