Very little beats tertiary education as a poverty-reducing investment, but it needs to be done right

POSTED ON: November 2, 2019 IN In the News

Achieving the NDP’s higher education targets could lift more than 20% out of poverty by 2030. The extra resources can be understood as an important investment only if there is a dedicated commitment to enhancing four performance areas.

In the drive to eradicate poverty and inequality in South Africa, nothing could be more important than better economic chances for the youth. Education, employment and rising incomes are very close relatives. Tertiary education is the most critical asset that opens up opportunities for low-income households to lift themselves out of poverty.

There is a two-way relationship between quality education output and job creation. A growing economy will absorb a more qualified and capable labour force. And a more qualified and capable labour force creates a greater incentive for firms to invest in labour-absorbing activities.

The National Development Plan (NDP) set targets for education to put South Africa in line with other middle-income economies. It proposes that, by 2030, about 400,000 university degrees be produced annually so that one in six of the population has a minimum bachelor’s-equivalent degree.

The NDP did not propose a vocational education target, but the Department of Higher Education, Science and Technology is crafting plans for its dramatic expansion. The target for vocational education should probably be about double that for university graduates.

Achieving NDP targets for higher education degrees and diplomas could lift 20% to 40% of low-income households out of poverty by 2030. A higher-quality and expanded vocational education system would have even more impact.

This may seem unbelievable, but here is my thinking.

Well over half (57%) of those qualifying for university are now graduating from schools in low-income communities, up from 35.2% in 2008. This was a significant achievement which should be celebrated. It helps to explain rising black university enrolments.

The unemployment rate for those with university degrees and diplomas is about 12% and 22% respectively, much lower than for those without these qualifications.

The average starting salary for a diploma or degree graduate is about two to four times higher than the poverty line. And these earnings normally rise by about four times over the following 10-20 years.

Achieving the NDP target would see the addition of two million employed university graduates who started out in a low-income household, with earnings that are at least two to four times the poverty line.

Government’s decision to move forward with free access to university and TVETs for households with annual incomes below R350,000 will make a significant difference to improving the flow of poor youth from school into post-school education and training (PSET). There is little doubt that the cost of PSET and related living expenses has been a major barrier to access. However, the budget allocation could therefore rise from R91-billion in 2018 to R172-billion by 2022.

There are many questions about whether this is affordable and correctly targeted.

Some see the investment in university students as “elitist”. Yet, channelling a young person from a low-income community to a higher education opportunity is likely the single most important course to reduce poverty and inequality, and promote intergenerational asset accumulation and class transformation.

The income trajectory that can lift relatives out of poverty is the most obvious first benefit. And, the graduate is a pied piper who encourages others to follow suit — so important in a country with isolated and marginalised communities.

There is also a question about whether a majority poor cohort of young black graduates should be saddled with extensive debt just as they are attempting to lift off in a country that is the world’s most unequal.

Four performance areas require single-minded attention so that the higher expenditure on tertiary education is an investment and does not become a very expensive social grant.

First is a proven commitment to economic revitalisation and employment expansion. Otherwise, an expansion of graduates will result in qualification inflation. The steps to igniting the economy do not have to involve complex reforms. For example, my article on 1 September focused on simple steps to quickly create jobs in tourism and linked activities in food, agriculture, retail, transport, vehicles and related activities. Strengthening municipal spending on already-budgeted-for capital, refurbishment and maintenance projects would be immediately stimulatory and job-creating.

Second is much stronger performance tied to university grants and NSFAS funding. This should focus on raising completion rates from 59% to 75% and to enhancing labour market success. The student financial support programmes, namely NSFAS, Thuthuka for accountants and Funza Lushaka for teachers, have already significantly improved student graduation rates.

Performance of tertiary education institutions will specifically need to be targeted. One option is to tie some part of the government’s institution grant to achieving improved governance, capacity, quality and labour market alignment.

Third is innovation to achieve a dramatic improvement in capacity, quality and alignment to labour market needs. The Department of Higher Education, Science and Technology wants to double enrolments by 2030, but has rightly slowed expansion to attend to quality improvement.

Surely these two goals could be achieved more effectively with innovative public-private partnerships? At a minimum, this could involve widespread industrial support for curriculum and capacity development, and for internships. There are already so many local and global examples.

Fourth is vigilance in expanding the number of students from low-income communities completing matric, ensuring they continue to account for at least half of all bachelor’s passes and that they do channel into tertiary education opportunities.

Only 30% of low-income youth that achieved a bachelor’s pass in the 2008 matric year enrolled within six years of passing matric, as compared with 70% from higher-income communities. Free higher education will immediately help close this gap.

We should not be confused into thinking that a programme targeted to channelling poor students into higher education is elitist. It could be the most powerful approach to achieving shared prosperity.

A commitment to institutional performance through strong government leadership, active partnerships with industry and shared purpose across stakeholders within the tertiary sector will be essential.

Published in Business Maverick, 15 October 2019.