Chapter 1. Higher education and the wider social and economic context

This chapter describes the wider economic and social context within which higher education systems operate, and the core challenges that higher education systems are facing today.

    

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

1.1. Higher education today

Across the world, countries face challenges related to the economic and social transformations which have come about as a result of globalisation, mass migration, ageing societies and technological development. Higher education is increasingly expected to play a central role in responding to these challenges. A comprehensive OECD review of higher education policy, carried out approximately a decade ago, acknowledged the expanding scope and importance of higher education and the increasing prominence of higher education issues on national policy agendas (OECD, 2008[1]).

Since then, the economic and social context surrounding higher education systems has continued to evolve. The 2007-2008 financial crisis led to a worsening of the economic situation in many OECD countries, while deepening inequalities have created new social divisions. Against this background, higher education systems have continued to grow in scale and scope, on the basis that social and economic benefits attributable to a high-performing higher education system can play a crucial role in both taking advantage of the opportunities and responding to the challenges presented by recent economic and social changes.

Economic success relies on human capital, i.e. “the knowledge, skills, competencies and other attributes embodied in individuals that are relevant to economic activity” (OECD, 1998[2]). Higher education plays a key role in developing high-value knowledge, skills and competencies. Higher education graduates themselves also receive significant economic benefits, such as higher employment rates, higher earnings and faster earnings progression (OECD, 2018[3]).

Moreover, in most OECD countries, higher education is the core provider of basic research, which produces the foundational knowledge required for innovation. The applied research and experimental development carried out by the higher education sector also plays an important role in the production of new technologies.

By providing social and cultural contributions to their communities, higher education institutions can help improve general well-being and produce better social and health outcomes, cultural capital, urban and rural regeneration and environmental sustainability (OECD, 2007[4]). These engagement activities have direct benefits for society by improving general health, welfare, and social cohesion; producing lively cultural surroundings; and supporting a clean and sustainable environment.

Given these economic and social benefits, many countries have invested in expanding their higher education systems in recent years. In 2017, on average across OECD countries, 44% of 25-34 year-olds had obtained a higher education qualification, while nine OECD countries, including Canada, Japan and the United Kingdom, achieved attainment rates of over 50% (Figure 1.1). At the same time, many higher education systems outside the OECD have expanded, particularly in emerging Asian countries such as China and India. As a result, the number of 25-34 year-olds with a tertiary education degree in OECD and G20 countries is expected to grow over the next decades, from 137 million in 2013 to 300 million by 2030 (Figure 1.2) (OECD, 2015[5]).

Figure 1.1. Population with higher education qualifications (2017)
Share by age group
Figure 1.1. Population with higher education qualifications (2017)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Chile: Data refer to 2015.

Source: Adapted from OECD (2018[6]), OECD Education Statistics, http://dx.doi.org/10.1787/edu-data-en; data provided by the Flemish Ministry of Education and Training.

 StatLink https://doi.org/10.1787/888933940132

Figure 1.2. Share of 24-34 year-olds with a tertiary degree across OECD and G20 countries (2013 and 2030)
Figure 1.2. Share of 24-34 year-olds with a tertiary degree across OECD and G20 countries (2013 and 2030)

Note: The figures in these graphs are estimates based on available data. The population estimations are based on the OECD annual population projections.

Source: OECD (2015[5]), "How is the global talent pool changing (2013, 2030)?”, Education Indicators in Focus, No. 31, https://doi.org/10.1787/5js33lf9jk41-en.

The rising demand for higher education has also led to a notable increase in the number and types of higher education institutions worldwide. It is estimated that there are now over 18 000 higher education institutions across over 180 countries offering at least a post-graduate degree or a four-year professional diploma (International Association of Universities, 2018[7]). The diversity of higher education systems today is reflected in different institutional models of higher education institutions, including public, government-dependent private, private for-profit and private non-profit institutions, depending on the national context (see Chapter 2). These different types of institutions may form distinct subsectors in some countries, with disparate governance arrangements.

Higher education also caters to increasingly diverse student populations. The traditional cohort of young upper secondary graduates, who tend to study full-time and on campus, has been increasingly joined by part-time and older students who may be full-time employees or carers. Increased student mobility has resulted in greater numbers of international students on many campuses. These groups have different motivations and learning needs, creating a need for a more diverse and flexible higher education provision. Higher education systems in most jurisdictions therefore face the challenge of responding coherently to the continued increase in demand from a complex student population.

Higher education plays an integral role in globalisation and in the knowledge economy, as it facilitates the flow of people, ideas and knowledge across countries. Higher education therefore acts as an engine for ‘brain circulation’ between countries. The number of international students in higher education has increased from 2 million in 1999 to 5 million in 2016, at an average annual rate of 5% among OECD countries and 6% among non-OECD countries (OECD, 2018[3]). Internationalisation can also be found in other forms, such as staff mobility, transnational branch campuses, joint and double degree programmes between institutions in different countries, international internships and training experiences abroad, franchise and twinning arrangements, online education delivered across the world and global research networks.

Figure 1.3. Higher education expenditure on R&D as a percentage of GDP (2006 and 2016)
Figure 1.3. Higher education expenditure on R&D as a percentage of GDP (2006 and 2016)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Chile: the 2006 data refer to 2007. Australia, Switzerland: the 2016 data refer to 2015. New Zealand: the 2006 and 2016 data refer to 2005 and 2015.

Source: Adapted from OECD (2018[8]), OECD Science, Technology and R&D Statistics https://doi.org/10.1787/strd-data-en.

 StatLink https://doi.org/10.1787/888933940151

Moreover, investment in higher education research and development (HERD) increased in most OECD countries between 2006 and 2016 (Figure 1.3). The number of higher education researchers (full-time equivalent) across OECD countries also increased from around 1 200 000 in 2006 to more than 2 300 000 in 2016 (OECD, 2018[8]) (see Chapter 6).

These trends show the extent of the expansion, diversification and globalisation of the higher education sector in recent years across the OECD. But these changes also raise questions about how well higher education is contributing to societies through education, research and engagement activities. Ultimately, there is increasing pressure to demonstrate that the substantial public and private investment in higher education creates positive economic, social, and cultural returns.

1.2. Economic and social background of OECD higher education systems

Each country faces a distinct set of policy issues related to higher education. The macro-economic situation affects the level of spending on higher education, and has consequences for employment and labour market outcomes. Demographic and social trends also influence the environment in which higher education systems operate, along with broader political processes and macro-institutional factors, often shaped by historical circumstances.

In this section, an overview of some economic and social contextual factors which form the background of higher education systems across the OECD is presented, with a focus on the four participating jurisdictions of the benchmarking project (Estonia, the Flemish Community of Belgium, the Netherlands and Norway).

1.2.1. Higher education and the economic context

OECD economies have largely recovered from the crisis…

Higher education has a role to play in meeting some of the pressing economic challenges faced by OECD countries, many of which are the legacy of the recent global financial and economic crisis. OECD economies have largely recovered from the effects of the crisis, and while more recently economic growth has slowed in many jurisdictions, Gross Domestic Product (GDP) per capita remains close to pre-crisis levels in several countries (Figure 1.4).

On average across OECD countries, GDP per capita was around USD 39 000 in 2017. The wide variation in GDP per capita across OECD jurisdictions affects the relative abilities of governments to invest in higher education systems. As this report shows, GDP per capita is very closely associated with the level of expenditure per student in higher education, even though it is not strongly associated with higher education expenditure as a fraction of GDP or of total public expenditure (see Chapter 3).

In the four participating jurisdictions, GDP per capita in 2017 ranged from above the OECD average in Norway (close to USD 60 000), Belgium and the Netherlands (between USD 40 000 and USD 50 000), while it was below the OECD average (around USD 30 000) in Estonia. These differences highlight the difficulties that some countries have to maintain and increase investment on higher education systems in a globally competitive environment, despite the policy priority that may be placed by governments on higher education.

Figure 1.4. GDP per capita (2006 and 2017)
Measured in US dollars at constant prices and 2010 PPPs
Figure 1.4. GDP per capita (2006 and 2017)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Latvia: data for 2006 and 2017 are not comparable due to changes in methodologies.

Source: Adapted from OECD (2018[9]), OECD Productivity Statistics, http://dx.doi.org/10.1787/pdtvy-data-en.

 StatLink https://doi.org/10.1787/888933940170

Some countries have reduced the disparity between their level of GDP per capita and the OECD average in recent years. This could imply that countries with GDP per capita below the OECD average could improve capacity for higher education spending in the future, depending on other commitments and contextual factors.

….but the majority of countries have increased their debt levels.

While GDP levels after the economic crisis have generally recovered across the OECD area, the crisis left the large majority of OECD countries with higher levels of government debt (Figure 1.5). This means that governments across the OECD have less room to expand public expenditure in areas in need of resources. For example, capital investment in higher education may suffer from the financial constraints imposed on governments by the post-crisis economic environment; some evidence reviewed in Chapter 3 suggests that higher education capital expenditure tends to increase more than proportionally when the general government expenditure increases.

The levels of government debt vary greatly across the four jurisdictions participating in the benchmarking exercise. Norway was among very few OECD countries that reduced their public debt level between 2006 and 2017, by around 15 percentage points. Estonia has enacted prudent fiscal policies over the past decades which have resulted in a very low (less than 15%) level of public debt, both before the crisis and more recently. Over the same period, the level of government debt increased in the Netherlands, but it was still relatively low in 2017 at 70% of GDP.

In contrast, Belgium had one of the highest levels of government debt in the OECD area, both in 2006 (around 100% of GDP) and in 2017 (120%). This relatively high level of debt could limit the possibilities of finding public resources for higher education in the future, particularly in a country where the large majority of higher education funding comes from the government (see Chapter 3).

Figure 1.5. General government debt as a percentage of GDP (2006 and 2017)
Excluding unfunded pension liabilities
Figure 1.5. General government debt as a percentage of GDP (2006 and 2017)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Israel, Japan, Luxembourg, Mexico and Switzerland: the latest available data refer to 2016.

Source: Adapted from OECD (2018[10]), OECD National Accounts Statistics, http://dx.doi.org/10.1787/na-data-en.

 StatLink https://doi.org/10.1787/888933940189

Growth in labour productivity has not recovered to levels seen before the crisis…..

The improvement of labour productivity is high on the political agenda in many OECD countries, as labour productivity growth in OECD countries has not yet returned to its pre-crisis level. Across the OECD area, GDP per hour worked increased by 2.5% per year, on average, between 2002 and 2006, but only by 1% per year, on average, between 2013 and 2017 (Figure 1.6). While the relationship between human capital and labour productivity is complex, lower growth puts greater focus on the role of higher education in increasing labour productivity, as a place where skills are developed and highly qualified workers are trained for their future roles in the workplace.

Across the four participating jurisdictions, Estonia experienced the highest average annual productivity increase (1.7%) during the 2013-2017 period, but also the largest difference in the average growth between 2002-2006 and 2013-2017. Norway’s average annual productivity growth over the 2013-2017 period was similar to the OECD average level, at around 1%. The average productivity growth was lower than average in the Netherlands and Belgium for both of the periods 2002-2006 and 2013-2017, with the lowest in Belgium for the period 2013-2017 (0.6%).

Figure 1.6. Annual average productivity growth (2002- 2006 and 2013- 2017)
GDP per hour worked, constant prices
Figure 1.6. Annual average productivity growth (2002- 2006 and 2013- 2017)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Countries with a data break in this series during the period 2002-2017 have been excluded (Chile, 2012; Hungary, 2010; Ireland, 2011 and 2017; Latvia, 2006; Mexico, 2010; Poland, 2010).

Japan, Turkey, the United States and the OECD total: the 2013-2017 data refer to 2013-2016.

Source: Adapted from OECD (2018[9]), OECD Productivity Statistics, http://dx.doi.org/10.1787/pdtvy-data-en.

 StatLink https://doi.org/10.1787/888933940208

…though employment rates have surpassed pre-crisis levels

The general employment rate in a country is a crucial piece of contextual information to interpret the employment rate of higher education graduates (a key indicator of higher education performance – see Chapter 5). The OECD employment rate was 2 percentage points above the pre-crisis level in 2017, while the OECD average unemployment rate was below the pre-crisis level of 6% and projected to fall further (Figure 1.7) (OECD, 2018[11]). However, prime-age and youth employment rates were only at, or still below, pre-crisis levels in many countries (OECD, 2018[12]).

In 2017, the employment rate was relatively high (around 75%) in Estonia, the Netherlands and Norway, while it was below the OECD average in Belgium (less than 65%).

Figure 1.7. Employment and unemployment rates (2017)
15-64 year-olds
Figure 1.7. Employment and unemployment rates (2017)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Source: Adapted from OECD (2018[13]), Main Economic Indicators, http://dx.doi.org/10.1787/mei-data-en.

 StatLink https://doi.org/10.1787/888933940227

One of the key roles for education in society is to compensate for initial inequalities and provide all students with the skills needed to succeed in the labour market and in life in general (OECD, 2018[14]). Dealing directly with the root causes of income inequality, such as education and skills inequality, is considered more effective than trying to fix the symptoms at later stages of life, through redistribution policies like taxes and transfers (OECD, 2015[15]). However, despite the continuously increasing levels of educational attainment in the population, income inequality in OECD countries is at its highest level in over 30 years, and wealth is even more unevenly distributed.

The Gini coefficient is a key indicator of income inequality. Values close to 0 indicate completely equal incomes, while values close to 1 indicate very high inequality. The Gini coefficient was around 0.3 on average across OECD countries in 2016 (Figure 1.8). It ranged from 0.24 in the Slovak Republic, the most egalitarian country, to 0.46 in Mexico, the country with the most unequal income distribution. Income inequality in Belgium, the Netherlands and Norway was lower than the OECD average, while in Estonia it was just around the average.

Figure 1.8. Income inequality (2016)
Gini coefficient (based on disposable income, post taxes and transfers - new income definition since 2012), 0 = complete equality; 1 = complete inequality
Figure 1.8. Income inequality (2016)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

The latest available year is 2016 for Finland, Israel, Latvia, the Netherlands, Sweden, the United Kingdom and the United States; 2014 for Australia, Hungary, Iceland and Mexico; 2012 for Japan.

Source: Adapted from OECD (2018[16]), OECD Social and Welfare Statistics, https://doi.org/10.1787/socwel-data-en.

 StatLink https://doi.org/10.1787/888933940246

1.2.2. Higher education and social conditions

Demographic changes have implications for higher education systems

Demography influences higher education in a variety of ways (OECD, 2008[17]; Ritzen, 2010[18]). A decreasing population, especially among the young cohorts who typically compose the majority of higher education students, can result in difficulties recruiting students, with potential effects on expenditure per student. It can also threaten the survival of some institutions, particularly those located in remote areas or offering less prestigious programmes. Decreasing population can also contribute to tightening labour market conditions, putting pressure on higher education to provide graduates with the necessary skills to boost the economy (OECD, 2017[19]).

On average across OECD countries, the population grew by 9% between 2000 and 2015, but with a very large variation between countries (Figure 1.9). While the population of Israel grew by over 30% in that time period, that of Latvia and Lithuania decreased by more than 15%. The population increased by between 5% and 10% in Belgium and the Netherlands, and by more than 15% in Norway; in contrast, it decreased by 6% in Estonia.

Figure 1.9. Population growth rates (2000-2015)
Reference year: 2000
Figure 1.9. Population growth rates (2000-2015)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Source: Adapted from United Nations Population Division (2018[20]), 2017 Revision of World Population Prospects, https://population.un.org/wpp/.

 StatLink https://doi.org/10.1787/888933940265

Norway has a demographic profile very similar to the OECD average. Belgium, Estonia and the Netherlands presented a slightly older profile in 2015, with almost 40% of individuals aged 50 or older. However, while the share of the population younger than 25 was closer to the OECD average in Belgium and the Netherlands, it was three percentage points lower in Estonia.

A declining population is related to ageing and emigration, which also reflect on the age structure of the population. Therefore, population growth is closely related to the age structure of the population (the correlation between the population growth rates from Figure 1.9 and the share of individuals older than 50 from Figure 1.10 is 0.69). On average across OECD countries in 2015, about 30% of the population was younger than 25, about 35% was 25- 49 years old, and the remaining 35% was 50 or older (Figure 1.10).

Figure 1.10. Age structure of population (2015)
Figure 1.10. Age structure of population (2015)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

Source: Adapted from United Nations Population Division (2018[20]), 2017 Revision of World Population Prospects, https://population.un.org/wpp/.

 StatLink https://doi.org/10.1787/888933940284

Migration is increasing across the world

Global migration flows are increasing. The number of international migrants in the world was over 230 million in 2013 (one-third greater than the number in 2000), and it is likely to have grown further in recent years. Migrants can counterbalance the labour shortages caused by declining population, especially those who are highly skilled, who constitute a growing fraction of the overall migrant population. In addition, migrants can establish social, business and cultural international networks from which both their host and home countries can benefit (OECD, 2015[21]).

When the share of foreign-born people (and their descendants) in the population is substantial, the higher education system must adapt to ensure that suitable learning opportunities are available. This includes both ensuring accessibility for young second-generation immigrants and providing lifelong learning opportunities for first-generation immigrants as well as for other adults (see Chapter 5).

On average across OECD countries, foreign-born people accounted for 13% of the total population in 2017 (Figure 1.11). In the Netherlands, the share of foreign in the population was close to the average, while in Belgium and Norway it was over 15%.

Estonia presents specific challenges not only in attracting skilled workers, but also in retaining them. The share of foreign-born people in the Estonian population was around 10% in 2017. Emigration has been high in Estonia in the recent past; however, immigration started to exceed emigration in 2015 (Statistics Estonia, 2019[22]).

Figure 1.11. Foreign-born population (2017)
% of the total population
Figure 1.11. Foreign-born population (2017)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

The latest available year is 2016 for France, Ireland, Mexico and Turkey; 2015 for Chile; 2014 for New Zealand; 2012 for Czech Republic, Poland and Portugal; 2011 for Canada.

Japan and Korea: data refer to the foreign population rather than the foreign-born population.

Source: Adapted from OECD (2018[23]), International Migration Outlook 2018, http://dx.doi.org/10.1787/migr_outlook-2018-en.

 StatLink https://doi.org/10.1787/888933940303

Higher education is associated with more favourable social outcomes across the OECD

Education is important to supply the skills the economy needs, but it is also important as a way to foster democratic engagement among citizens, civil society participation and other positive social outcomes. The achievement of higher education is generally associated with better well-being and social outcomes, including in health, interpersonal trust and political efficacy.

The proportion of 16-34 year-olds reporting to be in good health is higher than the average across OECD countries participating in the Survey of Adult Skills in Norway, close to the average in the Flemish Community and the Netherlands, and lower than the average in Estonia. The proportion of 16-34 year-olds reporting that they trust others is around the average in the all participating jurisdictions. The proportion of 16-34 year-olds reporting that they have a say in government is higher than the average in the Flemish Community, the Netherlands and Norway, while it is lower than the average in Estonia.

On average across OECD countries and economies participating in the Survey of Adults Skills, adults younger than 35 with a higher education degree have about 2.5 times the odds of reporting to be in good or excellent health, compared to people of the same age with only an upper secondary education degree. They also have almost twice the odds of disagreeing with the statement that only few people can be trusted and 1.5 times the odds of disagreeing that people like them have no say in what the government does (a measure of political efficacy) (Figure 1.12).

Figure 1.12. Relative level of self-reported health, interpersonal trust and political efficacy of higher education graduates, 16-34 year-olds (2012 or 2015)
Odds ratio to report good or excellent health, to disagree with the statements “only few people can be trusted” and “people like me don’t have any say about what the government does” (upper secondary education = 1)
Figure 1.12. Relative level of self-reported health, interpersonal trust and political efficacy of higher education graduates, 16-34 year-olds (2012 or 2015)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

The adjusted odds ratios are computed through a logistic regression model and take account of differences associated with other factors: age, gender, immigrant and language background and parents’ educational attainment. The probability differences are significantly different from 1 for all countries and economies except: Austria, England, Greece, Ireland, Italy, Japan, Northern Ireland, Slovenia, Spain, Sweden and Turkey for self-reported health; Chile, Greece, Israel, Italy, New Zealand, Northern Ireland, the Slovak Republic and Spain for interpersonal trust; Chile, the Czech Republic, England (United Kingdom), Estonia, France, Greece, Italy, Slovenia, Spain and Turkey for political efficacy. Countries are ranked in descending order of the relative level of self-reported health.

Source: Adapted from OECD (2018[24]), OECD Survey of Adult Skills, www.oecd.org/skills/piaac/data/.

 StatLink https://doi.org/10.1787/888933940322

Fostering a sense of political efficacy and participation in democratic life is fundamental to the functioning of democracy. Voter participation provides a good measure of civic and political engagement. However, caution is needed in the interpretation of this measure, which can also be influenced by institutional differences in electoral systems (for example, voting is compulsory in some countries).

On average across OECD countries, around 70% of the population registered to vote cast a vote at the most recent election (Figure 1.13). This proportion was substantially higher than average (around 80%) in the Netherlands and Norway, and reached close to 90% in Belgium, but was lower than average (around 65%) in Estonia.

Figure 1.13. Voter turnout (latest available year)
% of votes cast by the population registered to vote
Figure 1.13. Voter turnout (latest available year)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

The latest available year is 2017 for France, Korea, the Netherlands and the United Kingdom; 2016 for Australia, Iceland, Ireland, Lithuania, the Slovak Republic, Spain and the United States; 2015 for Canada, Denmark, Estonia, Greece, Israel, Poland, Portugal, Switzerland and Turkey; 2014 for Belgium, Hungary, Japan, Latvia, New Zealand, Slovenia, Sweden; 2013 for Austria, Chile, the Czech Republic, Germany, Italy, Luxembourg, Norway; and 2012 for Finland, Mexico.

Source: Adapted from OECD (2018[25]), OECD Better Life Index, http://www.oecdbetterlifeindex.org/.

 StatLink https://doi.org/10.1787/888933940341

Voter turnout is not the only indicator of democratic engagement. Another fundamental characteristic of democratic policy-making is the involvement of stakeholders in decision processes. It is difficult to generate a single measure of stakeholder involvement, but Figure 1.14 presents an average across a number of indicators on this topic for 2014. Estonia has a high level of stakeholder engagement relative to other OECD countries according to this measure, while Belgium was just above the OECD average, and the Netherlands and Norway were below average.

Figure 1.14. Stakeholder engagement for developing regulations (2014)
Level of formal stakeholder engagement in developing primary laws and subordinate regulations, a scale from 0 to 4
Figure 1.14. Stakeholder engagement for developing regulations (2014)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018.

The indicator is calculated as the simple average of two composite indicators (covering respectively primary laws and subordinate regulations) that measure four aspects of stakeholder engagement, namely i) systematic adoption (of formal stakeholder engagement requirements); ii) methodology of consultation and stakeholder engagements; iii) transparency of public consultation processes and open government practices; and iv) oversight and quality control, which refers to the existence of oversight bodies and publicly available information on the results of stakeholder engagement. The maximum score for each of the four dimensions/categories is one and the maximum aggregate score for the composite indicator is then four.

Source: Adapted from OECD (2018[25]), OECD Better Life Index, http://www.oecdbetterlifeindex.org/.

 StatLink https://doi.org/10.1787/888933940360

1.3. Performance challenges in higher education

The expansion of access to higher education to a broader range of students has unquestionably produced many benefits for individuals and society, and these benefits create strong incentives to invest in higher education. However, higher education institutions and those responsible for steering and funding systems have had to cope with substantial expansion in a relatively short period of time. As a result, many higher education systems are facing challenges in streamlining their contributions to high quality education, research and engagement and sustaining them into the future in an increasingly competitive and globalised environment.

The continuously increasing costs and funding requirements that have accompanied the expansion of higher education raise concerns about its future financial sustainability. Countries are also grappling with challenges associated with the quality and equity of higher education. While access to higher education has improved for a broader range of students, there are increasing concerns about how well non-traditional students fare in higher education programmes and whether they graduate with high quality degrees. There is also continuing debate about the ability of higher education to meet future labour market demands and broader societal needs.

1.3.1. Challenges with financing higher education

Between 1995 and 2004, higher education expenditure per student grew in most countries with available data, although at a substantially lower pace than in other levels of education (OECD, 2008[1]). Since 2005, expenditure per student in higher education has grown at a similar pace as that of other levels of education, on average across OECD countries. At the same time, the number of students in higher education has increased rapidly (by around 10% between 2005 and 2015). Combined with the rising per student cost, this rising number of students produced an increase of more than 30% in total expenditure between 2005 and 2015 (Figure 1.15).

The expansion of expenditure has raised the question of who should pay for higher education. In many OECD countries, governments are the main source of funding. On average across OECD countries, 66% of higher education expenditure was financed by governments in 2015. The public returns on investment in higher education are high in all OECD countries; on average across OECD countries, the total public cost to attain higher education is USD 48 500 for a man and USD 44 700 for a woman, while the total public benefits are USD 188 100 and USD 116 800 respectively (OECD, 2018[3]).

Figure 1.15. Trends in expenditure and students numbers (2005, 2011 and 2015)
Higher education as compared to other levels combined, OECD average, 2005=100
Figure 1.15. Trends in expenditure and students numbers (2005, 2011 and 2015)

Source: Adapted from OECD (2018[3]), Education at a Glance 2018, https://doi.org/10.1787/eag-2018-en.

 StatLink https://doi.org/10.1787/888933940379

To ensure that higher education remains financially sustainable, students and families are increasingly being asked to share the costs of higher education. The proportion of private expenditure is greater in the higher education sector, compared to other education sectors. On average across the OECD, private funding amounted to 31% at the tertiary education level, compared to 9% at the primary, secondary and post-secondary non-tertiary levels in 2015 (OECD, 2018[3]). The contribution of students and their families to funding higher education raises expectations and creates new forms of accountability for higher education institutions, which increasingly need to demonstrate that they deliver value for money.

1.3.2. Challenges of connecting higher education to human capital development

As noted earlier in this chapter, the OECD defines human capital as “the knowledge, skills, competencies and other attributes embodied in individuals that are relevant to economic activity” (OECD, 1998[2]). Future growth of knowledge economies depends on a well-functioning system of education and training that provides opportunities for upskilling and acquiring new knowledge throughout an individual’s life.

But there are questions around the effectiveness of higher education systems in contributing to human capital formation. Evidence on the skills levels of graduates, completion rates and the extent to which disadvantaged and non-traditional students can access higher education points to a number of performance challenges.

Graduate skills

There are little data on the learning outcomes of higher education and none available at the system level or internationally comparable level at present. In the absence of an international measure of student learning outcomes, the OECD Survey of Adult Skills has been used to assess skills proficiency among higher education graduates.

The survey shows that although adults with higher education qualifications, on average, show higher skills proficiency than adults without higher education qualifications, higher educational attainment does not always directly correspond with higher skills. On average across OECD countries, more than 30% of adults with higher education qualifications have low literacy and numeracy proficiency levels, i.e. at or below level 2 (level 1 is the lowest level; level 5 is the highest) (Figure 1.16). This implies that some higher education graduates may not have the adequate information-processing skills needed for employment or to solve the problems of everyday life. It also suggests that some students entering higher education may not be sufficiently prepared and higher education institutions may not able to help them build their skills to an appropriate level.

Improved skills narrow the labour market outcomes gap between individuals with different levels of formally recognised education, but do not close it completely (Lane and Conlon, 2016[26]). Degrees and qualifications are signals that matter in the labour market. However, a low skill proficiency at graduate level can affect labour market and social outcomes and consequently, returns on investment for individuals and society. Those with poor skills are more likely to be unemployed; and those who do find a job will be more likely to earn less than those with stronger skills.

In countries where student loans are the norm, graduates with poorer labour market outcomes may not earn sufficiently to pay back their student loans (i.e. they will default on their loans or not earn enough to meet the thresholds in income-contingent loan schemes). Much of the cost of higher education could then fall on the taxpayer, if the government guarantees the loans or has to accept unpaid debt.

Figure 1.16. Percentage of adults with higher education qualifications at low literacy and numeracy proficiency levels (2012 or 2015)
25-65 year-olds
Figure 1.16. Percentage of adults with higher education qualifications at low literacy and numeracy proficiency levels (2012 or 2015)

Note: *Participating in the Benchmarking Higher Education System Performance exercise 2017/2018. There are six levels (from below level 1 – the lowest – to level 5 – the highest). Tasks completed successfully at the literacy level 2 require respondents to make matches between the text and information, and may require paraphrasing or low-level inferences. Some competing pieces of information may be present. Some tasks require respondents to cycle through or integrate two or more pieces of information based on criteria; compare and contrast or reason about information requested in the question; or navigate within digital texts to access and identify information from various parts of a document. Tasks completed successfully at the numeracy level 2 require respondents to identify and act on mathematical information and ideas embedded in a range of common contexts where the mathematics content is fairly explicit or visual with relatively few distractors. Tasks tend to require the application of two or more steps or processes involving calculation with whole numbers and common decimals, percentages and fractions; simple measurement and spatial representation; estimation; and interpretation of relatively simple data and statistics in texts, tables and graphs. Source: OECD (2016[27]), Skills Matter: Further Results from the Survey of Adult Skills, https://doi.org/10.1787/9789264258051-en.

 StatLink https://doi.org/10.1787/888933940398

In addition to the risks of graduating with low skills, many students do not graduate at all. On average across OECD countries with available data, around 20% of students who enter a bachelor’s programme leave without a qualification within the theoretical duration plus three years (OECD, 2016[28]). The high level of non-completions can reflect failures in the guidance process from compulsory to higher education, low admission standards, inadequate academic support, poor programme quality and the financial cost of education (OECD, 2008[1]) (see Chapter 5).

Access for disadvantaged and non-traditional students

Despite widening access policies, disadvantaged students remain disproportionately under-represented in higher education, particularly within the more prestigious institutions (Jerrim and Vignoles, 2015[29]). Only one-third of 30-44 year-olds whose parents do not attain upper secondary education attain tertiary education themselves, compared with over two-thirds of adults in the same age group, who have at least one parent who attain tertiary education (OECD, 2017[30]). In addition to being under-represented in higher education, and concentrated in less prestigious institutions and programmes, disadvantaged students tend to have lower progression rates and graduate with lower skills and labour market outcomes (Jerrim and Vignoles, 2015[29]; OECD/European Union, 2015[31]; OECD, 2016[28]).

Countries with rapidly ageing populations and shrinking youth cohorts may become more dependent on developing the skills of older adults. Participation in adult education and training, both formal and informal, is now common in many countries, but the Survey of Adult Skills indicates major differences across countries. Participation rates in adult education exceed 50% in Denmark, Finland, the Netherlands, Norway and Sweden, while in Italy and Greece they remain well below half that rate.

In many countries, the organisation of higher education, including curriculum, study periods and other factors, typically caters to young, full-time students. However, older adults may wish to enter (or re-enter) higher education to re-train or up-skill throughout their working lives. Firms and other organisations may also seek to engage with higher education institutions to provide training for their workers to deal with new products, technologies and business processes.

Many adults may also wish to undertake short courses that do not lead to a qualification, simply to acquire new knowledge and skills for work or personal interests. However, those with existing work and caring commitments may find it difficult to access higher education unless it is more flexible in its delivery.

Internationalisation

Countries that attract international students are tapping the global pool for talent. Some countries have eased their immigration policies to encourage the temporary or permanent immigration of international students in order to benefit from better access to skills. Countries that charge international students the full cost of education also reap significant economic benefits. For this reason, several countries have policies to attract international students on a revenue-generating, or at least cost-recovery, basis. However, this can result in high costs for students and risks limiting mobility to only students who can afford it.

Internationalisation can involve inward and outward mobility of students, but also curriculum changes that promote an international and intercultural dimension to the learning and teaching process. These changes also benefit domestic students who are not able to travel abroad, by providing them with opportunities to develop a global perspective of their study field, and develop cross-cultural perspectives from interactions with international students (OECD, 2019[32]).

However, some countries have less success in attracting international students and researchers, which hinders their competitiveness and the economic impact of their higher education system. It also diminishes the exposure of domestic students to international students, and thus their capacity to operate in global environments later on. The benefits of internationalisation are also vulnerable to changes in government policy on migration or changes in circumstances within sending countries.

Despite general movement towards compliance with the UNESCO/OECD Guidelines for Quality Provision in Cross-Border Higher Education (OECD, 2005[33]), it is often too difficult for students and other stakeholders to easily access the information they need to assess the quality of cross-border provision or to understand the process of quality assurance that foreign providers or programmes undergo (OECD, 2015[34]).

1.3.3. Challenges of contributing to knowledge, innovation, social and cultural development

Concerns related to performance also extend into the research mission of higher education. In some countries, there are limited career opportunities for doctoral graduates and other early-career researchers. There are persistent issues with gender equity in research as well. For example, while the rate of women doctoral graduates are on a par with men in some fields, they make up less than one-quarter of engineering graduates. There are also considerable differences across countries in the share of women among authors who are designated as corresponding authors, a proxy for leadership in the context of research collaboration.

Scientific collaboration tends to be associated with research excellence. However, high quality research tends to be highly concentrated in certain countries and major institutions, which can reduce the possibilities for collaboration across the wider higher education system. Scientific collaboration can also be supported through international mobility, and scientists with a history of mobility are more likely to publish in high-impact journals; but resources and processes to promote international programmes and activities are scarce in some countries.

Research is also becoming increasingly specialised, while higher education systems in many countries do not play to their strengths in research. In some countries, the quantity and quality of scientific production do not always coincide; some countries produce most in areas where they do not excel, and less in areas where they have a comparative advantage in terms of the quality of research (OECD and SCImago Research Group, 2016[35]).

Basic research is concentrated in universities and government research organisations, and spending on basic research has been increasing faster than applied research and experimental development. The measure of scientific impact of research tends to be higher for publications that report basic research rather than applied research or experimental development. As a result, higher education institutions often concentrate on basic research and pay less attention to applied research and experimental development. This has an effect on the perception of the contribution of higher education to innovation, with only 10% of product and/or process-innovating firms regarding higher education or government as highly important sources of knowledge for innovation (OECD, 2015[36]). Industry funding accounted for only around 5% of public research funding, on average across the OECD in 2014 (OECD, 2016[37]).

Though the volume of research output has expanded substantially, mounting evidence has highlighted large-scale problems concerning the ability to reproduce results, and the prevalence of questionable research practices, which may affect the reliability of a proportion of output. This has serious consequences for the quality of research and, as a result, the quality of the knowledge which informs decision-making processes across society.

Higher education activities can also produce economic, social, cultural and environmental impact in the wider community, be it at the local, regional, national or global level. Governments and stakeholders are increasingly asking higher education institutions to engage more effectively with the wider world through the provision of continuing education; technology transfer and innovation and social engagement.

However, there are many barriers to making progress with this policy agenda. For example, academics and institutions are typically provided with few incentives to perform well in this dimension (Ćulum, Turk and Ledić, 2015[38]). Measuring higher education’s contribution to social cultural and environmental well-being is also problematic (Bornmann, 2013[39]). It is difficult to assess the scientific impact of arts, humanities and social sciences, and even more difficult to measure the societal impact of any kind of research (Van Raan, 2004[40]). Technology transfer is easier to measure (via licencing of patents, royalty income, number of spin-off and start-up companies). For this reason, government policies related to engagement often prioritise the uptake and development of tangible technologies, while mechanisms to support social entrepreneurship and innovation for wider needs have been more limited. ONE does not allow me to edit this source

Finally, higher education systems can contribute to the wider community through ensuring that the knowledge they generates is available for the benefit of all of society. Open access (OA) to publications is relevant to the promotion of open science, i.e. the efforts to make the outputs of research more widely accessible in digital format to the scientific community and to society more broadly. However, in most OECD countries, the share of documents published in OA journals is less than 10%, as the implied citation “prestige” of journals, as measured by citation indicators, is higher for documents published in non-OA journals.

1.4. The OECD benchmarking higher education system performance project

The benchmarking higher education system performance project is a comprehensive review of where OECD countries currently stand across the full spectrum of issues related to higher education performance. The report reviews comparative indicators of the performance of OECD countries across a range of topics, including financial and human resources and the inputs, activities and outcomes of higher education systems. For the four participating jurisdictions, recent policy activity related to each of the topics is also reviewed. The report is structured as follows:

This chapter has provided some context for higher education systems in OECD countries in general and the four participating countries in particular, including their economic and social context, and the core challenges that higher education systems are facing today.

Chapter 2 describes the structure and governance of higher education systems and the policies and practices driving performance in the participating jurisdictions.

Chapter 3 provides a discussion of financial resources in higher education, including the cost of higher education and policies on funding and accountability.

Chapter 4 includes an overview of human resources in higher education, including the profile of higher education staff, working conditions and professional development.

Chapter 5 provides an analysis of the education function of higher education, including policies on equity, participation, internationalisation, digitalisation, lifelong learning and links to the labour market.

Chapter 6 looks at the research function of higher education, including the distribution of research expenditure, the profile of research personnel, internationalisation and research productivity and impact.

Chapter 7 presents an analysis of the engagement function of higher education, covering three main thematic areas: building human capital, contributing to innovation and supporting wider development.

Chapter 8 includes an assessment and reflection on the conduct of the project, the obstacles to measuring higher education system performance which were encountered, key gaps in evidence and lessons learned from the benchmarking process.

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