Wednesday 13 October 2010

Portuguese Higher Education in a British Mirror

Figure 1

The UK received this week, not without some trepidation, the conclusions from the so-called Browne report on higher education and student finance in England. As was long expected, the review committee recommended an end to the cap on university fees, currently £3,290 per year (€3,800). The report suggests that different universities should charge different fees and, in particular, that world-class institutions should be allowed to charge much higher fees from their students, possibly above £12,000 (€13,800) per year. The report justifies this proposal for increased private contributions as a necessary means “to support high quality provision and allow the sector to grow to meet qualified demand.” The current budget crunch added to the urgency of these conclusions, as the country braces itself for the comprehensive spending review due next week. Today’s newspapers rumoured that the government is set to cut up to 80% of the public funding of university teaching, which would leave UK universities in serious financial strictures.

Earlier in the year, the results of the university admission exercise revealed that more than 150,000 applicants would not get a place, out of a total of 660,000. In the face of such excess demand for university places, elementary economics would suggest that some price rationing was in order. Some politicians, parents’ and students’ representatives have contended that a fee hike would unfairly saddle students with a heavy debt burden at the beginning of their working lives. Furthermore, fees of £12,000 or more would surely dissuade bright or otherwise aspiring pupils with an underprivileged background from applying at all.

The authors of the report disagree and take particular pains at arguing how this dissuasion effect can be avoided. One of the reasons is that graduates can pay more for their education. How much more? The authors rightly leave that to the market, while noting that “compared to other countries, high numbers of students in England complete their degrees and go on to employment with an earnings premium that is high by international standards.” This “earnings premium” is measured as the net benefit (in lifetime earnings) from completing a degree over the expected life-long remuneration of an individual who enters the job market with a high-school diploma. According to the data in Figure 1, this premium in the UK stands at slightly above 200,000 US dollars (€150,000) for a male with higher education. This is a third higher than the OECD average.

We all know the debate, as it has been rehearsed several times in Portugal since 1992. What I found interesting in the report was the oblique reference to Portugal as an outlier in the context of OECD countries. Portuguese university graduates have a staggering relative advantage over their non-degree holding competitors in the labour market. We currently lead the OECD in both net and in gross benefits from higher education. A university education is worth today €265,000 in Portugal, fully 2.5 times the OECD average.

This is clearly not a matter to be proud of. As a university lecturer myself, I refrain from commenting on what a fee hike from the current €920 could represent for the quality and growth of Portuguese universities. But I cannot but see the connection between a very high “earnings premium” and the low fraction of the population that has attained a university degree (Figure 2). Contrary to a contemporary current of opinion, there may not be “too many graduates” looking for inexistent jobs, but too few.

Figure 2

And here is another connection. A very interesting book recently singled out Portugal as an outlier, again for the wrong reasons. The authors of The Spirit Level notice that by level of income inequality, Portugal comes second among OECD economies, just after the USA... Most economists will agree that access to education is a powerful equalizer of opportunities, and that, vice-versa, a restrictive university system is a certain way of perpetuating income (and social) inequalities, particularly in our current skills-intensive model of economic growth. How one may go about increasing access to tertiary education is another question (namely in terms of how to split the cost between the state and the students), but the weight of evidence about the consequences of not doing so cannot be ignored.


  1. One thing that typicallu is missing in this statistics, is the value of higher education AFTER controlling for other explanatory variables.
    I do not claim that Portugal would be in a different position in the ranking, but this value of tje benefit from higher education is almost meaningless.
    I would say that place of birth, education level of the parents, etc. would be rather influential in the Portuguese case.

  2. I am a Portuguese student doing my undergraduate studies in Scotland. The government of Scotland pays the tuition fees of all the scottish students and EU students, so basically I am getting free brithish higher education, which is quite remarkable. Interesntingly, english students have to pay fees. I am just saying this because it is an interesting case study how Scotland invest in higher eduaction. Obviously now, there are already rumours, that the University is going to run out of money in three years due to a cut in the University's budget by the government of up to 1 quarter. The strategy is to increase the number of fee-paying students, such as non-EU students, which pay much higher fees and such.. But still it is great to have the fees payed, because then there is no excuse to not go to University,

  3. I was at a conference in Porto the other day, where I've heard that the Northern Portugal Regional Health Administration recently opened dozens of vacancies in Northern Portugal primary health care centres for physiotherapists, psychologists and other types of health care professionals, and less than half of the slots were filled. Is this a sign of lack of qualified professionals in Portugal?

  4. «Portuguese university graduates have a staggering relative advantage over their non-degree holding competitors in the labour market. We currently lead the OECD in both net and in gross benefits from higher education. A university education is worth today €265,000 in Portugal, fully 2.5 times the OECD average. (...) Contrary to a contemporary current of opinion, there may not be “too many graduates” looking for inexistent jobs, but too few.»

    This may be irrelevant, but speaking as a graduate who never intended to work in Portugal and knowing that 20%+ of Portuguese graduates (2005 data, now it's probably quite more than that) end up working abroad, isn't it possible that the net value of Portuguese higher education is so high because graduates have a tendency to move to countries with higher salaries such as the UK?

    It might be the case that the diagram is drawn using data for graduates who actually remain within the countries where they studied, in which case my objection doesn't make sense. Nonetheless, it would explain why Portugal, the Czech Republic, Poland and Hungary lead the table, as all of these are the poorest among the countries analysed, and, unlike Turkey, graduates can freely move within the EU. If this explanation is correct, it could also explain why the net value of a Portuguese higher education is so high and, simultaneously, be consistent with a saturated graduate market at home.

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