Our education myth

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Our education myth

The fiasco over year-end tax bills under the revised deduction base has rekindled the dreary argument about taxes and welfare. The opposition demands that the government raise, rather than tweak, tax rates to pay for new welfare plans. The government and ruling party argue that tax revenues will increase when the economy picks up. Others advise the government and legislature to be realistic and restructure or scale down welfare programs.

Taxes are a thorny political issue in any country. Since positions can differ depending on who would be paying more, the issue can never be free of political connotation and consequences. Such differences must be respected in a democratic society.

But if differences become entrenched, the social cleft can widen. The more people are open to new options and ideas to lessen the difference, the easier it will be to compromise and reach a solution. One option might be to overhaul national spending on education, especially the competition and investment required to get a college education. Reducing education cost could help revive the economy, ease the financial burden on households and contribute to resolving the unemployment problem for young people.

Education is often cited as the driver behind South Korea’s economic miracle. Most Korean parents still believe that giving their children the best possible education is their biggest priority. Cutting education spending is the last resort for many. In reality, the obsession is illusionary. The education sector is the most unproductive industry in the country. Pouring money into this bottomless well will only wear down Korean families and keep generating more unemployed college graduates.

The education industry is chronically ridden with deficits. University education is the most unproductive and overrated of all. Many with degrees from four-year universities either cannot find jobs or must settle for work unrelated to their credentials. This causes many young people to defer employment at an economic cost of 19 trillion won ($17.2 billion).

But many companies struggle to find qualified employees. The manufacturing sector has mostly older workers because young people do not apply for those jobs and employers worry about disruption in training and craftsmanship. Because the inflow of younger people has slowed, companies move overseas and reduce investment at home. Young people with high qualifications prefer to stay at home rather than take a job they see as being blow them.

Heavy education spending has contributed to a structural slowdown in the local economy. Middle-class families use the biggest part of their monthly income to pay off debt interest and then pay for their children’s education. The share of education spending compared to household income is the world’s highest and fastest growing. Education investment translates into losses for individuals, families and society, when taking into account the frustration and disappointment of young people and their parents and the lack of retirement savings.

Government policy and parents’ investment in education, however, remain unchanged. The Education Ministry has earmarked 7 trillion won from this year’s budget to subsidize scholarships. It would be wiser to cut off public subsidies to universities to halve the number of students and ease the burden for households, and marshal necessary workers into industrial fields instead.

The government promises to create many decent jobs. But unless it has a magic wand, it cannot provide decent jobs for everyone in a middle-income advanced society like South Korea, where one in eight high school graduates enters college. It would be more realistic to lower the education bar and job expectations so that more people can be employed and happier.

The working population in Korea will start to decline in 2020. If the country wants to avoid a Japanese-style decades-old stagnation, the working population must be stable. But instead of working, healthy and eligible young people prefer to stay on campus or at home doing nothing. Society must push these young people out into the work force. If the country’s biggest money-losing education industry is restructured, domestic demand and capital investment will pick up. Talks of tax increases and welfare programs can be solved naturally.

Translation by the Korea JoongAng Daily staff.

JoongAng Sunday, Feb. 15, Page 31

*The author is an economics professor at the National University of Singapore.

by Shin Jang-sup

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