College benefits the poor the most

Fascinating new study on the economic relevance of higher education – cited on Freakonomics.

A new study finds that the students who are least likely to go to college (based on family background, abilities, and friend group) are the ones with the most to gain from a degree. Jennie E. Brand and Yu Xie find that the unlikeliest male college graduates earned 30% more over their lifetimes than comparable men who earned only a high school degree. In contrast, male college graduates most likely to go to college earned only 10% more than their non-college-educated counterparts.  Brand and Xie observed a similar trend for women.  The authors believe that the tough labor market faced by non-college-educated, disadvantaged students partly explains the results, but they point to an additional factor: economic motivation. “For students from disadvantaged groups, college is a novelty that demands economic justification,” Brand said. “By contrast, for students from advantaged backgrounds, college is a culturally expected norm. Economic gain is less of a motivation.”

Very intuitive – and probably quite applicable in the Indian social structure too.   You’ll find that across villages in India, mothers know that education will help their children move to a better life.  They save up money, often hiding it from their husbands, to try and create a better future for their children.

We owe it to them to increase our educational infrastructure – any way that we can.

Making money in education

The foreign universities bill aspires to impose economic constraints on foreign players by creating an investment requirement of ~ $ 11 Mn and prohibiting them from repatriating profits from their academic ventures.  So why should anyone want to enter India?  Unless they’re into philanthropy, or just plain nuts?

Well the truth is that there are enough ways to still make money for a foreign educational provider.  This report in Mint reveals more than usual

Foreign universities want to expand their presence in India, senior administrators at these universities say, but they don’t expect to immediately build their own campuses even if the law is passed…“My research has shown that there is tremendous interest in India and a whole gamut of potential ways to interact, but setting up a campus in India is not what every institute is interested in doing,” Green said, adding that the interest in India is more in research partnerships and cooperation

Read between the lines.  One can set up technical partnerships with Indian colleges and charge a royalty (for practically nothing).  The Indian college advertises their foreign tie-up for selling seats and increasing their prices.  Everyone wins.

Similarly, there are several colleges that are keen to get foreign faculty – preferably famous ones – on their board.  Even if it’s for a few days, or for an executive workshop / programme.   The big ones aren’t averse to this practice either.  There’s a lot of money in such programmes.

Those who are interested in the big game, can set up operating companies that manage the entire academic programmes.  This is similar to how hotel operators work – get someone to create the shell and then operate them for a fees / royalty.

There are other ways too.  Point is, that the regulations will never prevent a foreign player from making money, or repatriating it.  It only creates perverse incentives to circumvent the system.

Why we need foreign (or any) universities in India

Gaurav made the point that foreign participation in Indian education is no bad thing.  Here are some numbers.

India’s Gross Enrollment Rate (GER) for higher education was 10% in the middle of the decade.  In the early 80’s, the number was 4%.  China is at 20%, Brazil at 27%, Japan at 55% – and they are not the highest.

Against this background, the target for 2012 was set at 15% by the UGC.   Even this modest target would require India to add another 12,000 colleges and 240 universities.  This would mean an infrastructure increase of 50% or more.

Who’s going to do this?

Private education is necessary for filling the educational void in India.  And it doesn’t matter whether those filling the gap are Indian or foreign!

Spending New Money…wisely and otherwise-ly

An article in the New York Times caught my attention today. It was about how some folks in India are spending  their new found wealth (from selling land) to show off with lavish weddings (and Land Rovers, and Lexuses). This brings up another question- should there be courses and counseling on how to spend new wealth wisely?

Naya Paisa

People can come into new money in many different ways- they could sell their company, sell land, win a lottery, inheritance, and stock market movement on that lucky stock. Whatever the source, this money didn’t come with a manual on “How to spend this money wisely”. Consequently, most people are likely to blow a large part of this money away before they know it’s gone.

A Fool and his Money are soon parted, goes the old saying, and it’s right. Not knowing whether this bounty is going to be repeated in the future, a wise man would try to invest this money into something that would give lifelong returns, or bring happiness to the society at large. A less prepared man, however, is likely to spend this money on signs of new wealth, or conspicuous consumption that would bring some small happiness in the short term, but leave a permanent lease on a lifetime of regret.

Happens all the time. There is very little material available around us to help people figure out how to keep this sudden wealth. Here are a couple of US based articles that examined this phenomenon more carefully (and agreed with my observations).

Article 1,

But winners are handed a check and shown the door, even though gaining sudden wealth is usually a dramatic, life-altering experience.

and Article 2.

A shockingly large number of lottery winners end up in financial ruin. National statistics show that about one-third of lottery win-ners ultimately file for bankruptcy. Often, that’s just the initial symptom of good fortune gone bad

What can be done? Unlike a lottery, winnings from land or stock sale happen at a time of the receiver’s choosing. That means that courses and counseling sessions could be created for people to attend BEFORE they get the big check. This way, they are aware of the ephemeral nature of their good fortune, and are better prepared to convert this fortune into a life-long income.

Education Reform in India…bold agenda, same old foot dragging

Getting their citizen ready to lead productive and prosperous lives is one of the primary obligations of a democratic government. Despite all the hype and excitement about the quality of Indian education, it is very clear that vocational and advanced education in India remain an elitist pursuit. That is unfortunate, because in the modern Indian economy the *only* way to escape from the social class of your birth is through education.

In the last few weeks, there has been renewed (and I hesitate to use this word) debate on the subject of allowing foreign universities to confer degrees in India. I hesitate to call the response a debate because, predictably, the response has come in the form of party line pandering. There has been no evidence of a thoughtful, emotion-less debate on a subject that would likely impact the future prosperity of the nation.

The minister, Kapil Sibal, makes some reasonable statements. There are 220 million kids who go to school, and only 26 million of these will be able to go to college. The remaining folks don’t have access to advanced or vocational training that they would need in order to get into higher paying jobs and businesses. This is a huge problem, in terms of the manpower requirements of a modern economy…will we, after all, import TV technicians from Japan to repair our TVs? The bigger problem is that the social divide between the ultra rich (educated IIT/IIM types) and the abject poor will continue to widen and, even worse, the people on the poor side would not have access to any means of crossing over.

Of course, the usual leftist objection to “phoren imperialists” will come up. After all, if they educate our kids today, who is to say that they won’t brain-wash our kids into capitalistic zombies tomorrow?

The real question is…who has the content, experience and credentials to provide India the education that Indians need? A case may be made that India should be taught by Indians. All well and good, but where will the content and the management capability come from “in the numbers that India will need”? Surely there is room to allow foreign universities to come in an help where they can?