It’s not just higher taxes.
The higher-education system in Finland is supposedly every American progressive’s dream. The Finnish government pays 96 percent of the total cost of providing young Finns with a college education; almost all domestic students at Finnish universities pay nothing in tuition. Indeed, Finland subsidizes its universities more than any other country in the developed world. American advocates of free college say that if Finland can do it, so can we. But there’s a catch to the Finnish model, and it’s not just higher taxes.
Finland offers a nice deal for students only if they are lucky and talented enough to get in. In 2016, Finnish institutions of higher education accepted just 33 percent of applicants. That’s the degree of selectivity we’d expect from an elite college in America, yet that is the admissions rate for Finland’s entire university system. There is a price to pay for that kind of selectivity: Finland ranks in the bottom third of developed countries for college-degree attainment. Meanwhile, the tuition-charging United States ranks in the top third, thanks to open-enrollment policies at many of our colleges and universities, along with private financing and plenty of spots offered through a diverse range of institutions.
The Finnish example reveals a reality often glossed over by politicians and activists who advocate mimicking European-style free-college regimes in the United States: government budgets are finite, even when taxes are high. If a government elects to pay for a greater share of each student’s college education, something else has to give. Perhaps the university system will accept fewer applicants and produce fewer graduates, as is the case in Finland. Or maybe it will spend fewer resources per student, potentially lowering the quality of education. Finland is evidence that such tradeoffs are not mere theory or a false choice manufactured by miserly conservatives. Nor is Finland the only country where such stark tradeoffs are on display.
In a new report for the American Enterprise Institute, we compare the performance of 35 developed countries on three aspects of their higher-education systems: how many college graduates the system produces, how much funding is available per student overall, and what share of that funding comes from government sources. In a world of finite resources, these three qualities are inherently in tension with one another, and a government that tries to prioritize one quality usually has to sacrifice one of the others.
We find that the nations of the developed world approach this trade-off in different ways. South Korea, for instance, has the highest college attainment rate in the developed world: 70 percent of young Koreans have earned a college degree. But all those sheepskins have a steep opportunity cost. South Korea ranks near the bottom on our measures of funding and subsidies, leaving Korean students to pay most of the cost of their education and Korean universities to operate on tight budgets. This is the natural result of a system that seeks stratospheric college attainment rates with finite public funding: to keep total spending under control, policymakers must make sacrifices.
While some countries prioritize a heavily subsidized higher-education system and others pursue a high college attainment rate, the evidence suggests that it’s almost impossible for a nation to do everything at once. No large country ranks in the top third of developed nations on all three measures. A nation inevitably has to pick and choose what its higher-education system should emphasize. Does it want free college at all costs? Or does it want higher degree attainment or better-resourced universities, even if that means that students have to pay some tuition?
The United States has chosen the latter path. America ranks eleventh out of 35 countries on degree attainment, and a striking third on our measure of the total resources available to colleges. (Some might argue that administrative bloat and unnecessary amenities on American campuses makes the U.S. ranking on this last measure not entirely desirable.) The United States achieves this high ranking precisely because its government does not insist on picking up every penny of the costs of higher education; we do not prohibit colleges from charging tuition. Students and their families share the burden, and so the higher-education system can do more than it could if it relied on public funding alone.
America is not the only nation to follow this route. An analysis of the English higher-education system found that the end of free tuition at English universities preceded remarkable increases in both student enrollment and funding per head. Universities in the United Kingdom are now the best-funded in the developed world (by our measure), and also post impressive numbers on degree attainment.
Whether the American higher-education system is “better” or “worse” than its peers overseas is the wrong question to ask. Rather, it’s more instructive to compare the world’s higher-education systems on multiple dimensions, because different countries prioritize different outcomes. America is behind Finland on government subsidies, but ahead of it on degree attainment and total funding. Whether that makes America better or worse than Finland depends on your own subjective preferences.
Trade-offs are a fact of life, and higher education is no exception. As Americans debate how to best reform our higher-education system, considering the trade-offs involved will enable clearer thinking about policy proposals such as free tuition. Copying what we like about Finland might mean sacrificing what we like about America.
— Jason Delisle is a resident fellow at the American Enterprise Institute. Preston Cooper is a higher-education analyst. They are the co-authors of the new report “International Higher Education Rankings: Why No Country’s Higher Education System Can Be the Best.”