Higher Education in Croatia and the US: Similarities and Differences Lucia Brajkovic IHE Overview of topics 1.University autonomy in the US and Croatia: decentralized and diversified market-based system vs. tight government control 2.Competition as a key feature of the US higher education 3.Academic Capitalism: US and European trajectories IHE Overview of topics 4. University funding, tuition fees and subsidization models 4.1. Who should fund higher education? Private, public and social benefits 4.2. Concept of free education and theory of public choice 4.3. Linear tuition model in Croatia 4.4. Student financial aid models in the US 4.5. Equity and efficiency considerations IHE Goals for this session To provide an overview of inherent differences of the US and European/Croatian higher education systems To gain deeper understanding of the literature and theory underpinning the similarities and differences between these systems IHE Basic facts on the US higher education As of 2011, the US has a total of 4,599 Title IV-eligible, degree-granting institutions: 2,870 4-year institutions and 1,729 2-year institutions The US has 21 million students in higher education Roughly 5.7% of the total population About 13 million of these students are enrolled full-time In the US direct financial support for higher education institutions comes from the states, not the Federal government IHE Source: 2plus2, US higher education system IHE Distribution of students across institutional sectors IHE University autonomy in the US and Croatia - decentralized and diversified market-based system vs. tight government control The US higher education is organized as a decentralized market-based system However, government still plays an important role in higher education Governments involvement in education is more extensive than in most other areas of the economy because the government provides direct support for many higher education institutions, research support in the form of grants, and financial aid to students who attend these institutions IHE Defining the level of university autonomy Example survey questions (Alcouffe & Miller, 2006): Does the university set its own curriculum? Does the university select its own students or is there centralized allocation? To what extent does the university select its own professors? How much does the state intervene in setting wages? Are all professors with the same seniority and rank paid the same wage? Does the university's budget need to be approved by the government? What share of the university's budget comes from core government funding? What share comes from research grants for which the university must compete? IHE Evidence from the literature on autonomy and competition Most productive European universities, such as those in the UK and Sweden, have substantial autonomy on most dimensions In order to become more productive universities need to control the use of their budgets, independently choose the compensation of their professors, and have the freedom to hire whichever professor they most prefer IHE Competition as a key feature of the US higher education A key aspect of the organization of higher education in the US is competition among universities Universities compete for students, professors and funding Yet they are in a different kind of competition than would normally be associated with firms in a market economy, because almost all higher education institutions are either state-supported institutions or private nonprofit institutions IHE Competition contd While state funding makes it possible for state schools to charge lower tuition, private nonprofits are still able to successfully compete for students Private nonprofits often have a reputation that makes them an attractive alternative to state schools They also offer scholarships to students who come from low-income families Thus, state-supported higher education and private nonprofit institutions have both been able to survive in competition with one another IHE Evidence from the literature on autonomy and competition contd Correlational evidence from the literature on both the US and Europe suggests that autonomy and competition enhance the impact of university funding on research Competition for basic research funding makes universities more productive Example of the EU institution which offers this type of research grants is the European Research Council (ERC) Its mission is to fund bottom-up, frontier research and it evaluates research on sole basis of scientific excellence IHE Evidence from the literature on autonomy and competition contd Basic research has not typically been an EU prerogative (which explains why only 5 to 6 percent of the public funding for research in Europe is spent at the EU level) However, the Seventh Framework Programme (FP7) created the ERC The logic behind it was that EU-wide competition for research money represents EU value-added and therefore does not violate the subsidiarity principle IHE Evidence from the literature on autonomy and competition contd Frontier research is a complex thing that a university can only pursue effectively if it has the discretion to direct resources and researchers towards what it believes are the most promising paths Universities will put more effort into directing resources well if they know that rewards are allocated based on competition, especially competition that is strictly merit-based IHE Academic Capitalism (Slaughter and Rhoades, 2004): US and European trajectories This theory teases out the ways in which new institutional and organizational structures are developed to take advantage of the openings provided by the neoliberal state to move toward the market Various sectors, such as state agencies, NGOs, corporations and universities, are involved in this process However, universities are not simply acted upon by outside forces Some segments of the university, including professors, administrators, and students, embrace market activity, while others are resistant or neglected IHE Analysis and comparison of EU and US moves toward the market (Slaughter & Cantwell, 2012) Features of academic capitalism: Intermediating organizations Narratives, discourses and social technologies Interstitial organizations Expanded managerial capacity New circuits of knowledge and new funding streams IHE Intermediating organizations Intermediating organizations in neoliberal states work with public, non-profit and for-profit organizations, in order to shape policy and soften boundaries between them, so they become more responsive to the market In the US, such intermediating organizations have existed since the late 1970s Some of those organizations involved with research policies are Carnegie Commission on Science, Technology and Government, the Belfer Center for Science and International Affairs, the Brookings Institution, the American Enterprise Institute and the Council on Competitiveness IHE Intermediating organizations contd A major example in the US is the Business-Higher Education Forum It brought together CEOs from industry and academic officials to craft policy narratives that specified the way that higher education should contribute to the US competitiveness The Business-Higher Education Forum produced position papers and lobbied in Congress to create tax-free financial instruments for the industry It also developed a competitiveness narrative that stressed universities role in economic development based on what later came to be called knowledge economies IHE Intermediating organizations contd The EU competitiveness trajectory was in some ways similar to the US Beginning in the 1980s, groups of European political and business elites began to lobby and operate within European institutions in order to enact neoliberal polices and establish a discourse on European global competitiveness (Bieler and Morton, 2001) The example of such organization is the European Round Table of Industrialists (ERT), a group comprised of around 50 CEOs and chairmen from large European corporations gathered together to influence the European policy agenda IHE Intermediating organizations contd In February 2008 the European Union created the Higher Education-Business Forum The Forum was designed to bring together university administrators, European Commissioners, representatives from chambers of commerce, and business executives, to network and coordinate the academia and industry activities in order for Europes higher education institutions to better serve the smart economy IHE Intermediating organizations contd Another form of intermediating organizations are the European Commissions expert committees They bring together experts from the private, public, and nonprofit sectors, and can be either permanent or temporary The largest numbers of committees are attached to the Director General for Research, followed by Environment and Enterprise In other words, these expert groups are concentrated around knowledge economy policy areas These experts circulate across sectors, normalizing the discourses and narratives and auditing systems that they develop They have also played an important part in promoting the Lisbon agenda IHE Narratives, discourses and social technologies Human capital and competitiveness discourses were among the most prominent narratives that circulated around and through intermediating organizations, research universities and various policy groups in the US and Europe from the 1980s They grew stronger, mostly because they provided a great fit with the neoliberal market narratives Social technologies such as audit exercises, league tables, and rankings and benchmarks were used to assess the success of universities in various aspects of competition IHE Narratives, discourses and social technologies contd The discourses that developed in the US and EU are somewhat different Typically for the US, the human capital narrative emphasized the role of the individual, thus converting higher education into a private good The competitiveness narratives, initiated by corporate leaders and non-profit think tanks in the 1980s, were complementing human capital discourses and were designed to deal with the competition the US faced from Germany and Japan IHE Narratives, discourses and social technologies contd These narratives emphasize investment in education that contributes to productivity, economic growth, health, environmental issues, and national defense The education should create a scientifically literate population and are a workforce versed in STEM fields The humanities, arts, and social science fields not closely related to these discourses are, for the most part, left out IHE Narratives, discourses and social technologies contd During this period human capital theory also became prominent among international organizations and trading blocs in Europe In 1974 the European Community established the Education Committee with an almost exclusive focus on vocational education and training Cooperation in market-oriented training was expected to reduce unemployment and increase Europes labor mobility Furthermore, the Lisbon Agenda elaborated on the EU competitive narrative IHE Narratives, discourses and social technologies contd In 2006, the European Commission made the case that European universities have enormous potential, but this potential is not fully harnessed and put to work effectively to underpin Europes drive for more growth and more jobs (European Commission 2006, p. 3) In response, a plan was announced for modernizing Europes universities, which largely focused on further market reforms The arts and humanities, which do not seem to be valued in the knowledge economy and often address national culture, are absent from the Lisbon Agenda and competitiveness narratives IHE Interstitial organizations Interstitial organizations emerge from the interstices of existing organizations within the university (Mann, 1986) They often intersect intermediating organizations and the opportunities they provide, and in turn adopt narratives and discourses of human capital and competitiveness The most common interstitial organizations are those that deal with research commercialization or technology transfer IHE Interstitial organizations contd The expansion of these organizations in the US began with the passage of the Bayh-Dole Act in 1980 During the 1980s and 1990s, research universities across the US established technology transfer offices that supported the process of patenting research discoveries and developing spin-off companies They emerged spontaneously from within universities and incrementally took advantage of the opportunities such as those created by Bayh-Dole at the state and national levels IHE Interstitial organizations contd In the EU, the development of interstitial organizations did not seem to be spontaneous Rather, states and universities frequently worked together to develop economic strategy to set the agenda for establishing intersecting structures through which innovation and commercialization occur As knowledge transfer units were created, they began to develop dense networks across many European countries IHE Expanded managerial capacity Simultaneously with the development of interstitial organizations, the managerial structures of universities have also started to change rapidly in order to enable universities to conform with and establish relations with neoliberal states Although there are significant differences in management modes among and between universities in the US and EU, there is a general trend towards increased corporate- like governance of higher education IHE Expanded managerial capacity contd This process has resulted in increasing authority of managers over the faculty collegiums, empowering them to assess, reward, and regulate academic work The reform also calls for greater autonomy of the universities, in most cases involving separation of the university from the state, for example, through eliminating employee civil service status Consequently, as NGOs with industrial interconnections, universities have access to public funds that can be used to generate commercializable knowledge In short, public funds are channeled through universities in the service of commercial interests IHE New circuits of knowledge and new funding streams New circuits of knowledge are characterized by increased publishing, patenting, licensing, start-ups, and other entrepreneurial activities such as university funding of research parks and incubators New funding streams are often discussed in the narratives and discourses about entrepreneurial science as being market-related; Revenues for patents are represented as contributing substantially to university general funds, and successful innovations based on academic discoveries are presented as an enticement for industry to contribute more funding to academic R&D IHE New circuits of knowledge and new funding streams contd Patents have not provided substantial revenue streams for most universities, and industry contributions to academic R&D have fallen off (Slaughter and Cantwell, 2012 ) In many cases, funds for entrepreneurial science are not market-derived, but rather come from redirecting and expanding government funding streams for academic research Resources for entrepreneurial science are also funded by redirected traditional resources - for example, rapidly increasing undergraduate tuition has been used to pay a portion of these rising research costs IHE The emergence of academic capitalism in Croatia EU research funding Even though the academic research sector in Croatia has very few ties with the industry and private business sector, the emergence of interstitial organizations such as university technology transfer offices has been a prominent feature of Croatian campuses over the last few years These organizations are founded primarily in order to bring in external funding through the EU research projects IHE The emergence of academic capitalism in Croatia contd With its EU candidate status, Croatia was eligible for pre- structural EU funds such as IPA (Instrument of Pre- accession Assistance), which mostly targeted capacity building, regional development and enhancing competitiveness Erawatch (2013) reports that, according to informal data, Croatia used only about 40% of IPA funds, therefore concluding that IPA program should have been used more intensively IHE The emergence of academic capitalism in Croatia contd Upon the EU accession Croatia exchanged the access from Pre-structural Fund (IPA) to Structural Instruments for further investments in the forms of the European Social Fund (ESF), European Regional Development Fund (ERDF) and Cohesion Fund (CF) According to the World Bank (2012) estimations, the EU Structural and Cohesion funds available to Croatia will exceed 1.5 billion EUR per year At the same time, Croatia also will be obliged to contribute about 680 million annually to the EU budget The estimations also suggest that it will be quite a challenge for Croatia to access and absorb EU funds effectively and efficiently IHE The emergence of academic capitalism in Croatia contd A potential negative policy implication of these new EU funding streams for Croatia may be that, in addition to directing the university research, they could provide a rationale for decreasing government appropriations to public universities even further in the subsequent years IHE University funding, tuition fees and subsidization models Years of research evidence shows that funding universities is a privately and socially efficient investment However, universities are also one of the many sectors that need to be funded. For example, hospitals, prisons, national defense and roads need to be funded as well. How much money will be allocated to each of these competing sectors, and who will pay, is a very complex issue, not easily solved through a mechanical linear (or even nonlinear) programming solution IHE University funding, tuition fees and subsidization models contd Making funding decisions is much easier in the private sector because there is a very well defined object that firms have; to maximize profits Theoretically, the government also has an implicit goal; to maximize social welfare But social welfare is a much more complex concept than company profits (Bevc, 2007) IHE Who should fund higher education? Private, public and social benefits Human capital theory states that individuals invest time and money in their human capital - education and training in order to enhance their productivity, which would then lead to higher earnings throughout their lives These earnings are considered private benefits that individuals derive from education IHE Private, public and social benefits contd However, it is also very important to understand the value of social benefits derived from education This is relevant to how much of the total investment in education should be financed publicly These benefits, or education spillovers, include higher life expectancy, lower crime rates, democratization of the society, improved human rights etc., which all in turn lead to political and economic stability IHE Private, public and social benefits contd There are still issues in the in the literature concerning the estimations of private and public returns to education (Psacharopoulos 1994; Psacharopoulos and Patrinos 2004) Therefore, a major issue of who should finance the universities, the individual or the state, is still debated in countries all over the world In most cases it is the mixture of two, the difference is in the percentage of public subsidization, through taxes, across countries IHE Concept of free education and theory of public choice In Croatia, the concept of free education has had a long standing tradition We know that free education is not really free, it is paid by the citizens of a state through taxes That means that most individuals who will never acquire private benefits derived from higher education (e.g. higher salaries) pay for the education of those who will realize those benefits IHE Concept of free education and theory of public choice contd If that is the case, why is this narrative still persistent in many countries? The reason for this practice can be found in the theory of public choice (Buchanan and Tullock, 1962) Public funding of universities is the result of voter preferences; free higher education appeals to the majority of voters It is hard to explain to average voter why free education is not really free; it is subsidized through the voters taxes IHE Concept of free education and theory of public choice contd Probably the most difficult part to explain is why free education is at odds with the equity argument; The same price (zero) for the rich and the poor can lead to even greater social stratification and disastrous socio- economic effects Therefore, the theory of public choice suggests that, for the sake of obtaining votes, politicians succumb to the free education syndrome (Psacharopoulos 2003; Psacharopoulos and Papakonstantinou 2005) IHE Linear tuition model in Croatia The theory of public choice has very accurately captured the decision-making process regarding university subsidies in Croatia In 2009 students occupied the University of Zagrebs Faculty of Humanities and Social Sciences, taking over classes and replacing them with public assemblies and student-organized lectures Furthermore, students protested in front of the Ministry of Science, Education and Sports, and demanded an audience with the Minister They demanded free education for all students IHE Linear tuition model in Croatia contd Students from other Croatian universities joined the protest, which then turned into the largest student movement in Croatia since the 1970s These events took place during a politically very sensitive period of Croatias final preparations for entry into the EU Under these unique political circumstances the students requests made a significant impact on the higher education financing policy of the Croatian left-centered government IHE Linear tuition model in Croatia contd Their demands were not fully met, but they led to the adoption of a unique linear tuition model, which may the only one of its kind in the world The governments rationale for this new system is that more students would be able to study without paying tuition However, the real impact of this policy decision is yet to be seen, as the subsidy paid by the Ministry for each student is significantly lower than the average yearly tuition charged by Croatian universities before the implementation of this linear model IHE Linear tuition model in Croatia cond This entirely meritocratic system also does not take into account the fact that students coming from lower socio-economic backgrounds might not have the same academic preparation when entering college, and thus have greater difficulty obtaining the number of ECTS credits necessary for the tuition waiver after the first year of study Another major problem for these students is the fact that there is no need-based student aid available, nor does a student loan system exist in Croatia Many studies have found that grants and loans are crucial for offsetting the negative consequences of tuition and fees, especially for vulnerable and underrepresented social groups IHE Linear tuition model in Croatia cond Furthermore, even if these students meet the merit criteria and are not charged tuition, they would still have other out-of-pocket expenses, such as books, housing, dining and other living expenses, which might deter them from enrolling in college if there is no financial support available to offset these costs. Nonetheless, this example should be worth considering by other countries where student aid and loan systems are inadequate or non-existing, which is notably the case in the post-transition countries of Central and Eastern Europe IHE Linear tuition model in Croatia contd This model does provide incentives for student performance (i.e. addresses issues of merit), and if a country is able to establish at least a basic need-based grant system for its most vulnerable and at-risk student populations, this approach could have the potential to improve student access and lead to a more equitable higher education system IHE Student financial aid models in the US Student financial aid in the United States is funding that is intended to help students pay education-related expenses including tuition, fees, room and board, books, and supplies for education at a college, university, or private school General governmental funding in the form of subsidies for public education is not called financial aid Financial aid refers to awards to specific individual students IHE Student financial aid models in the US contd A scholarship is sometimes used as a synonym for a financial aid award, although grants and student loans are also major components of financial aid packages The US federal government and all US state governments provide merit- and need-based student aid including grants, work-study, and loans As of 2010, there are nine federal and 605 state student aid programs, and many post-secondary institutions also provide merit aid IHE Equity and efficiency considerations Evidence regarding higher education financing and human capital formation suggests that present university public finance mechanisms in most countries are both inefficient and inequitable The policy implication is that imposing student fees would promote efficiency and, paradoxically, equity (Psacharopoulos, 2008), given that there are other mechanisms such as student aid, grants and loans available to offset the costs of attending college IHE Equity and efficiency considerations contd Based on the existing research, it is argued that the most efficient and equitable way of financing higher education today is to allocate public funds to the universities in an indirect way This means that students should be left to decide which university will get funds, and which university may close because of lack of funds If more money was given to the poorer students, equity issue would be addressed However, the literature suggests that Europe, as a whole, is still too far away from adopting such solution; according to the Treaty of Rome, the European Commission has no say in the domestic education policies and it cannot impose the denationalization of universities IHE Thank you for your attention! 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