Social Versus Private Benefits And Cost Of Education

Social Versus Private Benefits And Cost Of Education

It has been found out that in case of developing countries the social costs of education (the opportune Ay costs to society as a whole) increase rapidly as the students move to higher education. The private costs _  the costs which the students themselves have to bear, increase more slowly or even they may decrease as the students climb over the ladder of higher education. Thus because of such widening gap between societal and private costs the demand for higher education is having a greater stimulus than demand for lower education. Thus the educational demand at higher level is more exaggerated. In such situation when demands are increasing progressively the social costs of education also go on increasing. More and more resources will have to be misallocated to educational expenses in terms of social costs, and the potential for creating new jobs will come down as the govts. have to face the budget constraints.

These figures show the divergence between private and social benefits and costs. It also displays how this divergence leads to mis-allocation of resources when private interests supersede social investment criteria. The (a) part of Fig.1 shows that as a student completes more and more years of schooling, his expected private returns increase at a much faster rate than his private costs. Therefore, the best strategy which a student would like to follow is one of spending such a number of years in school where the difference between expected benefits and the costs could be maximized.

In the (b) part of the fig. we have plotted the social returns and social costs. The social benefit curve rises sharply at first. This happens because of increase in productivity of small farmers and self—employed people from the receipt of basic education comprising of basic

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reading and writing, arithmetical skills and elementary vocational skills. Afterwards, the marginal social benefit of additional years of schooling declines more sharply. Hence the social returns curve begins to level off. On the other hand, the social cost curve shows a slower rate of growth in the initial years of schooling  the days of basic education.
Afterwards, the social costs curve rises rapidly, particularly at higher levels of education. The costs of post primary education rise because of expensive capital and recurrent costs of

higher education (buildings and provision of subsidized education. deduced that the best strategy from social point of view will be one where net social rate of return  to educational investment  could be
maximized. This, accordingly, will consist of spending B years of schooling on the part of students. After B years of schooling the marginal social costs exceed the marginal social benefits. As a result any additional investment in education will result in a negative net social rate of return. According to a study made by Behrman and Bridsall the optimal social investment strategy will be one whereby the quality of existing primary schools be upgraded, rather than opening of new and more schools.

It has been observed in case of developing countries that the private
consideration regarding the value of education often exceed its social value. As a result, there i6 not only unemployment of educated persons, but the resources of the state are being utilized unoptimally. Therefore, as long as the subsidized higher education is availed of to the people they will prefer to spend more years in the schools, colleges and universities, even though the jobs are not becoming available in the modern urban sector and unemployment is rising. Such misallocation of resources will continue how long people value more to education and its greater burden is borne by the state. The heavy craze for higher education in developing countries gives rise to two types of effects: (1) The output of educated persons exceed the number of people which the economy can absorb. In this way, there do exist the chances that the more educated people could not be employed because they do not want to degrade themselves, their aspirations are very high which have been instilled in them by the education system itself and are not prepared to accept the realities of unemployment in modern sector. (2) Those people who adjust their sights downwards and get the modern sector job for which they are over—educated in terms of the number of years spent in school. Those who are unable to get the jobs in modern sector have to join the ranks of permanently unemployed or they have to become self employed in the informal sector. In this situation they fail to contribute to society that made a heavy investment in their education.

Thus in the poor countries like Pakistan one finds the combinations of over paid and over educated employed alongwith the impoverished and unproductive educated unemployed. This is clear cut a wastage of scarce national resources. It would have been better if such resources could have been spent in providing jobs to the school, college and university leavers.

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