A National Perspective on Higher Education During Recessions

A higher education system is a national endeavor that strengthens capacity to participate effectively in an increasingly competitive global knowledge economy. It is also an enterprise that works best when it marshals talent and fosters leadership and commitment from all sectors of the national population (Task Force 2000). A financial crisis slices into the heart of this national endeavor by heightening the conditions that marginalize selected populations (ILO 1998). The poor remain affected, while the ranks of the vulnerable population grow larger as more citizens suddenly find themselves bereft of the financial wherewithal to cope. Moreover, economic crises and recessions have generally damaged the competitive edge of higher education in Asia. Rather than viewing such times as opportunities to proactively push ahead with major reforms that over the long term will sustain the dynamic rise of Asian higher education within the global system, there is less emphasis on long-term planning than on short-term measures to attain financial buffering and minor management reorganization.

Despite the recent trend toward massification in higher education, students from poor and vulnerable populations in the developing countries of the Asian region are less prone to enter and complete a tertiary education during a recession, and their absence diminishes the representation of national diversity in colleges and universities (Altbach and Umakoshi 2004). Moreover, when poor populations do manage to attend and graduate, they are less likely to locate employment in a depressed labor market. Other populations become more vulnerable and cannot afford private higher education. They are limited in seeking higher education overseas and governments are more likely to reduce scholarships for overseas study.

For poor and vulnerable populations, household finance affects decisions about whether to attend regular or vocational colleges, or to defer a higher education. Economic hardships experienced by households during a recession can affect the ability of students to complete their studies. It becomes more difficult for some households to pay education fees and their children may not be able to repay loans, especially when they are unable to locate employment after graduation. Some households may decide to defer higher education opportunities or select more practical alternatives to an academic track. While household savings and the value that families place on education help sustain access rates in some countries, the choice of what postsecondary institution to attend and what major subject to study becomes of increasing concern to students and their families.

Students from poor and vulnerable populations often attend institutions more likely to experience a drop in the quality of instruction during a recession, thus further decreasing student competitiveness after graduation in an already tightly stretched labor market.

Finally, cutbacks in higher education due to recession also have the potential to affect the amount of funding available for research in the fields of medicine, science, and technology that help poor communities overcome health threats, increase food production, and improve conditions associated with development.

To be sure, the development issues and challenges will differ across the countries of the region. Whatever the case, ministries of education and college and university administrators will be confronted with more complex situations that require increasing strategic governance capabilities (Postiglione 2006). While there were generally major declines in university budgets during the Asian economic crisis of the late 1990s, some places soon began to expand enrollments. Enrollments rose in many PRC universities. Public universities diversified and increased their offerings of market-driven courses. However, this expansion took its toll on the quality of instruction. In countries with large private sectors of higher education, like Indonesia and the Philippines, many households with children in private higher education or in overseas colleges and universities moved them to public universities in the home country, where the fees were less and subsidies were more readily available. This substitution effect from private to public higher education affected the management of academic staffing, but it also initiated higher levels of management autonomy and stricter measures of financial accountability. Public and private colleges and universities tried to twin with overseas institutions to lower costs, and some tried to team up with banks to foster offers of long-term, low-interest loans to students.

The one constant challenge to higher education in any recession is bound to be the rising unemployment rate among graduates. Unfortunately, this was already an emerging issue as a result of the sudden regional massification of higher education that grew at the turn of the century. Still, patterns differ across countries. For example, unemployment of tertiary education graduates in some countries has been far worse than in others. Moreover, the patterns of unemployment may differ among graduates of public or private institutions, as they do among graduates of regular or vocational-professional institutions of higher education (Postiglione 2009a, 2009b, 2009c, 2009d).

5.1 Income Groups Disproportionately Affected

Unlike the global recession, the Asian crisis of1997–1998 resulted from overambitious private sector investment. The declining value of currencies led to crises in banking and manufacturing that eventually resulted in a loss of jobs and a decline in household income. The root cause was not public sector inefficiency but rather the unrestricted inflow of private capital and its sudden withdrawal. Private domestic investment and human capital still drive growth in most places in Asia. Since private colleges and universities in Asia also outnumber public ones in most countries, public confidence can more easily be shaken during a recession if higher education access and quality experience a setback.

Aside from the poor, the rising middle class—the main clients of higher education—were seriously affected. While there was an expectation after the economic shock of 1997–1998 that enrollment would be significantly affected, this was not the case in all countries. Part of the reason was that many Asian economies differed from developed economies that had large government sectors. Large public sectors would naturally be required to make severe cutbacks but the late 1990s Asian recession was a matter of private sector collapse. Therefore, employment in the public sector was not severely affected and this included public higher education. However, the emergent middle class was hard hit with job losses. Still, its demand for higher education did not change. Government institutions of higher education continued to operate and represented hope for the future to a class that associated its rising status with the dual pillars of wealth and education.

Since the publics' sectors were small and not deeply affected, higher education was not devastated on the same scale as the private sector. Private higher education revealed its fragility and lack of stamina within a financial meltdown. Although the massification of higher education had not started at the time of the 1997–1998 crisis, a large proportion of the colleges and universities in Indonesia and the Philippines were private institutions. The PRC, Malaysia, and Mongolia had also begun to establish private colleges and universities but they represented a small proportion of the total. Viet Nam led the way in the privatization of higher education in country and among its neighboring economies of Cambodia and the Lao People's Democratic Republic. The two major urban centers of East and Southeast Asia with market economies—Singapore and Hong Kong, China—had not strayed from a public sector-dominated system, though they have begun to do so since then. In most cases, the 1997–1998 crisis caused a decline in employment and household income that led to a steady divestment of income elasticity, which affected enrollments in private higher education.

Those households with substantial savings were willing to expend part of it for educational purposes. Where household savings are substantial, this Asian pattern exhibits itself in many cases. The PRC expanded its higher education at the end of the 20th century, which would have been impossible without the amount of household savings that families were readily willing to make available for study costs. There are similarities in the global recession in other Asian countries. Even when household savings are low, Asian families are willing to borrow and take out loans for their children's education (as noted for Mongolian cattle-rancher households, above).

In short, the 1997–1998 crisis did not shake the strong commitment to higher education of poor and vulnerable populations. However, attendance was weakened in selected institutional sectors by financial hardships. When household savings were low, decisions about education costs were made on more pragmatic grounds. The quality and relevance of education during economic setbacks becomes increasingly important. Since recession of the late 1990s, quality assurance measures in Asian higher education has been increasingly promoted by the ASEAN University Network, an organization under the auspices of the Association of Southeast Asian Nations (ASEAN) (UNESCO 2004). The Internet has also become important for households as a source of information for making decisions about higher education in some countries, but in others there is still a need to improve the availability of both the information for decision making, and reliable and inexpensive counseling services for prospective students.

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