Is higher education the last industry where the final customers (companies) are not paying? (a controversial post)

Posted on 29/01/2013

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The short term aim of higher education is to provide graduates who will be ready to be employed by companies and organisations. As such, the final customer has never been the student but the companies. And outside of rare exceptions, companies are not directly paying for that. In light of the mounting debts for graduates all over the world (see for example Australia http://www.universityworldnews.com/article.php?story=20130122094827273 ), it could be time to revisit the situation.

I know it can be a controversial statement but let’s mention several points for discussion:

For public higher education institution, as studies are generally subsidized by governments, we could argue that companies are paying through the taxes. But as for any “public good or service”, they are not paying more or less than any other taxpayer. But they are benefiting more than others of the outcome. On overall, economist still argue that funding higher education publicly is good for countries (see for example UK http://www.guardian.co.uk/higher-education-network/blog/2013/jan/24/value-of-uk-degree-investment ) but what about the numerous private H.E.I.s, that of course, countries cannot decide to nationalize and don’t have the money to subsidize.

Then we could argue that by employing a graduate, companies are paying him or her back for the cost of getting the degree. But someone is not paid because she/he has a degree, someone is paid to perform a task that contributes to the value chain of the organization and supports the generation of profits. Then, we could argue that companies are paying a premium if you are a graduate or a higher premium if you are a graduate from an institution perceived as better (and better often equates more expensive) and that this premium is covering the extra cost of studying. But here, companies are enjoying a market situation that to a certain extent they created. For example, there are countries where basically a Master is needed to land a job as a junior auditor in one of the big 4s. On the contrary, there are markets where a Bachelor is enough. And for the later, companies are paying to train the fresh employees to get the extra skills needed, and to get for example the ACCA or CPA accreditation (well they may train them also if they have a Master by the way). And the extra cost of getting a Master vs. a Bachelor is on the students. Just for the discussion, let’s imagine now an improbable scenario where students, because of the hiking fees, decide NOT to go anymore for a degree but to look for a job right after college. Who would then need to pay to train them to get the necessary skills? Companies…

. the interesting twist is that many companies claim on top of that, and rightfully, that they are not happy with the graduates they get and need to give them extra training in “basic” managerial skills, and for the larger ones, through their corporate universities, presented as a threat to higher education (http://www.forbes.com/sites/dougguthrie/2013/01/22/corporate-universities-an-emerging-threat-to-graduate-business-education/ ). If companies are not directly participating to a training that they are finally not fully satisfied with, forcing them to spend money after for extra training, why not funding studies directly, and participating in the definition of the curriculum?

There are cases where companies are acting differently. In France, for example, the concept of “apprenticeship”, which was before only for vocational training, has been extended to higher education. Thanks to a few public subsidies to support the initiative, you have more and more students who are working part time for a company, receiving a salary for that, and having their tuition fees paid by the company employing them. The result is that companies get a part-time employee (in training not trained) for a very small cost, can “test” a future full time employee, train them on the specific processes and culture of the company and students get paid while they study for free.

Other countries could take this as an example but also multiply opportunities for companies to participate through directed scholarships for example. Of course, it would mean that universities are also ready to involve even more the corporate world in the design of their curricula.

Happy to get your feedback on this one!

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