Overview of Higher Education Trends: Returns and Financing Highlights from EAG 2014

1. Overview of Higher Education Trends: Returns and FinancingHighlights from EAG 2014 29 September 2014 Patricia Mangeol OECD HigherEducation Programme Directorate for Education and Skills

2. Key Questions on OECD Trends • Higher education attainment and returns • What is the relationship between HE and Skills? • Is higher education still a strong protection against unemployment? • What are some of the non-financial returns? • Financing higher education • How much do countries spend per student across the OECD and who pays? • How have funding models and student aid systems evolved? • Impact of the crisis and key challenges: • Impact of crisis on returns and financing • How to make HE high quality and relevant to the labour market, while maintaining affordability and expanding access?

3. The Rate of People with HE Still Rises 25-34 and 55-64 year-olds with tertiary education, and percentage-point difference between these groups

4. Educational Upward Mobility in Many Countries – With Large Variations Percentage of 25-64 year-old non-students whose educational attainment is higher than (upward mobility) or lower than (downward mobility)

5. But Mobility Did Not Trickle Down to the Disadvantaged Percentage of 20-34 year-olds in tertiary education, by parental attainment (2012) Parents with tertiary education

6. HE aND SKILLS

7. HE and Skills: A Rocky Relationship Mean literacy score, by educational attainment (2012)

8. Proportions of Highly Literate, Tertiary Educated Adults Vary Across Countries Percentage of adults scoring at literacy proficiency Level 4/5 in the Survey of Adult Skills, by educational attainment (2012)

9. And Skill Levels Matter for Earnings, Even Within the Same Education Level Mean monthly earnings, by educational attainment and literacy proficiency level – Average Level 4 or 5 Level 3 Level 2 Level 1 or below Chart A6.4 – EAG 2014

10. RETURNS TO HIGHER EDUCATION: RECENT FINDINGS

11. Individuals with HE Have Higher Employment Rates … Chart A5.1 – EAG 2014

12. ... And Higher Earnings Relative earnings, by educational attainment and gender (2012); upper secondary education = 100

13. Individuals with HE Have Better Social Outcomes/ Enjoy Better Quality of Life Proportion of adults reporting that they believe they have a say in government Proportion of adults reporting that they are in good health Proportion of adults reporting that they volunteer at least once a month Proportion of adults reporting that they can trust others Chart A8.1 – EAG 2014

14. Returns to HE: Is the Investment Worth It? Man with HE, compared with returns from upp sec or post-sec. non-tertiary Chart A7.1 – EAG 2014

15. Returns to HE: What to Keep in Mind • Net public and private returns increase with the level of education, both for individuals and the public • “Net present value”: complex calculation and caution needed • Social outcomes are not included – hard to measure but important • No distinction along key aspects like field of study • Contextual factors have an impact (local employment regulations, tax systems, etc) • But useful to have a broad picture and take into account both the direct and indirect costs and benefits of HE E.g. foregone earnings, foregone tax revenues for government, but also lesser social transfers • The question of a potential “oversupply” of HE educated people on returns – no clear answer

16. HE FINANCING TRENDS

17. State of HE Funding: Per Student Expenditures Annual expenditure per student by educational institutions for all services, tertiary education (2011) Chart B1.2a– EAG 2014

18. State of HE Funding: Cumulative Expenditures (Over Duration of Studies) Cumulative expenditure per student by educational institutions over the average duration of tertiary studies (2011) Chart B1.4– EAG 2014

19. Annual Spending Per Student and Rate of Change Between 2005 and 2011 Chart B1.5– EAG 2014

20. State of Financing: Private Expenditures Represent a Larger Share… Share of private expenditure on tertiary educational institutions (2000, 2008 and 2011) Chart B3.3 – EAG 2014

21. … But With Large Differences in Recent Patterns Across Countries Change (in percentage points) in the proportion of private expenditure between 2000 and 2011 Chart B3.3 – EAG 2014

22. Fees and Student Aid – Select OECD Countries • Relationship between: • average tuition fees charged by public institutions and • proportion of students who benefit from public institutions and proportion of students who benefit from public loans and/or scholarships/grants in tertiary-type A education (2011) For full-time national students, in USD converted using PPPs for GDP, academic year 2010/11 Chart B5.1– EAG 2014

23. Financing Models and Access in Select OECD Countries: What Interactions?

24. Issues for Ireland Ireland is not easy to fit into the four models: tuition fees were abolished but the “student charge” represents an increasing cost to the individual Any increase in student charge / tuition fees should be accompanied by the development of robust student aid systems

25. RECENT TRENDS AND IMPACT OF THE CRISIS

26. People Without an Upper Secondary Education Face A Rising Unemployment Risk Unemployment rates 25-64 year-olds, by educational attainment – below upper secondary education %

27. Those with an Upper Secondary Education Are Not Immune to Unemployment Unemployment rates 25-64 year-olds, by educational attainment – upper secondary education or post-secondary non-tertiary education

28. While People with Tertiary Education Still Have a Low Risk of Being Unemployed Unemployment rates 25-64 year-olds, by educational attainment – tertiary education

29. Impact of Crisis on Unemployment Rates – Cont’d • HE-educated individuals have lower unemployment rates throughout the period • In some countries, including Ireland and Southern and Eastern Europe, tertiary-educated people have been hit hard – but UR have increased across all education levels • Factors leading to unemployment of HE-educated people are complex • Supply side: potential oversupply in some fields, relevance of degrees to labour market, variations in skill level • But also demand side: economic restructuring and destruction of jobs, features of national labour market (e.g. minimum wage, hiring/firing rules, etc)

30. Evolution of Earnings – Widening Gap Trends in relative earnings of workers, by educational attainment, in 2005 and 2012 25-64 year-olds with income from employment; upper secondary education = 100 Table A6.2a EAG 2014

31. Moderate Cuts in Educational Funding So Far Despite GDP Declining Impact of the economic crisis on public expenditure on education 2008-2011 Chart B2.3 – EAG 2014

32. But in Some Countries Funding Per Student in HE Has Not Kept Pace with Enrolments Change in expenditure per student by educational institutions, tertiary education (2008, 2011) Chart B1.6 – EAG 2014

33. The Crisis Has Revealed Some Weaknesses of HE High employment rates and earnings signal a strong need for highly-qualified people – and a highly qualified population is important for long-term growth But in some countries the unemployment rate for tertiary-educated people has increased substantially HE needs to meet the needs of the labour market and be responsive to structural economic shifts  e.g., need for HE to prepare for 21st century skills, new forms of work like entrepreneurship, etc.

34. Implications for HEIs • Traditional funding schemes are under pressure – need for more effective business models. • Clarify and enhance value proposition of HEIs in a globally competitive environment • Identify cost-reducing/ cost-stabilising strategies where possible • Seek alternative revenues – while recognising limitations of those relying mostly on cost-sharing • Promote quality in a constrained environment • Range of methods to promote quality teaching and learning – outcomes of IMHE teaching quality reviews 2012 • Funding research excellence: combining funding approaches to promote competitiveness while maintaining diversity

35. Thank you www.oecd.org/edu/imhe Patricia.Mangeol@oecd.org