Review the Human Capital Model. Discuss different ways in which developing countries could finance higher education?

Review the Human Capital Model. Discuss different ways in which developing countries could finance higher education?

Education remains to be one of the critical tools that sustainable development in either the developed or the developing countries in the world. How to finance higher education is a huge challenge that the governments face due to a shortage of funds with the rising demand in the countries. The relevance of the human capital in the education sector has some positive externalities which result in growth and improvement in the sector. A country benefits greatly from quality education in several ways such as the growth of the economy and improved political and social progress. The issue of globalization and improvement in technology has also led to fostering higher education, especially in developing countries.

Despite all the efforts made, there is a major problem in the provision of higher education in the developing countries which is funding. The increased fiscal pressure together with the rising demand for higher education and the benefits of the private sector has resulted in a shift in the way higher education in these countries can be funded. An alternative to a policy that has been adopted by these countries is the cost-sharing concept.

From the literature review on higher education financing, the policy that should be adopted is supposed to have sustainability, equality oriented and also based on quality. In general, the policy implemented should be capable of increasing access, increase the rate of participation in higher education and also be in a position to cater to the increasing dement of higher education. Apart from increasing the access to education, it is not supposed to discriminate any person or group of students like the students with disabilities or those coming from poor backgrounds. The funding system should also be capable of dealing with the increasing demand without interfering with the quality of education offered to the students. The policy should also be sustainable for long-term purposes.

This paper focuses on the different ways that developing countries can use to finance higher education in relation to the human capital model. To be able to achieve this objective, the paper uses some online sources as well as other research reports carried out by other researchers. This paper will be based on the four concepts when assessing the best policy to be implemented to finance higher education in developing countries.

Human capital in relation to education

Human capital can be defined as the set of skills that boost the productivity of an individual in the workplace. Human capital in the provision of higher education might differ in several ways such as; Pre-labor market influences, training, School quality and non-schooling investments, schooling and innate ability.

Training; is the component that is usually acquired by the teaching staff after schooling.it is usually most of the time associated with some skills which are useful in different fields combined with a set of technologies. Training of the staff takes place to increase their potential to deliver quality education to the students. An individual might find it difficult to get the required training by himself thus in most of the time it is the duty of the film to carry out the task resource-wise. The educational organizations should invest in training the teaching staff by contributing some percentage of the cost occurred in the process.  It is the role of the film to ensure that the investment they make to train their staff I in line with the kind of technologies required to boost productivity. Thus it would be right to conclude that training should be a joint investment between the worker and the organization.

The non-schooling investments and schooling quality; this policy imply that the workers could be in the same training place but acquire completely different skills according to the efforts made by each worker. The human capital in every educational organization depends on the efforts that are made by the firm to equip the workers with the necessary skills to teach the students. The human capital takes different dimensions when it comes to the difference in the investments and efforts made by both the organization as well as the individual worker.

The innate abilities of the employees; the workers in an organization might have skills that differ in the quality and quantity as a result of the innate differences. The difference in the skills of different workers is a result of genetic factors that are inherited from the parents of an individual. In this policy, human capital is argued to have some heterogeneity factors despite individuals having access to similar opportunities and economic constraints.

The pre-labor market influences; there is a connection between the individuals being exposed to the labor market before others from different places, it is a factor that has a significant effect to the human capital in most of the institutions.one of the factor that influences the pre-labor market is the sociological impact. The workers who get a chance to be exposed to some skills during the early stages of their lives have higher chances of being better in the market than those who have no exposure at all until the time they are trained for the first time. The teaching staff in the higher learning institutions ends up being very different because of this factor despite going through the same training system.

Different ways in which developing countries could finance higher education

Public financing

The higher education funding in most of the developing countries is largely catered for by the government using tax with a very little contribution by the student or at some point the students do not contribute anything at all. An example of the sub-Saharan region, most of the governments in the countries provide more than 90% of the funds required to cater for the higher education. According to the economies of these countries, the system of sponsoring more than 90% of the fee required for the student is not sustainable because of the increasing demand for higher education while the tax collection does not increase. Due to this reason, the contribution of the government to the student fees fails to result in an interference with the quality of education offered to the students. In the past two decades, the number of students in the higher learning institutions has tripled while the funds being allocated to the higher learning institutions has increased with around 15% to 20%.

The public funding policy in the developing countries is characterized by a high rate of discrimination to the students coming from poor backgrounds. In most of these countries, the students from middle and upper-income brackets have high access to higher education as compared to the students from the lower and the lower middle families. Lack of enough funds to sponsor these programs in the universities has resulted in high competition of the available vacancies. The universities have thus been forced to use the generalized performance to admit the students which are also argued to be discriminative to the students according to the income which results in the poor still being discriminated. Due to this reason, the tax financing system can be considered to be regressive because the poor in the country pay more tax from their earning but do not get equal chances of access to higher learning institutions like the rich.

When higher education is evaluated based on the work rate of return, it has very low social return as compared to the private return which is quite high than the social return in higher education as compared to the level of education an individual acquires. An example is that the private rate of return in education is 27.8% as compared to 11.3% of the social rate of return. The rise in fiscal pressure combined with the increasing work on rates of return is one of the major reasons that led to an increase in the acknowledgment to most of the countries in the developing stages coming up with the policy of the students making contributions to the cost of their education.

Privatization

This is one of the improvements that would be very appropriate in diversifying higher education financing in developing countries. It involves increasing the private sector participation in the higher education sector in these countries. Privatization will increase the institutions offering higher education which will subsequently result in the government institution lowering the cost of studies ensuring that all the students including those from low-income families can afford the cost. Privatization creates efficiency because the management of the private institutions can use the resources provided more appropriately that the public institutions that are run by the government. In most of the developing countries, the cost of the university fees is 14% higher in the government institutions than in the private institutions offering similar courses. An increase in the private institution numbers is supposed to be accompanied by a rise in the quality of education offered by the universities because of the rise in competition.

Other researchers argue that the privatization of higher education is mostly based on the profits generated by the institution rather than the quality of education they offer. That most of the private universities in the developing countries specialize in the undergraduate courses which are cheaper to avoid using much expenditure from their capital. This action has resulted in private universities neglecting to make any investments to support the field of research. The private universities are also usually accused of underrating equality where students from poor backgrounds are not offered with similar opportunities like those from richer homes in terms of the tuition fee charged. The tuition fee charged requires quite a stable individual to afford thus most of the students that make to join these universities are only the rich. The reason for the high cost is due to the high operation cost of the universities. Below are some of the ways that the developing countries may use to finance higher education;

Tuition Fees

Due to the increase in the need of sharing the cost, it has resulted in the charging of the tuition fee in the majority of the public institution. Charging of the tuition fee provides some funds to the university and also reducing the financial burden of education to the students as well as their families. The introduction of the tuition fee despite providing funds will also result in the improvement of education quality and efficiency because of the increased competition between the universities in a country to be in a position of attracting more students.

Introduction of the tuition fee is a proper way of financing higher education in developing countries because higher education is only usually partaken by few people who can afford it. It will reduce the repressiveness in most of these countries’ higher education such as tax financing. Despite tuition fees being better than tax financing, it raises the direct cost of high education which might limit the enrolment to the students whose parents/sponsors can afford these fees. This is a good idea though, in most of the countries that it has been tested, it has been faced with huge opposition from the politicians which have limited its implementation. In some universities, it has also resulted in violence by the students claiming the idea not to be applicable.

The efforts that have been made to restrict the introduction of the policy because of its unpopularity have given birth to the adoption of the dual-track in most of the developing countries in the world. The dual-track system involved admissions of students who are less-qualified only because they can afford to pay the full tuition fee. Despite this system increasing the revenue volume to the universities, it might result in favoritism to the students who can fully pay the fees which reduces the chances available for the other students who rely on the government sponsorship.

From the above explanation, the tuition fee is an effective policy that can be used in sharing the cost in the higher education institution. Currently, the high demand for higher education is a major challenge in most of the developing countries that can be sorted through the charging of tuition fees. The only challenge with applying the tuition fee is the identification of the level that it will be set and the right way to introduce it especially in the places where it has never been to existence.

There should be enough emphasis that the tuition fees should not be used as a tool for public funding in the developing countries but should be applied like a compliment to it. The amount set for the tuition fee should be dependent on several factors like the availability of assistance programs to the tuition fees like the loans and grants. It is also significant that the tuition fees should be set in different programs during the studies at different higher education institutions.

Every institution is supposed to be given the freedom of setting its tuition fees to indicate its difference in operational cost. This action will improve the efficiency of the higher learning institutions by increasing the competition. Because the number of higher learning institutions in the developing countries is low, there is low competition thus the government should be involved in setting the tuition fee prices to avoid exploitation of the students.

Through the financial assistance schemes

To help in controlling the negative effects of the tuition fees together with the other cost-sharing policies to the poor students in the universities, various grants and loan schemes have been introduced in most of the developing countries. These loans are supposed to be issued on a need basis or the basis of merit to the needy students. These loans will result in an improvement in the rate of participation in the universities by the students from poor backgrounds because they can pay little amounts or completely no payment during their entire studies. The loan schemes are supposed to be based on the needs of the students to enhance equality because if they are offered on a merit basis they will be at risk of being given to most of the middle-income students.

The tuition fees can only be implemented after the government has introduced financial assistance policies like loans and scholarships and grants are put into place. The government should develop a proper credit market to help the education sector through financial assistance programs. The financial assistance programs are not only supposed to in the public sector but also to the private universities so that all the students in these universities can enjoy the privileges equally. By doing his to all the universities in these countries, it would enlarge the available choices for the students from both the upper, middle and lower class backgrounds also.

The loans that are appropriate for financing the higher education in the developing countries are the income-contingent loans that cover all the costs of living being charged with some interest that is equal to the cost the government has incurred in borrowing the money.

Because most of the students default from paying back these loans, the government is supposed to put some tough conditions to the defaulters to counter the migration rate of the graduates. There should also be a transparent and efficient regime to be in control of the personal taxation and security mechanism in the system to ensure that the chances of misusing the funds are completely minimized.

The government might also come up with special funds to help the students from a poor background to completely settle their fees for higher learning. The body should be well organized to ensure that the beneficiaries are only poor students. The rate of repaying the money should also be dealt with to give the students some time to settle down in jobs after graduation before they restart on repaying. The rates should be also reduced and the repayment duration increased and calculated from the period the graduate starts to work.

The most unfortunate thing in the developing countries is that the loan and grant schemes are faced with the challenge of poor recovery rates, ineffective administrative and implementation of policies, and also high migration rates by the graduates after their studies.

Through the Participation of Private Sector

To boost the efficiency of the educational system in the developing countries and reducing the financial constraints to the public finances the government is supposed to create a conducive environment for the private sectors to be involved in the education sector. There could be some reforms made to ensure that there is such an atmosphere. The education sector should reduce restrictions for entry of the private institutions and also the government might also offer some help to these institutions such as by offering them the loan.

A good working environment can also be created through the collaboration of public-private sectors especially in the delivery of some courses by sharing the available infrastructure. To reduce the negative effects that privatization might result inequality, there should be some supportive measures like the tax incentives to help in undertaking independent research and also the initiation of less privileged students enrolment programs.

The majority of the developing countries have formed some accreditation institutions with staff to regulate and also eliminate the operators involved in fraudulent activities to maintain the quality of education offered by the higher learning institutions. There should also be reforms put in place to ensure that all the activities carried out by the boards like equipping them with skilled professionals and the right infrastructure to help in carrying out their duties.

In most of the developing countries, the private sectors are known for providing quality education to the students they enroll. If the government in the developing countries collaborates in the complicated issues with the private sector, higher education will be at a good point.

Through internationalization of the higher learning institutions

This is another method that can be adopted by developing countries to help in financing higher education. It involves the adoption of the concept of inviting the big universities in the world to open some branches and help the needy students through scholarships and grants, the universities if not in a position to open a branch in the country might offer the distance learning through the technological devices.

In most of the places, they prefer setting up physical university branches where the entire fund used is generated from the developed countries including the construction of the infrastructure. It is a policy that can work in most of the developing countries because of the shortage that is currently present in the number of universities. The university at some point where they are a difficulty or where the operation cost goes very high, the government may offer assistance to make the operation quite successful within a short time.

The government might take the incentive of inviting the university and collaborate in setting up the infrastructure and help the university in recruiting the students. The government through their programs can be able to locate the needy students in the society who might be from the poor background and sponsor their education in these universities. This is a strategy the will boost higher learning within a very short time because there is a widespread notion that the foreign universities offer a quality level of education as compared to the local ones.

Adoption of the Income-contingent concept

This concept would be one of the best programs that any developing country can adopt. It ensures that every student either male or female has the chance of joining the higher learning institution despite the financial condition of their parents. The only factor that drives this concept is the willingness to learn. There is a strong body created to provide funds to all the students without subsidizing some student’s chances of getting into the universities at the expense of that others.

The student is assisted to pat the higher education fee agrees the terms to repay the loan with a specified percentage of their earning after getting into the job market. The loan payment could be combined with the income tax repayment of the student plus an additional administrative expense. The student might also be requested to repay the loan based on his/her annual income to avoid exploiting the student immediately they join the job market. The duration of payment is agreed upon by the student and the government body that is in charge of issuing the loans.

Conclusion

From the past century, higher education in developing countries is financed by the government through the use of tax financing. The strategy of funding the higher education by government is not much sustainable in most of the developing countries due to rising fiscal stringency that has led to the increase in demand for higher education resulting in low quality of teaching. For this reason, it has brought the idea of students contributing to the cost they incur for their education because of the private benefit which is most of the time fueled by the concept of cost-sharing.

Policies of cost-sharing like the use of tuition fees strategy have gained more popularity in these countries. Scholarship, loans, and grants have been introduced in universities to limit the negative effects resulted from cost-sharing and also increase the chances of equality and access in the universities. The involvement of the private sector in the provision of university education has also increased although there is also the problem of fraudulent operators.

There is a single policy that any country would adopt and fully become successful in financing higher education but there are some sets of options that can be carefully designed and solve the problem. The higher learning instructions are supposed to be given some freedom in setting the amount of tuition fee to charge so that they can be in a position to reflect on their cost of courses they offer and the internal costs.to reduce the social and political tension in the countries which might be experienced during the implementation process of the cost-sharing initiatives like the reforms is supposed to done gradually through phases involving all the stakeholders in the decision-making process in every step taken.

Scholarship and the other assistance schemes are supposed to be implemented to help students from poor backgrounds. Although the adoption of the most effective income-contingent grant scheme might not be applicable in the poor nations because of the insufficient and inefficiencies in the repayment infrastructure. For such countries that do not have the proper infrastructure, the use of small scale grant and loan scheme is the best option

On top of that, the government of the developing countries is supposed to support the private sector by creating a more conducive environment to facilitate their functioning. The education sector can do this by introducing some tax incentives to the private institutions that venture into research activities and also support the students from poor backgrounds. Apart from doing all this implementation, the higher education affairs should be governed by the well-created board to ensure proper performance.

The above-stated proposals might not completely solve the problem of higher education funding in the developing countries but it would be better to start introducing the reforms than letting the problem become deep-rooted in the country. The reforms would reduce the problem greatly and will time if completely implemented and given some maximum concentration could become the all-time solution.