Providing an equitable and efficient tertiary education in Kazakhstan
Introduction
Should richer taxpayers pay to enable the poor to study in universities? What factors must be considered in choosing the educational policy? Here is some food for thought, based on educational policies in Kazakhstan.
Grants, vouchers or educational loans?
Education is not a pure public good. Individuals can be excluded from receiving it and the cost of educating each additional student is not zero, though it is small in an uncongested college, where no new rooms, desks or equipment are needed for the additional student. Taxpayers bear all the costs, if the government charges no tuition.
Higher education is more competitive than primary and secondary education are. Schoolchildren usually study in the city or town of residence, which can enable a single private school to monopolize education. A university student may leave his or her home town to study elsewhere. Distance education adds to the competition, lowering tuition fees.
Education yields positive externalities, benefitting those who do not receive it. For example, educated people are usually more informed citizens and more active voters. They can help improve political processses in the country. (Since the opposition in Kazakhstan is weak, this benefit of education is largely yet to be realized.) Education also enhances social stability, by increasing familiarity with and acceptance of common values. The bias in teaching and indoctrination of students is the flip side of the coin.
Too few people would study if only private educational institutions existed. Yet the above-mentioned benefits are hard to quantify, making it difficult to determine how much the government should spend. Also, some classes may not help achieve the above-mentioned goals. Nevertheless, in most countries, the state owns some or all universities (which may or may not charge tuition), and supports outstanding or poor students through educational grants or loans.
Supporters of educational grants argue that incomes of parents should not dictate students’ opportunities. Yet children of wealthy parents are still more likely to apply to universities. If grants are provided, based on merit, they subsidize the rich. The rich also usually pay more in taxes, making their net effect ambiguous.
Opponents of grants argue that too many people get a higher education. Prospective applicants compare the increment to their income with the extra costs, including the income that they could earn if they worked instead. Since the government subsidizes their education, their personal costs will be less than the social cost, inducing some to stay in school, even though the increment is less than the marginal social cost. This model assumes that the relevant positive externalities are small, compared to the subsidies. If students received loans instead of grants, they and their parents would weigh the costs and benefits. Only those skilled enough for universities would study, for most demanded specializations, to repay loans.
Supporters of grants deny that they are inefficient or inequitable. They argue that schools and universities themselves screen out the skilled students from the unskilled ones. Also, grants are cheap, compared to total expenditures on education. In Kazakhstan, grants for 2014-15 amounted to 28.3 billion KZT ($153 million), while total educational expenditures in 2014 amounted to 1.47 trillion KZT ($7.94 billion), reports Daniyar Kuanshaliyev, of the Forbes magazine. Poorer borrowers may not pay off the debt without delays and penalties, so loans exacerbate inequality.
Both measures are less equitable in Kazakhstan than in developed countries. Kazakhstan has a proportional individual income tax rate of 10%, compared to the top individual income tax rate of 39.6% under the progressive income tax system in the U.S., reports Heritage Foundation. Thus, less money returns to the government in taxes from the former recipients of grants than in the U.S. However, since students and their parents in Kazakhstan are poorer and less financially literate, they are more likely to delay repayment and be penalized.
University corruption prevents screening out the more skilled students from the less skilled. According to Nurlan Sydykov, former executive secretary of the youth branch of the ruling “Nur Otan” Party, the bribe for passing an exam session in 2014 in an average university amounted to 29,000 KZT, dissertations and theses sold for 60,000 KZT, and tuition grants cost 500,000 KZT. These results were collected, using anonymous surveying of 1,200 college and university students of Kazakhstan, from 62 higher educational instutitions. Among the students surveyed, 93.4% were undergraduate students, 5.2% were enrolled in Master Programs, and 1.4% were enrolled in doctoral programs. The overwhelming majority (90%) confirmed the existence of corruption in their educational institution, reports Tengri News.
Bribes discredit education in the eyes of private employers, who need to check applicants for actual skills during the probation period, rely on credible recommendations, or both. Many students treat education as a formality, and the teaching quality suffers. These factors perpetuate the vicious cycle of corruption. In the above-mentioned survey, 20.8% of respondents said that the lack of interest of students in education is the main cause of corruption. Another 12.6% of students said that the lack of professionalism among instructors was the main cause.
Bribes make educational grants inefficient. Substituting loans may make borrowers think twice before spending on a corrupt university, where the skills, necessary for debt repayment, would not be taught well enough. If a bank “forgets” to collect the debt, favoring some borrowers over others, its financial performance will suffer, and it may face penalties from the National Bank. The desirability of grants versus loans thus depends on the effectiveness of financial regulation compared with that of detecting and penalizing bribery in grant provision. If the National Bank bails out the creditor, it may continue to extend corrupt loans.
The Ministry of Education considered an alternative to grants that may be implemented as early as this year. Vouchers, containing a fixed amount that students can spend on any university, would replace traditional tuition grants, tied to a specific university. If tuition in the university exceeds the voucher, the student will be allowed to pay the rest in cash. Outstanding students and students from poor families may also receive university or state scholarships and grants, in addition to vouchers. Vouchers exist in schools (not universities) of Georgia, another former Soviet republic, reports Aidana Usupova, of Tengri News. Fourteen states offer traditional student vouchers, according to EdChoice, a school choice advocacy group based in Indianapolis: Arkansas, Florida, Georgia, Indiana, Louisiana, Maine, Maryland, Mississippi, North Carolina, Ohio, Oklahoma, Utah, Vermont and Wisconsin, plus Washington, D.C,” reported National Public Radio.
The voucher system is a two-edged sword. Supporters argue that vouchers improve education through competition between state and private educational institutions. When students can choose how to spend the voucher, most choose well-paying specializations. Other factors staying constant, education becomes more expensive for most students, as top universities take advantage of increased demand. Over time, however, higher tuition causes more colleges and universities to open.
Critics of school vouchers argue that they stratify society: students from richer families go to some schools and students from poorer families go to other schools. Nevertheless, university students are adults, who may work to pay for their education themselves, so the system may work better for universities than for schools. However, like with traditional grants, bribes may distort their effect.
Conclusion
Not every country fits the mold in educational policy.For example, corruption plagues education in Kazakhstan. Other factors, such as financial literacy and taxation, must also be accounted for, in choosing whether to rely on grants, loans or vouchers.
Higher education is more competitive than primary and secondary education are. Schoolchildren usually study in the city or town of residence, which can enable a single private school to monopolize education. A university student may leave his or her home town to study elsewhere. Distance education adds to the competition, lowering tuition fees.
Education yields positive externalities, benefitting those who do not receive it. For example, educated people are usually more informed citizens and more active voters. They can help improve political processses in the country. (Since the opposition in Kazakhstan is weak, this benefit of education is largely yet to be realized.) Education also enhances social stability, by increasing familiarity with and acceptance of common values. The bias in teaching and indoctrination of students is the flip side of the coin.
Too few people would study if only private educational institutions existed. Yet the above-mentioned benefits are hard to quantify, making it difficult to determine how much the government should spend. Also, some classes may not help achieve the above-mentioned goals. Nevertheless, in most countries, the state owns some or all universities (which may or may not charge tuition), and supports outstanding or poor students through educational grants or loans.
Supporters of educational grants argue that incomes of parents should not dictate students’ opportunities. Yet children of wealthy parents are still more likely to apply to universities. If grants are provided, based on merit, they subsidize the rich. The rich also usually pay more in taxes, making their net effect ambiguous.
Opponents of grants argue that too many people get a higher education. Prospective applicants compare the increment to their income with the extra costs, including the income that they could earn if they worked instead. Since the government subsidizes their education, their personal costs will be less than the social cost, inducing some to stay in school, even though the increment is less than the marginal social cost. This model assumes that the relevant positive externalities are small, compared to the subsidies. If students received loans instead of grants, they and their parents would weigh the costs and benefits. Only those skilled enough for universities would study, for most demanded specializations, to repay loans.
Supporters of grants deny that they are inefficient or inequitable. They argue that schools and universities themselves screen out the skilled students from the unskilled ones. Also, grants are cheap, compared to total expenditures on education. In Kazakhstan, grants for 2014-15 amounted to 28.3 billion KZT ($153 million), while total educational expenditures in 2014 amounted to 1.47 trillion KZT ($7.94 billion), reports Daniyar Kuanshaliyev, of the Forbes magazine. Poorer borrowers may not pay off the debt without delays and penalties, so loans exacerbate inequality.
Both measures are less equitable in Kazakhstan than in developed countries. Kazakhstan has a proportional individual income tax rate of 10%, compared to the top individual income tax rate of 39.6% under the progressive income tax system in the U.S., reports Heritage Foundation. Thus, less money returns to the government in taxes from the former recipients of grants than in the U.S. However, since students and their parents in Kazakhstan are poorer and less financially literate, they are more likely to delay repayment and be penalized.
University corruption prevents screening out the more skilled students from the less skilled. According to Nurlan Sydykov, former executive secretary of the youth branch of the ruling “Nur Otan” Party, the bribe for passing an exam session in 2014 in an average university amounted to 29,000 KZT, dissertations and theses sold for 60,000 KZT, and tuition grants cost 500,000 KZT. These results were collected, using anonymous surveying of 1,200 college and university students of Kazakhstan, from 62 higher educational instutitions. Among the students surveyed, 93.4% were undergraduate students, 5.2% were enrolled in Master Programs, and 1.4% were enrolled in doctoral programs. The overwhelming majority (90%) confirmed the existence of corruption in their educational institution, reports Tengri News.
Bribes discredit education in the eyes of private employers, who need to check applicants for actual skills during the probation period, rely on credible recommendations, or both. Many students treat education as a formality, and the teaching quality suffers. These factors perpetuate the vicious cycle of corruption. In the above-mentioned survey, 20.8% of respondents said that the lack of interest of students in education is the main cause of corruption. Another 12.6% of students said that the lack of professionalism among instructors was the main cause.
Bribes make educational grants inefficient. Substituting loans may make borrowers think twice before spending on a corrupt university, where the skills, necessary for debt repayment, would not be taught well enough. If a bank “forgets” to collect the debt, favoring some borrowers over others, its financial performance will suffer, and it may face penalties from the National Bank. The desirability of grants versus loans thus depends on the effectiveness of financial regulation compared with that of detecting and penalizing bribery in grant provision. If the National Bank bails out the creditor, it may continue to extend corrupt loans.
The Ministry of Education considered an alternative to grants that may be implemented as early as this year. Vouchers, containing a fixed amount that students can spend on any university, would replace traditional tuition grants, tied to a specific university. If tuition in the university exceeds the voucher, the student will be allowed to pay the rest in cash. Outstanding students and students from poor families may also receive university or state scholarships and grants, in addition to vouchers. Vouchers exist in schools (not universities) of Georgia, another former Soviet republic, reports Aidana Usupova, of Tengri News. Fourteen states offer traditional student vouchers, according to EdChoice, a school choice advocacy group based in Indianapolis: Arkansas, Florida, Georgia, Indiana, Louisiana, Maine, Maryland, Mississippi, North Carolina, Ohio, Oklahoma, Utah, Vermont and Wisconsin, plus Washington, D.C,” reported National Public Radio.
The voucher system is a two-edged sword. Supporters argue that vouchers improve education through competition between state and private educational institutions. When students can choose how to spend the voucher, most choose well-paying specializations. Other factors staying constant, education becomes more expensive for most students, as top universities take advantage of increased demand. Over time, however, higher tuition causes more colleges and universities to open.
Critics of school vouchers argue that they stratify society: students from richer families go to some schools and students from poorer families go to other schools. Nevertheless, university students are adults, who may work to pay for their education themselves, so the system may work better for universities than for schools. However, like with traditional grants, bribes may distort their effect.
Conclusion
Not every country fits the mold in educational policy.For example, corruption plagues education in Kazakhstan. Other factors, such as financial literacy and taxation, must also be accounted for, in choosing whether to rely on grants, loans or vouchers.
References
Heritage Foundation. 2016 Index of Economic Freedom: Kazakhstan. http://www.heritage.org/index/country/kazakhstan. 2016.
Heritage Foundation. 2016 Index of Economic Freedom: United States. http://www.heritage.org/index/country/unitedstates. 2016.
Kuanshaliyev, D. Top 10 universities, which earned the most on grants in 2014-15. Forbes. https://forbes.kz/leader/znaniya_dengi_2. 2015.
Tengri News. The volume of bribes in the universities of Kazakhstan was named. https://tengrinews.kz/kazakhstan_news/razmer-vzyatok-v-vuzah-nazvali-v-kazahstane-261792/. 2014.
Turner, C. School vouchers 101: What they are, how they work - and do they work? National Public Radio. http://www.npr.org/sections/ed/2016/12/07/504451460/school-choice-101-what-it-is-how-it-works-and-does-it-work. 2016.
Usupova, A. Vouchers may replace tuition grants in Kazakhstan. Tengri News. https://tengrinews.kz/kazakhstan_news/grantyi-v-kazahstane-hotyat-zamenit-na-vaucheryi-291915/. 2016.
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