14 July, 2016
Dorothee Stapelfeldt, senator for science in Hamburg, states “Tuition fees are socially unjust” and that “they particularly discourage young people who do not have a traditional academic family background from taking up studies.”
Germany, in 2006, lifted a universal ban on tuition and fees, which resulted to the charging of tuition in seven states. This decision fully retracted that earlier ban.
According to the Organisation of Economic Co-operation and Development (OECD) Germany has the second highest income tax burden of all OECD’s 34 countries. Of course this is not surprising considering Germany is the father of “Sozialstaat” or in English “Social State” founded in 1870 under Then Chancellor Bismarck’s reforms.
Add on more state subsidies to keep higher education free, and the 2012 tax burden figure of 49.8 percent of income is sure to increase.
There Is No Such Thing As A Free Lunch. And there is also No Such Thing As A Free Higher Education (TINSTAAFHE). Higher education, especially in science-heavy Germany, is incredibly expensive to run and maintain. In a typical economic model for financing higher education, the consumer (student) would pay for the good that it consumes (education) and the research that researchers do would lead to innovations that have positive economic impact on society, therefore paying for themselves.
We have departed from this free market, “sustainable,” model globally, and depend heavily on federal subsidies to keep universities afloat. CCAP has argued that these federal monies have largely led to increases in the cost of higher education, which has over time compounded, translating into higher tuition fees. It is clear in the United States, with annual tuition fees in the $40,000s or $50,000s and wealthy university presidents, that federal subsidies have led to outrageous increases in university spending, as universities, administrators, and faculty enjoy the benefits of captured student loan and grant moneys.
Sooner or later this “free” higher education will feel less and less free as increasing taxes will likely drive the most educated, highest earning, most able Germans away from Germany and into societies where they can take home a greater percentage of their pay. This will then decrease the tax cache and start to decrease the deficit more than the added tax revenues from a more professional society will add to them.
Nationalistic pride is historically important, and they recently won the World Cup in “Fußball.” It is noteworthy that Germany has had its highest net immigration in recent years, though migration away from Germany was up 11 percent in 2013 over 2012.
Third Party Payments
This lead to many unintentional adverse consequences. Recently, the Association of American Physicians and Surgeons asserted that the third-party payment system is key to the increasing cost of health care. The same can be said about any industry that the consumer is not directly paying for the good consumed, including higher education.
The problem arises from the “Moral Hazard” linked with not paying for services. Because students are not sensitive to the costs associated with an additional year of higher education they will consume more of it. Progressive politicians may consider more higher education consumed a good thing, but I’m not talking about more students but the same students taking longer to finish.
The United States has seen the rise of the five year degree. Of the 60% of students who graduate from public schools in the U.S., over half take longer than four years to graduate. Compare that with private institutions (there are natural differences in students at each type of school that pay a role) which see 80 percent of its graduates out in four years. Their sensitivity to the marginal cost of that fifth or sixth year factors into their decision to consume.
If everyone decided to take an extra year to graduate, because it was free, the burden of higher education on the public funds would increase by 33% (if they took four as opposed to the European norm of three years to finish). Graduation rates are already an issue in Germany, which is known for its “Dauerstudenten” or “eternal students.” As The Local reports, German students fail to graduate on time, and the average graduation age (following master’s degree) is around 28 years old.
Third-party payments can reduce academic quality. Students, less sensitive to costs, are less likely to hold a university accountable for an education that they aren’t paying for. Again we can look to the United States education system as an example: Public K-12 education has been criticized for its declining standards and educational outcomes, while the private K-12 system continues to flourish.