Tuesday, November 8, 2011

Higher Education Costs and American Competitiveness



When Steven Hill spoke at the University of Illinois in September 2011, he mentioned an array of statistics that make a strong case for the superiority, in terms of socioeconomic outcomes, of Europe's “Social capitalism” over America's “Wall Street capitalism”. According to Hill in his book Europe’s Promise: Why the European Way Is the Best Hope in an Insecure Age, Europe has a “workfare support state,” which he argues helps maintain a productive workforce by providing healthcare, childcare, education, and other social services (p. 20). The more deregulated American system, by contrast, allows individuals to keep more of their paycheck, but leaves them on their own to pay for many of these services (p. 22). Hill asserts that when you sum up the total balance, “you discover that many Americans pay out just as much as Europeans, but we receive a lot less for our money” (p. 23).

This certainly seems the case in terms of higher education. As you can see in the below chart from the 2010 Global Higher Education Ranking report (p. 27), American students face disproportionately greater higher education costs than their European peers. The authors of that report calculated the average out-of-pocket cost of higher education, based on five cost inputs—education costs, living costs, grants, loans and tax expenditures. Whereas the out-of-pocket cost as a percentage of the national median income is 53.28% in the US, of the European countries studied it ranges from 38.71% in England and Wales to a mere 3.95% in Finland.


Not only is a college education disproportionately more expensive in the US, but in the eyes of most Americans, it is out of reach. According to the 2011 Pew Social and Demographic Trends report, only 22% of American adults agree that most people can afford a college education, and a full three-quarters disagreed (p. 33).  

Moreover, the Pew Research Center found that Americans between 18-34 primarily cite financial reasons for why they did not, and are not, pursuing higher education (p. 17).


It is perhaps not entirely surprising then that a 2010 study by the Center on Education and the Workforce at Georgetown University warns that “by 2018, we will need 22 million new workers with college degrees—but will fall short of that number by at least 3 million postsecondary degrees.” If this shortfall comes to pass, there is a good chance these jobs could go overseas, perhaps permanently, denying not only Americans of income but also eliminating the trickle down into the economy that their spending would provide.

While there are advantages to the American university system, such as having a large proportion of the world's elite schools, clearly if we're facing a gap that large there's something wrong with our higher education system. Indeed, since America's international economic competitiveness is dependent upon our primarily knowledge-based comparative advantages, I would argue that the disproportionately greater cost of higher education in the US threatens the success of our economy. Therefore, at least in terms of higher education, I think there is much evidence to support Hill's contention that European social capitalism is a superior development model for the 21st century.


Michael Slana is a political science graduate student in the Civic Leadership Program at the University of Illinois. He completed his bachelor’s degree with a major in political science and a minor in history. During his freshman, sophomore, and junior years he interned for Champaign County State Senator Michael Frerichs, with responsibilities including constituent service and correspondence. In spring 2009 Michael studied in Austria as a participant in the Vienna Diplomatic Program, where he developed a strong interest in European and Transatlantic politics. During his junior year Michael began contributing to research on the impact of natural disasters on societal stability through a class at the Cline Center, and has continued this work first as an hourly research employee and later as part of a graduate assistantship. To fulfill his Civic Leadership Program residency requirement, Michael completed an internship in spring 2011 with the US State Department’s Mission to the European Union in Brussels, Belgium. He is currently collaborating with the other Civic Leadership Program fellows on a joint masters thesis project on higher education costs and accessibility in the United States.

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