IZA Newsroom

IZA – Institute of Labor Economics

admin

What happens to student applications when university tuition fees go up?

by

By Filipa Sá (King’s College London and IZA)

The coalition government’s increase of university tuition fees in England in 2012 has led to lively debates on how the cost of higher education affects university applications, particularly for students from disadvantaged backgrounds. Labour has brought this issue back to the centre of their election campaign, by pledging that if it is elected, tuition fees would be cut from a maximum of £9,000 a year to £6,000 a year.

By looking at the variation in university tuition fees in England and Scotland, my research has attempted to measure the effect of fees on applications and attendance.

The situation is very different on each side of the border because of two reforms. In 2001, the Scottish government removed upfront tuition fees, replacing fees of £1,000 a year with an endowment scheme that required students to pay a total of £2,000 after graduation. This endowment scheme was itself eliminated in 2007, meaning that Scottish students do not pay any fees to attend university in Scotland. In England, the coalition increased fees from a maximum of £3,375 a year to £9,000 in 2012.

Using data on applications from the Universities and Colleges Admissions Service for the period 1998-2013, I found that the removal of upfront fees in Scotland in 2001 increased applications by about 26%, while the increase in fees in England in 2012 reduced applications by about 19%. These results imply that a 1% increase in tuition fees leads to a fall in applications between 0.14% and 0.26%.

In England, applications dropped in 2012 and then picked up in 2013 and 2014. But the question is whether they would have increased by more in the absence of the reforms. If they had followed the same trend as in Scotland, then they should have increased by more in 2013.

To test whether this effect differs by institution and subject, I merged applications data separated by gender, institution and subject area, with information on average salaries and average employment rates of students six months after they graduated from their first degree.

Applications to institutions and subjects that lead to higher salaries and higher employment rates after graduation – such as medicine, dentistry and engineering – are much less affected by changes in fees. These results are consistent for the 2001 Scottish reform and the English reform in 2012 and suggest that students respond to higher fees by choosing courses that offer better employment prospects after graduation.

No drop off for disadvantaged students

To examine whether the increase in fees in 2012 had a disproportionate effect on students from less advantaged backgrounds, I looked at data from the Higher Education Statistics Agency (HESA) on the number of first-year undergraduates by ethnic group and by local authority for the period 2008-2013.

Although students from ethnic minorities are less likely to go to college, they were actually less affected by the increase in fees in 2012: the number of first-year black undergraduates fell by about 5%, between 2008 and 2013, compared with 28% for white students.

There is also no evidence that attendance has decreased more among students from local authorities with lower rates of participation in higher education. This suggests that fair access schemes and the provision of student loans are improving access for students from disadvantaged backgrounds.

Impact of any future cuts

The results of this study suggest that the Labour party’s proposal to reduce the cap on tuition fees in England from £9,000 to £6,000 could increase applications by between 5% and 9%. However, a reduction in fees would mean that a larger share of university funding would need to come from general taxation.

The Labour party has said the estimated £2.7 billion gap would be plugged by raising extra taxation by restricting pension tax relief on those with the highest incomes. Other parties have questioned how to ensure any money raised in taxation is passed onto universities.

If most of the benefit of a university degree is social – because society as a whole benefits from having well-qualified doctors, nurses and teachers – it makes sense to charge lower fees and fund universities out of general taxation. But if students are the ones who benefit the most from having a degree, it would make sense to charge higher fees, particularly for courses that lead to better paid jobs after graduation.

This article was originally published on The Conversation.
Read the original article.

The ConversationDisclosure statement: Filipa Sá receives funding from a British Academy small grant.

image source: pixabay

Interview: Costs and benefits of emigration from West Africa

by

Held in Dakar, Senegal, this year’s IZA Annual Migration Meeting acquired a tragic topicality: The ongoing loss of lives in the Mediterranean Sea makes migration from Africa to Europe one of the most pressing policy challenges at the moment. Tomorrow German policymakers will come together at a refugee summit in Berlin. However, much of the European debate centers on how to deal with (and pay for) the inflow of refugees.

To provide an inside view from one of the major source countries of African emigration, we talked to Mamadou Dansokho (University Cheikh Anta Diop of Dakar and CRES), who is an expert on migration and economic development in West Africa:

How would you describe emigration from Senegal in terms of the costs and benefits for your country?

Dansokho: Senegal has a long history of emigration to Europe. The first wave of emigrants left the country after the Second World War, while the most important wave occurred in the 1970s, when many people from the North and South East of Senegal moved to Europe. These emigrants have been instrumental for their hometowns until today. Through remittances, they not only support families, but they help building and maintaining hospitals, and thus invest in the education and health of the people left behind.

But emigration also comes at a cost. Many emigrants have relatively low education levels. At the same time, they serve as role models for young people. Instead of aspiring to go to university, many young people think that education is not important because they can do better by moving abroad. Thus, many young people no longer believe in the benefits of higher education, and even of work. This is an enormous economic cost.

But there is also a social cost for the Senegalese abroad and the societies they live in. Children of the second immigrant generation find it increasingly difficult to integrate in the society. Take the example of France. Many young Africans only know poor areas in the Banlieue. There is a great emptiness in the young generation, a lack of identity, which makes them vulnerable to fundamentalism.

What can West African and European policymakers do to stop the refugee tragedy in the Mediterranean Sea?

Dansokho: It’s a drama. Africa and Europe certainly look back on a difficult common history. But one has to realize the cynicism of today’s world. European societies are very rich, and they know well the situation in most African countries. Without economic development, the only hope for young Africans is to move abroad. And while we live in a globalized world, it only goes so far. We have been asked to sign agreements which ensure free movement of goods and services, but which exclude the free movement of people.

At the same time, young people who want to pursue their higher education in Europe, especially in France, face difficulties. They are often brilliant minds, but the bureaucratic hurdles to enroll in a French university are enormous. Many young people are now more oriented toward the United States, and even China, because university access there is easier, and the universities are more integrative.

Also, even though civil rights are important in Europe, Europe has no harmonized rights for immigrants. African immigrants often feel marginalized, which can breed fundamentalism. Europe needs to improve the rights for immigrants. At the same time, if the goal is to control emigration from Africa, more funds will need to be provided for economic development in Africa.

“Who owns the robots rules the world”

by

A new generation of serfs could be created if employers don’t take more action to create shared ownership of companies and technologies, warns Richard Freeman (Harvard University) in a new IZA World of Labor article. His suggested solution also addresses the rising income inequality: Workers must own part of the investment gained from robots. This will enable workers to benefit from the technologies that threaten to replace them:

“Without ownership stakes, workers will become serfs working on behalf of the robots’ overlords who own the companies and corporate capital. […] If human workers own a stake in the capital gained from the technologies that are changing the world of work, they will be provided with a steady stream of income and more inclined to accept increasing robotization of the workplace.”

The article sets out five key recommendations for creating employee ownership:

  • Spreading employee ownership across the whole company by including robots and intellectual property in the company valuation
  • Increase the proportions of workers’ income through capital ownership rather than direct employment
  • Create employee ownership trusts to manage ownership
  • Support more stock options as part of an employee’s pay package, or allow workers to buy shares at lower rates
  • Government support for the creation of employee ownership

The IZA World of Labor article argues that the establishment of shared ownership of robots and new technologies will also help businesses maximize on the benefits of robot technologies. If workers are comfortable with them and become a highly skilled workforce alongside machines, this will also result in better performance rates and increased productivity.

Freeman concludes:

“Each country will have to choose the way that best fits to spread worker ownership and capital so as to give a stream of earnings that are changing the world of work. With appropriate policies, the higher productivity due to robots can improve worker well-being, by raising incomes and creating more leisure time. To benefit from this, workers need to own the capital of companies rather than rely on government redistribution policies.”

The article attracted international attention in leading papers like Süddeutsche Zeitung (Germany) and El Mundo (Spain).

image source: pixabay

International Workers’ Day Address: The Big Trade-Off in the World of Labor

by

On May Day 2015, which also marks the first anniversary of IZA World of Labor, IZA Director Klaus F. Zimmermann takes the opportunity to describe key shifts in the world of labor and to discuss their impact on future employment. With robots and automation on the rise, labor market pressures are felt around the globe. Still, the “end of work” is not in sight, says Zimmermann. But work will take on different forms, and constant innovation is required to smartly balance the ups and downs of changing workforces and workplaces. Zimmermann remains optimistic: After all, societies have been able to cope with other earth-shaking changes in the past.

View his International Workers’ Day Address on video:

The full text of Zimmermann’s speech is available as IZA Policy Paper No. 100 and was published in international media.

New IZA WoL book featured on Bloomberg TV

Launched a year ago, the online platform IZA World of Labor already contains close to 150 articles providing decision-makers with relevant and succinct information based on sound empirical evidence. To celebrate our first anniversary, we have published the first page from over 100 articles to provide a convenient reference guide to the research available on key policy topics:

  • Evidence-based Policy Making in Labor Economics (now in print)

Read the opinions of key figures from the IZA World of Labor community on the future of the global labor economics landscape.

Join the debate: #FutureWork and @IZAWorldofLabor

A new definition for ‘replications’ in social science

by

A series of small wars have recently erupted between researchers in labor, development, and other fields of economics. They involve disagreements over studies claiming that they cannot “replicate” some earlier study’s result.

Replication lies in the bedrock of science. The pathological science underlying “cold fusion” was uncovered after one lab claimed to generate boundless energy in a cheap, low-temperature chemical reaction but other labs could not replicate it. Likewise in social science, when others learn that a famous result could not be replicated, they wonder about the original researchers—thinking at best of carelessness or freak chance, and at worst of deliberate deception or outright fraud.

This ambiguity makes the claim of a failed replication extremely serious. Heated, protracted controversies are common. The original authors (usually more senior) often attribute the new study’s results to differences of method that disqualify it as a replication, and complain of perverse incentives for attention-getting “gotcha” studies. The new study’s authors (usually more junior) complain of intimidating blowback that deters others from doing any replication studies at all.

Failed “replications” carry a stinging stigma

A new IZA Discussion Paper by Michael Clemens proposes one modest step to move beyond this impasse: Social science needs a single, clear definition of what a ‘replication’ is. This would make it clear what it means when a study ‘fails to replicate’ some earlier result.

The definition is simple but technical: A follow-up study replicates an original study when the follow-up study estimates a parameter from the same “sampling distribution” as the original. This means that the methods in the original study and the follow-up should be so similar that, if each of them were repeated countless times, they would arrive at practically identical estimates.

For example, if a follow-up study substantially alters the statistical methods or sampled population used in the original study, this definition makes it wrong to say that the original results could not be replicated. It could be said that the original results were not robust to reanalysis with different methods, or were not robust to extending the data to cover a different population. But these classifications do not carry the stinging stigma of a failed “replication”.

The discussion paper digs into the literature to show why this definition makes a difference. First, it spells out the definition of a replication test, contrasts it with the mutually exclusive category of “robustness” tests, and gives several examples of each. Second, it catalogs 41 different (and often conflicting) definitions of “replication” in the social science literature. Third, it classifies numerous recent and prominent follow-up studies, finding that only about one third of them qualify as replication studies by the proposed definition.

image source: pixabay

Air pollution impairs productivity of professional soccer players

by

Air pollution is the top environmental risk factor of premature death. Annual costs of environmental damage for the European countries range between 60 and 200 billion euros, according to the European Environment Agency. The trade-off between the population health benefits of limiting air pollution and the negative impacts on industrial activity and employment has been well documented in the economics literature. A new paper by IZA researchers Andreas Lichter, Nico Pestel and Eric Sommerr looks at an aspect that is highly relevant in this context – the negative effect of environmental pollution on individual labor productivity.

The study is based on panel data for professional soccer players in Germany over the period 1999-2011. Professional sports data offer consistent and comparable measures of productivity, which are largely missing for other occupations. The authors use a player’s total number of passes per match as the main productivity indicator and combine this data with hourly information on the concentration of particulate matter in spatial proximity to each stadium at the time of kickoff. The match scheduling rules of the “Bundesliga” are beyond the control of teams and players. This setting creates exogenous variation in the players’ exposure to air pollution, thus overcoming endogeneity concerns arising from residential sorting and avoidance behavior.

[Read more…] about Air pollution impairs productivity of professional soccer players

Debunking the myth of job-stealing immigrants: NYT article draws on research from the IZA network

by

In the face of increasing migrant flows, public discourse often focuses on the perceived negative effects on the native population. But do less educated immigrants really displace similarly skilled native workers? Or do they rather complement native skills, thus stimulating natives’ specialization and increasing their job opportunities and wages? A recent New York Times article seeks to debunk the myth of “job-stealing” immigrants. It cites research by various IZA network members including Giovanni Peri (University of California, Davis), one of the leading experts on this topic.

In a new IZA Discussion Paper, Mette Foged and Giovanni Peri examine the labor market outcomes of low-skilled natives in response to massive inflows of immigrants to Denmark during the period 1991-2008. The inflow, mainly caused by refugees from Former Yugoslavia, Somalia, Afghanistan and Iraq, consisted of mostly low-skilled workers, who were distributed across Danish municipalities through a centralized program. This administered distribution of immigrants provides a “natural experiment” to assess the impact of immigration on native labor market success.

[Read more…] about Debunking the myth of job-stealing immigrants: NYT article draws on research from the IZA network

Robots at work: Boosting productivity without killing jobs?

by

What have industrial robots done for growth and employment? IZA affiliate Georg Graetz and Guy Michaels answer this question using novel data on industrial robots in 14 different industries in 17 developed countries including Germany, Australia, South Korea, and the US, over the period 1993-2007.

Their findings: Robots account for one-sixth of productivity growth on average across countries. They also account for more than a tenth of total GDP growth. And while robots do not seem to reduce overall employment, there is some evidence that they reduce the employment of low-skilled and, to a lesser extent, middle-skilled workers.

By Georg Graetz and Guy Michaels

Robots’ capacity for autonomous movement and their ability to perform an expanding set of tasks have captured writers’ imaginations for almost a century. But more recently, robots have emerged from the pages of science fiction novels into the real world, and discussions of their possible economic effects have become ubiquitous (see e.g. The Economist 2014, Brynjolfsson and McAfee 2014). However, there has so far been no systematic empirical analysis of the effects that robots are already having.

We compile a new dataset spanning 14 industries (mainly manufacturing industries, but also agriculture and utilities) in 17 developed countries (including European countries, Australia, South Korea, and the US). Uniquely, our dataset includes a measure of the use of industrial robots employed in each industry, in each of these countries, and how it has changed from 1993-2007. Our data on these robots come from the International Federation of Robotics (IFR). We obtain information on other economic performance indicators from the EUKLEMS database. [Read more…] about Robots at work: Boosting productivity without killing jobs?

On the origins of dishonesty: Do kids learn to cheat from their parents?

by

Dishonesty is a pervasive and costly phenomenon that may threaten mutual trust and social cohesion. But why is it that men tend to lie or cheat more often than women? IZA fellow John List and his co-authors Daniel Houser, Marco Piovesan, Anya Samek and Joachim Winter explore a possible explanation in a lab experiment (IZA DP No. 8906), which shows that parents are more likely to cheat in front of sons than in front of daughters.

(Note: This column was originally published on voxeu.org; edited and reposted with permission.)

Dishonesty is a widespread and multifaceted phenomenon – every day, the news brings reports of corporate dishonesty generating millions of dollars of costs to society. These public scandals, however, account only for a small part of dishonesty in society. Many ordinary people who consider themselves honest nevertheless sometimes cheat on taxes, steal from the workplace, illegally download music from the Internet, or use public transportation without paying the fare. The social cost of small-scale dishonesty is surprisingly large. As Dan Ariely summarizes in a recent article, the ‘tax gap’ – the difference between what the IRS estimates taxpayers should pay and what they actually pay – exceeds $300 billion annually; and employee theft and fraud is estimated at $600 billion a year in the US (Mazar et al. 2008).

[Read more…] about On the origins of dishonesty: Do kids learn to cheat from their parents?

‘High’ achievers? Students banned from cannabis shops perform better at university

by

Should the recreational use of cannabis be legalized? In recent years, there has been a momentum towards more liberal drug policies across the world. In Europe many countries have decriminalized consumption. In Germany, Berlin is considering opening up the first legal cannabis shop of the country. Uruguay plans to be the first nation in the world to fully legalize all aspects of the cannabis trade. In the U.S. over 20 states now allow medical marijuana use, and recreational consumption has become legal in Alaska, Oregon, Washington and Colorado. With scarce empirical evidence on its societal impact, these policies are often implemented without much knowledge about their potential effects.

A recent IZA discussion paper by Olivier Marie and Ulf Zölitz provides new empirical evidence to the legalization debate by looking at the side effects of a very unusual policy experiment that took place in Maastricht, the Netherlands. In 2011, a temporary city-wide regulation was introduced which restricted legal cannabis access via licensed ‘coffeeshops’ depending on individual’s nationality. Only Dutch, German and Belgian passport holders maintained access while other nationals were prohibited from buying cannabis legally.

[Read more…] about ‘High’ achievers? Students banned from cannabis shops perform better at university