Reasons Why Higher Education Should Be Subsidized

Education, in general, provides several societal benefits. Higher education, in particular, is too vital to be left to market forces since it could lead to under-provision, causing the economy to suffer from the effects of unskilled or half-baked graduates (Corcos 97). Furthermore, in a free market economy, higher education may become the preserve of wealthy families with the means to send their children to the best universities (Spring 20). As a result, there is a compelling case for the government to provide higher education subsidies. This paper seeks to examine the reasons why the government should subsidize higher education and how it should go about it.

The first reason why the government should subsidize education is due to the fact that higher education brings about positive externalities. By and large university education yields a more productive and educated workforce. Moreover, a population that is educated is much more informed and actively participates in the voting process (Samuels 24). Another positive externality of government subsidy in education is the fact that it provides families with an access to financial aid through loans and grants (Baum et al. 12). This goes a long way in uplifting such families out of poverty. Government subsidy in higher education also assists with redistribution facilitating all families irrespective of their level of income to offer quality education to their children (McMahon 30). In addition, countries that have increased levels of higher education normally have high degrees of productivity and innovation growth. Friedman (1962) argues that it is impossible to have a society that is stable and democratic without the citizens having a minimum level of knowledge and literacy (Spring 77). There should be extensive acceptance of a shared set of values among the general citizenry. Higher education has been known to provide both. Consequently, the gain from higher education accumulates not only to the educated, but also to other society members as well (Baum et al. 12). This, therefore is a strong justification why the government should subsidize higher education.

Secondly, a government that invests in its people, invests in its human capital . Every individual in society possesses a certain amount of inherent skill, brain power, understanding, knowledge etc. (Baum et al. 12). All the above factors other than an individual's "unskilled" labor enable one to produce output and can all be summed up as human capital (Callejo-perez et al. 20). There exists a strong relationship between economic growth and human capital. Thus, human capital has a positive effect on a country's economic growth and can assist in developing an economy via the skills and knowledge of people (Baum et al. 12).

Therefore, economically, human capital refers to the skill sets, knowledge as well as the motivation that a country's people possess and which offer economic value. Economists argue that human capital differs from one person to another and that quality of work can greatly be enhanced by taking time to invest in people's education (Baum et al. 12). On the other hand, economic growth can be defined as an increase in the ability of a given economy, compared to previous periods, in producing goods and services (Baum et al. 12). Economic growth is determined by measuring the % in the real GDP of a given country. Human capital relates directly to economic growth-a relationship that can be determined by how much a government has invested in educating its people (Baum et al. 12). For instance, several Nordic countries have successfully provided their students with a free education system that comprises postgraduate studies. Moreover, in Finland and Norway, free education has also been extended to international students not from Europe. Germany has also just eliminated fees in all of its states (Spring 100).

The other argument why government should provide subsidies for higher education is to promote equality and equity. Equity in education is dependent on 2 key factor that include fairness and inclusion (Baum et al. 12). A government subsidy will ensure fairness which means that factors which are specific to certain population segment will not act as an hindrance to attainment of educational success. Secondly, inclusion is another critical factor and is used to imply to a comprehensive standard applicable to everybody in a given system of education. A government that subsidies higher education for its students will definitely achieve a proper academic balance of its educational system since the fairness and inclusion are closely linked. Equity in higher education is the only way to attaining equality.

A government subsidy in higher education will therefore offer the best opportunities for every student, irrespective of their family backgrounds (Baum et al. 12). Moreover, such students will be able to accomplish their full potential and go out to tackle instances of inequality that derail educational achievement (Baum et al. 12). Through government subsidies therefore, education equity can be attained. Equity in education measures fairness, accomplishment, as well as opportunity in education. Thus the rising significance of equity and equality in education is on the basis of the principle that a person's education level is directly correlated to the quality of life s/he will enjoy in future (Baum et al. 12). Consequently, a country whose education system applies education equality and equity will lay a strong and firm foundation of a society which is thriving and fair (Baum et al. 12).

As far as government subsidy is concerned, research has shown that the more highly educated a person, the more s/he will contribute in taxes. Thus attainment of higher education raises the possibility that a person will be meaningfully employed and therefore earn increased wages. According to research, increased education is correlated to at least 7-10% more earnings per extra year of schooling amongst those that are employed (McMahon 10). The increased wages earned by individuals with higher education lead to increased tax returns and higher remittances to such programs as social support as well as insurance programs like Medicare and Social Security.

A RAND research modeled on tax, social support as well as insurance remittances as a function of age, level of education and demographic features concluded that for any given population segment, increases in a person's level of education are linked to significant increases in remittances to insurance and social support programs (Toutkoushian 87). The research further found out that college graduation rather than high school graduation was linked to the biggest increase in tax remittances, closely followed by high school diploma graduates instead of high school drop outs (Toutkoushian 87).

Subsidizing education also is advantageous since university graduates do not draw much from social support programs. Since attainment of higher education is linked to high possibility of plum jobs, hence higher pay, it is also linked with a decreased possibility that the educated person will draw from social support programs like Unemployment Insurance, Temporary Assistance for Needy Families, Medicaid, Supplemental Nutrition Assistance Program (food stamps) and housing subsidies (Toutkoushian 87). Thus higher wages due to attainment of high education also effectively reduces the amount that a highly educated individual is likely to receive when s/he does take part in social support programs, of course with exceptions of Social Security and Unemployment Insurance (McMahon 10). Such reductions as those at the expense of social support programs are of great value to the government, that would otherwise be required to fund them at a higher level.

In addition, college educated persons are not likely to incur imprisonment costs (Toutkoushian 88). Whereas direct causal relationship is not easy to determine, there exists a great deal of proof that higher education is linked to a reduced probability of crime. Consequently, increased education achievement is also related to reduced possibility of a person being imprisoned. Decreased size of the jail and prison population greatly reduced the expenses associated with operational and maintenance cost related to correctional facilities and thus easing the strain on the public budgetary allocations (Toutkoushian 88). Evaluating the savings that would be realized expenditure on state prisons and municipal and county jails, research has found that increased attainment of high education is linked with the biggest savings in imprisonment costs amongst high graduates than high school dropouts. Thus, the savings are more to university and college graduates in comparison to the high school graduates and dropouts (Toutkoushian 89).

The other reason why government should subsidize higher education is due to the fact that increasing and raising the level of education of its population leads to net benefits to the country's public budget (McMahon 16). According to RAND research (2002), estimation of the net benefits accrued to the government of increased education achievement, was estimated by summing up of the growth in public income from increased tax deductions as well as the reductions in expenditure on incarceration and social support, less the expense of providing additional higher education (Spring 27). For instance, on average , raising the education of a US white male citizen till he graduates from high school would be linked to increased tax remittances over his lifetime amounting to $54,000(as of 2002) (McMahon 10). Increasing his level of education would be linked with decreased future social support demands and reduced imprisonment expenses totaling respectively to $22, 000 and $13 000. Therefore, the average sum value linked with raising the level of education up to high school graduation would total to $89,000 (Toutkoushian 87). Offering additional education would cost the government $15, 000, which implies that the net value to the country would equal to $74,000 (McMahon 12). The size of the observed impact is the same for any other group and thus, irrespective of the student's ethnicity, race or gender, increasing his or her education level is highly correlated with positive benefits for the overall economy (McMahon 12).

How the government can subsidize Higher Education

The following are policies that the government can undertake to subsidize education hence offering the much needed reprieve to families and students. First and foremost the government can increase Pell grants (McKeown-Moak 57). Thus Pell grants are subsidies set by the US government and are given to students that need it for their college education. Normally, a Pell grant us usually regarded as the foundation of a financial aid package of a student to which other kinds of aid are given. Increasing the amount and number of students that are getting Pell grant can go a long way in boosting higher education (McKeown-Moak 57).

The second way in which the government can subsidize higher education is through the introduction of the American Opportunity Tax Credit. Generally a tax credit has the effect if reducing the amount of income tax one might have to remit. As opposed to deduction, whose main effect is reducing the total income that can be taxed, a credit directly decreases the tax itself (McKeown-Moak 57). For instance, in 2016, a student may claim a credit totaling up to $2, 500 for adjusted eligible education expenses paid for every student qualifying for the American opportunity credit. Increasing this credit will incentivize more students to seek higher education (Toutkoushian 89).

Another subsidy that the government can implement is maintaining Stafford loan interest low (Toutkoushian 90). This can be done by extending a reduced rate on subsidized Stafford loans for the period the student will be studying. Generally direct Stafford Loans are the most widespread federal student loans and are given to students enrolled in institutions of higher educational (Toutkoushian 91).The US government provides subsidized Stafford loans to eligible students who have demonstrated financial need. Lowering the interest rates for these loans can go a long way in promoting higher education (McKeown-Moak et al. 54). These techniques are not exhaustive and more methods for subsiding education can be designed to ensure that higher education is affordable to anyone willing to pursue it.

In conclusion, there are so many glaring benefits that a good education system can offer a society. Unfortunately, very many students are not able to afford higher education leading to loss of great potential. It is my believe that each and every student deserves the opportunity to realize their full potential. If higher education was made more affordable, everyone with dreams of becoming somebody someday can realize his/her dreams (Spring 50). The government therefore should pursue pro-higher education policies and programs that are effective in facilitating students to raise their educational levels. Such policies will finally have the ripple effect of yielding long-term as well as significant value to the government for the general good of the society at large. Policy-makers therefore should take into consideration these possible benefits in their endeavor to evaluate the importance of higher education by searching, financing and implementing policies aimed at boosting higher educational attainment by anyone willing to pursue it!

Works Cited

Callejo-Pérez, David M, Stephen M. Fain, and Judith J. Slater. Higher Education and Human Capital: Re/thinking the Doctorate in America. Rotterdam: Sense, 2011. Print.

Corcos, Alain F. Affirmative Action for All Our Children: And Why College Education Should Be Free. , 2016. Print.

McKeown-Moak, Mary P, and Christopher M. Mullin. Higher Education Finance Research: Policy, Politics, and Practice. , 2014. Print.

McMahon, Walter W. Higher Learning, Greater Good: The Private and Social Benefits of Higher Education. Baltimore: Johns Hopkins University Press, 2009. Internet resource.

Samuels, Robert. Why Public Higher Education Should Be Free: How to Decrease Cost and Increase Quality at American Universities. , 2013. Print.

Sandy Baum, Jennifer Ma, Kathleen Payea. "Education Pays: The Benefits of Higher Education for Individuals and Society." College Board (2013): p1-34.

Spring, Joel. Economization of Education: Human Capital, Global Corporations, Skills-Based Schooling. New York: Tylor & Francis, 2015.

Toutkoushian, Robert K, and Michael B. Paulsen. Economics of Higher Education: Background, Concepts, and Applications. , 2016. Internet resource.

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