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Higher education, low returns

21 February 2016 - 02:00 By Jabulani Sikhakhane

Many of the young people who have swelled South Africa's higher education system are headed for the boulevard of broken dreams.

This will be the fate not only of the majority who drop out before they complete their studies. Even some of those who stay the course and graduate will find themselves on a lonely road, with only their shadows walking beside them.

If in any doubt, just look at Chile and Colombia. Research in those two Latin American countries shows that two decades of investment in higher education have not been worth the money and the time spent at universities.

The substantial expansion of the higher education systems led to a drop in the quality of the education received. Also, the majority of students, especially those from poor families, studied the wrong subjects because they lacked labour market intelligence about what employers were looking for.

Many young South Africans will face a similar fate. Many are already walking down that boulevard.


The benefits of higher education, according to the Organisation for Economic Co-operation and Development, include increased earnings that people with higher education typically enjoy compared with those without. People with degrees can also face a smaller risk of being unemployed, subject, of course, to them having the kind of qualification most in demand by employers.

The Chilean and Colombian findings explain the student protests in Chile since 2010 and the general university strike in Colombia.

Chile expanded enrolment in higher education from 21% in 1991 to 71% by 2012. In Colombia's case, it rose from 14% in 1991 to 45% by 2012.

These increases in enrolments came about because of increased investment in education by citizens, as well as public policies designed to facilitate access to higher education.

The Chilean government, for example, provided financial support for students. Colombia, on the other hand, increased the geographical spread of higher education institutions. All of this was done in the expectation that these investments would result in significant economic and equity gains.

But evidence points to disappointment. Most painful, perhaps, has been the decline in the economic returns to higher education, a problem that is prevalent across most of Latin America. This, according to a working paper published by the Inter-American Development Bank, could be explained - to some extent - by a worsening in the quality of the education system.

"With increased access, it is possible that institutions and students of lower than marginal quality have entered the system," write economists Carolina González-Velosa, Graciana Rucci, Miguel Sarzosa and Sergio Urzúa in an IDB paper, "Returns to Higher Education in Chile and Colombia". González-Velosa and Rucci are with the IDB; Sarzosa and Urzúa are with the University of Maryland in the US.


The poor quality of higher education has had serious implications for the region's economic growth. Poor education translates into poor-quality workers - or human capital, as economists would say. And poor-quality labour means low productivity. In Chile and Colombia's case, labour productivity has been rising at a snail's pace, despite the dramatic increases in education enrolment.

The productivity and quality of labour are two sources of economic growth. As economist Montek Ahluwalia, the former deputy chairman of India's planning commission, points out, initial development strategies paid insufficient attention to the supply of labour as a determinant of economic growth.

"However, what matters is not the total supply of labour irrespective of skill levels, but the availability of labour with the right skills," Ahluwalia writes in a paper, "Role of Economists in Policy-making", published by the UN University's World Institute for Development Economics Research.

The authors of the IDB study conclude that, for a significant proportion of graduates in Chile and Colombia, higher education has not been worth the investment, both in time and money. It yielded negative economic returns.

The problem of negative economic returns to higher education is most pronounced in the case of Chilean and Colombian students with technical degrees. The study found 51% of Chilean and 59% of Colombian students would have been better off financially without higher education. In both countries, technical programmes tend to attract students from poor homes.


This means the education system has failed the students the expansion of access to higher education was meant to help. They are young people for whom policy mistakes are costlier.

The study calls into question the benefits of the expansion of higher education enrolment without paying attention to raising the quality and relevance of the education.

"There has been a dramatic increase in the access to a system that pledged to improve the economic conditions of those who decided to invest in higher education. Results in this study suggest that, way too often, this promise has not been fulfilled," the authors conclude.

As South Africa seeks to improve access to higher education, policymakers should pay greater attention to quality education - or we will continue to prepare young people for the boulevard of broken dreams where, as lyricists Al Dubin wrote in the '30s, one walks a lonely road, with only one's shadow for company.


Sikhakhane is deputy editor of The Conversation Africa