Globally, there is increasing demand for higher education, especially from the youth population of developing countries, as it is viewed as an important pathway for greater social mobility (Devesh, 2008). According to the World Trade Organization (WTO 2010), private returns from higher education are high for both developed and developing countries. In developing countries, the wage differential between a secondary school leaver and a university graduate is estimated to be as high as 200%. Besides the wage premium, rapidly changing technology in a globalized world is also demanding new and changing competencies that require life-long learning skills, for which mature students often have to go back to college for re-training and re-skilling.
Malaysia is one of the most subsidized nations in the world. Its total subsidy of RM74 billion in 2009 is equivalent to RM12,900 per household or 4.6 per cent of GDP even higher than Indonesia (2.7 per cent) & Philippines (0.2 per cent). Out of the numbers, RM 30.8 billion goes to Primary, secondary, higher education and scholarships.
Higher education in Malaysia is divided into 2 sectors; public and non-public sector, there are about 20 universities and 6 university colleges (the term “university college” is used to for those tertiary level education institutions that are able to confer their own degrees but have not achieved university status). In the non-public sector there are 559 institutions of varying types including: universities and university colleges and foreign university branch campuses. The term “non-public” refers to the broad category of institutions not funded by the state. A division between private and for-profit institutions exists within this category, but is not entirely clear. Outside of these categories are polytechnics (24) and community colleges (37), which will not be dealt with this profile. The Higher Education Department within the Ministry of Education, co-ordinates and monitors the activities of public and private universities and colleges.
Because of government’s large investments in higher education, issues of government involvement and university autonomy arise. Currently, students are assigned to specific universities based on their cumulative grade point averages, faculty members are essentially civil servants with highly fixed salaries, and vice chancellors and deans are appointed by the state. Malaysian public higher education students must pay tuition and other fees and cover their living costs (though accommodations on campus are subsidized by the government).
Solid financing is the backbone of a well-functioning higher education system. The decision to attend tertiary education has monetary and non-monetary variables. In Malaysia the cost of tertiary education (tuition fees) and associated living costs affect how much a cash constraint can discourage otherwise talented students from enrolling and completing higher education.
Currently many kinds of subsidies exist such as government owned and operated school (public and private universities & state colleges), subsidized loans, grants and scholarships.
THE “PROS” TOWARDS GOVERNMENT SUBSIDY:
Why does government need to intervene in the market for education? That is, doesn’t the market produce the “right” amount of education? If the market outcome is not right, what is the best way to intervene? To answer these questions, we first need to consider the basic model of education.
In the economic model of education, every person in society has a certain amount of brain power, skill, knowledge, understanding, and the like. All those factors other than our “unskilled” labor allow us to produce output. We can think of all these factors as one, the composite factors which is human capital. It is very useful to think of human capital as analogous to physical capital. Durable: continues to have value over time, can decrease over time due to “depreciation” and can increase due to “investments”. Acquiring education is like making a physical investment, improves the quantity and/or quality of the human capital. The purpose is to increase productivity and that’s for sure.
Hence, there are a few drawbacks if the Malaysian government didn’t subsidized university education tuition fees. Family income determines whether the student can afford the costs of the university or college. First issue related to monetary variables and non-monetary variables will lead to a drop line of a higher education access. This has made many young talents and bright students fail to enter university and are a loss to future generation. This is due to: •Cost benefits barrier – the barrier arises when the group decides that the cost of attending university is greater than its expected return to the education investment. •Cash constraints barrier – occurs when the students who have decided that the returns to education outweigh the costs still cannot put together the resources to obtain entry to universities. •Debt aversion barrier – arises when an individual refuses to use the funds at his or her disposal because part of the funds might be loans, which at some point will have to be repaid. •Parental education, race and ethnicity, gender and geographical location – all play a role in the college decision-making process.
Of course there are many reasons why government should step in. Subsidy indirectly can reduce crime. Of course crime is clearly an externality in this context. The actions of others affect us and they are not negatively compensated. If we look at current situation there is an extremely strong relationship between crime and education. Well at least for three reasons: •Pure human capital motive – education related to income, and people with higher income have less incentive to commit crime. •Direct schooling effect – classes makes students smarter so realize that crime doesn’t pay at all. •Opportunity cost of time – students are busy at faculty so actually in other words have less time to commit crime.
Escalating expenditure for public higher education has ked the government to adopt a cost-sharing system in which students and parents shoulder and increasing share of the costs. The MARA financial aid scheme was converted in January 1998 to a 100% loan scheme except for loans given out under the Excellent Student Scheme. The National Higher Education Fund Corporation (PTPTN) was established for the purpose of offering subsidized loans to help students meet the costs of enrolling a local higher education institution. It is also designed to ensure that there would be loans available for Malays to afford both public and private higher education so that the targeted ethnic composition of enrolment in higher education is maintained.
THE DEBATE TOWARDS GOVERNMENT SUBSIDY:
When the government is in the business of handing out money, interest groups lobby to get it, or advocate receiving more than they are already getting. So, it is with spending on higher education. Over the long run, the funding for those areas has increased dramatically. Taxpayers should be skeptical of the current reasons for subsidizing universities further. There are few arguments are dubious for five main reasons stated below in regards with government subsidy related to university fees. It can be elaborate and debate as the following:
There is no link between higher education subsidies and economic growth, and none between universities or college degrees and job creation. Malaysia has spent a much higher proportion of personal income on federal and state government to support for higher education. States with a higher proportion of university and college graduates do not necessarily grow by adding more college degrees. For now, the country is currently experiencing a rather worrying unemployment especially among young graduates. Excess of the graduates is unable to meet domestic open vacancy in any sector since most of them are experiencing the freezing phase of job vacancy. Thus its shows there are no linkage at all between higher education qualifications with job vacancies. Indirectly it could not keep the country’s economy.
More subsidies equals to more waste. The number of academicians, staff, administrators and service staff at all 20 universities and 6 university colleges increased at a faster rate than full-time equivalent students over the same time period. At the same time, the compensation for the average employees increased too for sure. Colleges set tuition rates relative to supply and demand, but the government subsidies distort this process and inflate the cost. That’s why private universities such as Sunway International College and Lim Kok Wing University which receive no government funding, do a much better job at keeping down the cost of
At the present time the federal government already spends billions of dollars subsidizing universities, whether it is money for Lecturer’s salaries, buildings, or the millions of dollars provided for research. The cost of classes and tuition picks up only small portion of the tab. Aside from that, there are many people who do not deserve or would not make the best of the education provided. Scholarships and government grants are available for people who have worked hard and earned the opportunity, but to hand it over to everyone for free are insane.
When comparing earning power between college graduates and non-graduates, correlation is not causation, and the actual cost of universities or collage matters. Proponents of more funding for higher education almost always cite the same statistic as their main point: Overall, universities and college graduates tend to make more money in their lifetime than those without a degree. But this assumes that the degree caused the higher earnings, rather than the fact that those who complete college are already more likely to be financially successful whether they attend university or not.
The common figure cited is that a college degree is worth MYR1 million over the lifetime of a worker. Besides ignoring the point above, this is a poor exercise in statistics. The number is arrived at by taking the difference between the average pay of a university and college graduate and the average pay of a non-universities and college graduate and multiplying it over a 40-year career.
First, that only tells us what the average is today, not what the actual future earnings are. Second, this assumes that all universities and college degrees have the same value. For example, it assumes that a Bachelor of Arts in art history is the same as a Bachelor of Science in quantum physics. Most significantly, it ignores many important factors: taxes, the real salary data of today’s graduates, the opportunity cost of going to college (how much someone would earn during those years in school), the fact that large proportions of student’s starts school and do not finish, and, most importantly, student loan debt.
Keep in mind that government may be funding someone’s desire to paint or be involved in the arts which do not advance society enough to justify the cost. Perhaps if everyone were taking physics, biology, or computer sciences in order to contribute in a meaningful way post grad it would be a different story. Also the amount of people in college is at the highest it’s ever been. In fact a BA or BS degree is essentially required now for low level jobs and a Masters or Doctorate is needed to advance up the ladder.
Ensuring that everyone has university or college schooling would not enhance the labor market – it would dilute a university degree. The assumption among many is that every career should require a higher education. This belief leads to subsidies for subjects with little practicality in the workforce and areas where a student may be better off doing an apprenticeship or working for four years than attending more school. Pushing for everyone to go to universities or college does not automatically make those students university-ready; it lowers the overall standards of higher education. This has led to a high dropout rate, more repeated classes for those in school and an explosion of marginal subjects in which many degree-holders are forced to work outside that field because of a lack of demand. In short, incentivizing degrees students do not ever use.
Higher education may be the next bubble to burst. Much like the housing bubble, higher education is fueled by government subsidies, publicly-backed loans and incentives that say everyone should be doing something. Lately tuition costs have risen steeply well above inflation while colleges compete to expand into areas outside of their main purpose and taking on more debt to do so. At the same time, competition from other sectors, like online education, offer cheaper alternatives to the bread-and-butter of university academia.
It is important for citizens to be educated, both to learn a job and to better be able to respond to a changing marketplace. But there is a difference between education and schooling. Spending more money to send people to get a specific number of degrees at a specific institution is different from education. Education comes in the form of apprenticeships, trade schools and time on the job learning.
And education is something you can’t force on someone else. Just putting someone in college does make force them to learn anything. Education is a personal matter, and more subsidies will only influence a person’s decision to learn or not to learn at the barest of margins. Higher education can build new skills, enhance old ones and show prospective employers that students are able to put in the time to earn a degree. But the value of a degree varies — by the institution, the cost, the time and the subject.
From an individual’s perspective, private universities and colleges may be worth the cost. But for a growing number, it’s not. And government subsidies, where political incentives trump market realities, only worsen that problem
Education issues remain an important priority in developing countries. Because resources are limited and ensuring adequate allocation is a struggle for many countries including Malaysia itself. The delivery of educational services has become a challenge. Malaysia, like other countries in Southeast Asia, faces similar challenges in ensuring the allocation of appropriate funding for efficient and equitable educational services in order to promote access to quality education for all social groups.
While Malaysia faces many challenges amid rapid global chances, we can draw on a number of strengths and unique advantages as we take purposeful policy actions to move forward. Education is not preparation for life; education is a life by itself. From the job market to tertiary education, from UPSR to A-Levels, Education in Malaysia focuses on bringing us the latest news and analysis on our nation’s best bet on the future.
The future earnings of the individual typically constitute an adequate return on the gross investment in obtaining higher education. Moreover, providing subsidy university and college education to all is a rather inefficient way to serve the interest of poor students since a large proportion of students who acquire higher education come from relatively well-off families.
Raising demand for higher education and the need to produce a critical mass of highly educated and skilled workers for a knowledge economy has led to the massification of Malaysian higher education. However, escalating higher public education expenditure led the government to adopt a cost sharing system where students and parents shoulder and increasing share of the cost for acquiring a higher education.