It is often argued that because higher education unit costs are much greater than those at secondary and primary level there is scope in many developing countries to shift educational investment downwards. There are several elements to this argument.
Taking Sub Saharan Africa as an example Table 2 (Section 1.1) shows that in 1988 the ratio of primary: secondary: higher education costs was 1:3.6:31.8 (based on expenditure per student as a percentage of GNP per capita). There is a wide dispersion from the mean in different countries such that in some higher education unit costs are more than 50 times those at primary. Table 3 (Section 1.1) shows that higher education enrolments consistently grew faster than those at the first level (4.5 times faster over the period 198088 (UNESCO 1991:98)). Thus for every additional place in higher education an extra class of primary school children could have been financed. Moreover the proportion of total public educational spending allocated to higher education in low income Sub Saharan African countries averaged about 20% in the mid 1980's (World Bank 1988:140) though enrolments at this level accounted for less than 1%, of total enrolments at primary and secondary level. The beneficiaries of higher education are disproportionately drawn from relatively high income groups, since children from these backgrounds have the highest survival rates through secondary schooling and are more likely to reach high levels of academic achievement. Rates of return to education in low income countries tend to be higher for primary than higher education the mean rates of return for primary, secondary and higher education respectively have been calculated as 26:17:12 for social rates of return and 40:20:32 for private rates of return in 12 Sub Saharan African countries (Haddad et al 1991:7). Taken together these observations seem to present a strong case in favour of more educational investment at lower levels and less subsidy of higher education from the public budget.
Further examination of this issue suggests that the case is not so dear cut. First, it is reasonable to argue that some higher education is needed in all countries to meet high level human resource needs.
In many Sub Saharan African countries there remains a chronic shortage of competent degree level personnel, evidenced not least by the slow progress of many localisation programmes and the difficulties of recruitment for industrial concerns and in the public sector. Second, it may be the case that the problem is at least as much one of pervasive inefficiency and marginal relevance in higher education investment as it is one of over- investment. Though there is very little evidence on declining quality in higher education and few studies have taken place (King 1991) there is widespread disquiet about the orientation and effectiveness of higher education, especially in Africa (Bown 1992, Mazrui 1992).
Third, it is to be expected that, in those countries which are approaching universal enrolments at primary levels, the percentage of the budget allocated to higher levels will grow as a result of increased post-primary provision. Of more concern are those cases where changes in unit costs disproportionately favour higher education. In Sub-Saharan Africa recurrent unit costs fell at primary and secondary level in the early 1980's, but appeared to increase for higher education. Median values in constant 1983 USS fell from 67 to 48 at primary level; 362 to 223 at secondary; and rose from 2,462 to 2,710 at tertiary level over the period from 1970-1983. These aggregate figures require cautious interpretation since the number of countries for which data are available differ at each educational level (World Bank 1988:141-3). Since 1983 the financial position of higher education has probably worsened substantially and the trend may have been reversed. Where structural adjustment has taken place this has often sought to limit the growth of higher education subsidies though success in achieving this has been mixed. It is probably a minority of countries that have actually seen higher education as a whole grow more slowly than other levels. This has usually been where there has been a strong policy preference in this direction e.g. in Malawi and Tanzania which have deliberately limited the supply of post primary places and have resisted the pressures of excess demand, at least in so far as the publicly financed elements of the system are concerned.
Fourth, data on rates return and the conclusions that can be drawn from it has to be treated with caution for many well known reasons which have long been discussed in the literature (Hough 1992). The rates quoted above are historic rates many of which are based on relatively small samples taken more than a decade ago and which contain assumptions that may no longer be robust. Distortions in income patterns, related to structural characteristics of the labour market which may under or over value the contributions to production of different groups of workers, are also common and make reliable calculation difficult. There are apparently some consistent patterns that show, for example that the differences in rates of return between levels do tend to collapse over time as development takes place. This is almost inevitable. As more individuals acquire a particular level of education the marginal value is likely to decrease and "wage compression is likely to occur (Knight and Sabot 1990).
Fifth, it is debatable how significant reducing subsidies to higher education might be. Mingat and Tan (1985) have made attempts to measure the resources which would be released by reducing or eliminating subsidies at higher levels. Their study indicates that the scope for this tends to be greater in Francophone Sub-Saharan African countries where unit cost differences are greatest. Using data from 10 countries (8 of which are Francophone) they argue that 10% reductions in higher education subsidies would permit about 2% increase in primary enrolments. Similar changes at secondary level would support an increase of 1.6% in primary enrolments at the current unit cost levels. It is only when large reductions in subsidy and high levels of recovery of operating costs are introduced that substantial enrolment gains become possible at primary. Thus if higher education student subsidies were cut completely, Gross Enrolment Rates [GER] at primary could be improved by up to 18 points in some cases, though the average is much less than this. Removal of all subsidies at higher and secondary level and 100% cost recovery in higher education fails on its own to release enough resources for universalising primary in most of the countries studied. Part of the reason is that the countries with the smallest current primary enrolment levels also have the smallest absolute enrolments in higher education and therefore the lowest amounts of subsidy which can be transferred. Since unit cost ratios are much lower outside Africa the impact of subsidy withdrawal elsewhere is potentially less. This situation would change if higher education continued to experience the highest growth rates and pre-empt more and more of the public budget.
Despite Mingat and Tan's analysis it should be remembered that worthwhile transfers are possible. In a system which spends 20% of its finance on 1% of the cohort at tertiary level a reduction in the length of higher education by one year from say four to three (and/or by combining some income earning work experience with study to achieve the same effect), or by increasing student teacher ratios by 25% (these were estimated to be around 11:1 in 1983 in low income Sub Saharan Africa) could release about 4% of the total education budget. This could represent as much as a 10% increase in primary expenditures and enrolments. There are some examples where transfers of this kind are being pursued (e.g. in Senegal and Ghana (Colclough with Lewin 1993).
A further dimension of the question of balance between investments at different levels relates to secondary education costs. As primary GERs increase the cost burden of secondary provision will increase if transition ratios from primary to secondary are kept constant. Historically, transition ratios in most systems have grown as primary has expanded thus tending to increase the proportion of total expenditure allocated to secondary education. Secondary costs may grow at a multiple of increases experienced during primary expansion since unit costs are typically about four times greater at secondary. It then becomes at least as urgent a financial priority to examine efficiency related reforms at secondary level that can reduce unit costs if heavy skews in favour of secondary are not to emerge.
The implications of this brief analysis are that in some developing countries a case can be sustained that it would be both more efficient and more equitable to shift some level of public subsidy from higher education to lower levels. This is most likely to be the case where unit cost differentials between educational levels are high, the labour market shows signs of saturation for particular types of graduates, where primary enrolment ratios are low suggesting that a large proportion of the population has little access to any education, and where progressive taxation measures are weak.
There are a number of possible policy options where such conditions pertain. Which are the most appropriate ones will depend on particular country circumstances. They include various kinds of efficiency measures to reduce unit costs at higher levels, planned shifts in subsidy to lower levels, and cost recovery mechanisms to capture surplus income and reduce subsidy levels. The balance of arguments regarding the latter, in terms of both equity and efficiency, will depend on the educational level to which they are to be applied and the detailed nature of their specification. Some of the possibilities are discussed in the next section.
