[Free Speech Forum] Cheap Tuition Produces Cheap Talent

In 2023, I saw news reports saying that undergraduate tuition at Seoul National University and other major universities had been frozen for the 15th consecutive year. Thinking about it, my own tuition had not increased since I entered university. In fact, universities want to raise tuition in line with inflation, but they say they are suffering financial losses because of the government’s tuition regulations.

There are two legal mechanisms that regulate tuition increases at universities. First, there is the “statutory ceiling” system stipulated in the Higher Education Act. Under this system, the rate of tuition increase is capped based on 1.5 times the average consumer price inflation rate over the most recent three years. This year, the statutory ceiling is 4.05%, meaning each university may raise tuition by up to 4.05%.

The government has also introduced the “National Scholarship II regulation.” Since 2012, the government has provided National Scholarship II only to universities that have frozen or lowered tuition and that have maintained or expanded on-campus scholarships. In other words, if a university raises tuition, it becomes ineligible for National Scholarship II. Although tuition increases are legally permitted, this is in practice the most important reason universities are unable to raise tuition.

Because of the government’s tuition regulations, universities have been unable to raise faculty and staff wages. With personnel costs constrained, they cannot increase salaries, and opposition from faculty and staff has been intense. In addition, universities reportedly have difficulty recruiting professors and lecturers who specialize in research related to the Fourth Industrial Revolution.

Investment in facilities and research is also being constrained. Most training equipment and educational facilities have become outdated, but with prices rising, replacing them is not easy. In the end, cuts in universities’ educational investment lead to a decline in educational quality.

From an economic perspective, when the government controls prices, the quality of goods and services can decline. Under tuition regulation, universities have little choice but to provide lower-quality educational services in order to reduce deficits. This produces a result contrary to the government’s policy intention of offering high-quality education at low tuition.

Tuition accounts for 53.5% of revenue at private universities in Korea, more than half of their total income, but because their revenue structures are not diversified, worsening financial difficulties have become a serious problem. As time passes, university enrollment will decline due to low birth rates, while high inflation and high interest rates will further worsen university finances. The Ministry of Education is regulating universities’ financial structure while at the same time demanding high-quality education from them—an ironic situation.

Because of the government’s tuition regulations, universities have been placed in a position where they cannot raise tuition. Students and parents may benefit in the short term from paying low tuition, but from a medium- to long-term perspective, students who pay cheap tuition will receive low-quality education and graduate as globally uncompetitive talent. The government’s tuition regulations will ultimately harm students and parents. The government should allow universities to determine their own tuition increases autonomously.

Taegyu Noh

Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 값싼 등록금은 값싼 인재를 양성한다

Author: Tae-gyu Noh

Date: 2023-02-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25406