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Analysis shows that attending university pays dividends later in life

As the world emerges from the global economic crisis, demand for university education will be higher than ever, says Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development (OECD).

“To the extent that institutions are able to respond, investments in human capital will contribute to recovery,” he adds.

Growing advantages for the better educated and likely continuing high levels of unemployment as economies move out of the recession will provide more and more young people with strong incentives to continue educating themselves.

Governments need to take account of this in planning education policies.

OECD analysis shows that attending university pays dividends in later life through higher salaries, better health and less vulnerability to unemployment. In most countries, the difference in pay levels between people who have degrees and people who do not, is continuing to grow.

The numbers involved in the jobs crisis that resulted from the international recession from the fourth quarter of 2008 to the third quarter of 2009, are staggering. From a 25-year low at 5.6% in 2007, the OECD unemployment rate had risen to a post-war high of 8.5% in July 2009, corresponding to an increase of more than 15 million unemployed.

The OECD believes, however, that higher education could be a long-term answer.

It also calculated the return on investment in education by balancing the costs of education and of foregone earning against prospects for increased future earnings as a result of higher education attainment.

According to these calculations, said Gurría, a male student who completes a university degree can look forward to a gross earnings premium over his lifetime of more than $186 000 on average across OECD countries, compared with someone who only completes secondary school.

For a woman, the figure is lower, reflecting the disparity in most countries between male and female earnings, but it still averages out at just over $134 000. The highest earnings advantages are in the United States, where a male graduate can expect to earn more than $367 000 extra over his lifetime, and a female graduate more than $229 000. Italy comes second for men, with an average lifetime earnings advantage of just over $322 000; and Portugal for women, with an average advantage of nearly $220 000.

And the benefits do not stop there

Government budgets and the overall economy also reap an advantage from higher numbers of graduates, the OECD figures show.

The average net public return across OECD countries from providing a male student with a university education, after factoring in all the direct and indirect costs, is almost $52 000, nearly twice the average amount of money originally invested.

For female students, the average net public return is lower because of their lower subsequent earnings. But overall, the figures provide a powerful incentive to expand higher education in most countries through both public and private financing.

Gurría also revealed that the number of people with university degrees or other tertiary qualifications has risen on average in OECD countries by 4.5% each year between 1998 and 2006. In Ireland, Poland, Portugal, Spain and Turkey, the increase has been 7% per year or more.

In 2007, one in three people in OECD countries aged between 25 and 34 years had a tertiary level qualification. In Canada, Japan and Korea, the ratio was one in two.

In most countries, the number of people who leave school at the minimum leaving age is falling, but in Germany, Japan, Mexico, Poland, Turkey and the US, their numbers continue to rise.

Early childhood education is growing fast, and nowhere more than in Sweden. On average in OECD countries, enrolments have risen from 40% of three- to four-year olds in 1998 to 71% in 2007; and in Turkey, Mexico, Korea, Poland, Sweden, Switzerland and Germany, enrolment in early childhood education more than doubled.

Young people who leave school at the minimum leaving age without a job are likely to spend a long time out of work. In most countries, over half of low-qualified unemployed 25- to 34-year olds are long-term unemployed.

People who complete a high-school education tend to enjoy better health than those who quit at the minimum leaving age.

And people with university degrees are more interested in politics and more trusting of other people.

South Africa and the OECD

Countries that form part of the OECD spent 6.1% of their gross domestic product on education.

South Africa is not one of the 30 member countries of the OECD, yet a level of co-operation exists between the OECD and South Africa.

In 2007 South Africa spent R105.5 billion, or just more than 5% of GDP, on education. That amount is currently R110bn per year.

Where South Africa’s expenditure on education is just more than 5% of its GDP, that of Poland is 5.6%, and that of Brazil is 4.1%.

In spite of South Africa’s significant investment in education, it has not yielded the desired results. According to a paper delivered in February this year by Koena Moloto, acting chairperson of the Portfolio Committee on Finance, education expenditure as a percentage of GDP is well above the world average and has remained that way for a number of years.

The problem, the chairperson maintained, is not the amount of money spent but the outcomes of our education system.

South Africa’s disappointing educational performance

In all international tests of South African learners, such as the Progress in International Reading Literacy Study and Trends in International Mathematics and Science Study, South African learners come last.

African countries that spend much less than South Africa, such as Botswana and Ghana, come ahead of South African learners.

Moreover, when comparing the results of high school finishers across 19 emerging market economies, South Africa comes second last.

The question is, why? And what can South Africa do to change that?

Negative role of labour unions

Professor Theuns Eloff, chairperson of Higher Education South Africa (HESA), told Achiever that the problem is not the amount of money South Africa invests in education.

“My information is that we spend more than 20% of GDP on education – that includes expenditure on basic education, further education and training and higher education.

“Especially the expenditure on basic education is high, but does not yield the desired outcomes. Our average expenditure on higher education is slightly below that of other comparable countries, but it has increased in the last few years,” he said.

“Our school system suffers from many ailments, among them the negative role played by the labour unions (especially SADTU), the loss of a teaching and learning culture in most of our schools, the preparedness of teachers to teach the new outcomes-based education system, and lack of facilities (including the availability of books),” added Eloff.

The recent study conducted by HESA showed that levels of language and mathematical literacy of school-leavers are very low.

The resolve by the new Minster of Basic Education Angie Motshekga to return to the basics, is a good start on the way to recovery, said Prof. Eloff.

A lack of FET colleges

Eloff told Achiever that whether the country invests enough energy to encourage young people to resume study after school, is debatable.

The problem is that too many learners who do not qualify academically want to go to university, and too few want to go to Further Education and Training (FET) colleges.

Minister of Higher Education and Training Blade Nzimande resolved to increase the number of FET students to one million by 2012, from the current 400 000.

International best practice is to have five times as many FET students as higher education students.

With 800 000 higher education students, South Africa should boast four million FET students. But the current 50 FET colleges cannot carry this burden, even if we had the numbers. That means that serious investment in the FET sector is necessary.

The need to invest in human resources

Prof. Eloff says it is clear that South Africa is in dire need of more young people in a post-secondary system.

The reality is that neither universities nor FET colleges can absorb many more without substantial investment by the government.

The problem is that even if South Africa possessed the investment in infrastructure, it does not have the human resources to run more and larger universities and/or FET colleges. Investment in human resources takes longer and is more difficult to show quick results.

People get an education, and then leave for better paying jobs. This is a vicious cycle that South Africa has not been able to break, said Prof. Eloff in the interview with Achiever.

The vicious cycle caused by poverty

The Matric pass rate of South Africa was 62.5% in 2008, but it paints an incomplete picture. This is due to the high dropout rate from Grade 11 to Grade 12.

Of the 920 716 learners who were in Grade 11 in 2007, only 333 681 advanced to Grade 12 in 2008 and passed their exams.

This signifies that only 36%, just over a third, of all learners who were in Grade 11 in 2007 completed their Matric in 2008. (Source: The Municipal Outreach Project, January 2009)

The main reason learners give for not completing their Matric is the inability to pay fees.

Poverty remains a major factor in decisions to leave school, as children from poor families and communities are required to have an income in order to supplement the household income.

With over 10 million South Africans living on less than R250 per month, poverty remains a hurdle in South Africa’s socio-economic development. (Source: The Municipal Outreach Project, January 2009)

Back to the OECD message about tertiary education, and pass rates

In South Africa, the jobless rate increased to 24.5% of the labour force in the third quarter of 2009, from 23.6% in the second quarter.

In its latest quarterly, Labour Force Survey, Statistics South Africa said the total number of unemployed people stood at 4.192 million in the three months to September.

Stats SA said the number of employed people fell by 484 000 to 12 885 million.

Unemployment among young South Africans is hovering at 30%, shooting up to over 60% for youths in their late teens and early 20s.

According to a 2008 report by the Centre for Development and Enterprise, a conservative think tank that researches the effect of poverty and unemployment on South Africa’s economic growth rate, 65% of the four million youths between 15 and 24 who were available for a job in 2005, were unemployed.

Pre-recession figures by the state-owned Human Sciences Research Council furthermore show that about 30% of youths between the ages of 25 and 34 years are jobless.

Low education levels form part of the problem. Recent statistics by a Cape Town-based consumer research agency, Eighty20, show that almost two-thirds of South African adults did not have a high school diploma in 2005. In that same year, only 8.4% of the population was in possession of a tertiary qualification.

Government statistics further show that 24% of South Africans older than 25 are illiterate.

“This crisis is growing, as many youngsters are not in school, drop out or do not have some sort of a degree,” said Mike Abrahams, programme co-ordinator at Change Moves, a development and training co-operative that offers training, capacity building and management services. (Source: Inter Press Services, 2009)

Research by the Development Policy Research Unit in the University of Cape Town’s School of Economics found that unemployment among graduates grew from 6.6% in 1995 to 9.7% in 2005.

Yet, a policy brief published in September 2005 added that graduate unemployment remained low relative to overall unemployment, with graduates comprising only 2.6% of the jobless South Africans.

Gurría said that lifelong training and education is more important than ever before and education policies should make provision for enough advanced educational systems for older adults who have to acquire new skills.

According to Gurría, programmes for advanced training and education are often designed to compensate for shortages and initial education systems.

Fanie Heyns

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