Economist: Give students and the labor market greater influence over the number of students accepted into programs

The students’ own wishes and the needs of the labor market should have a greater impact on the supply of higher education, researcher Mats Bergman argues in a new SNS report.

The Scope of Higher Education – Who Decides 541.7 KB PDF

Universities and colleges have since the beginning of the 1990s more or less unilaterally decided on the number of students in their programs. Politicians mainly influence the supply indirectly through the funding going to higher education institutions (HEIs). This approach should remain in place, according to Mats Bergman in the SNS report The Scope of Higher Education – Who Decides? However, he also argues that a bit more consideration should be given to what the students want and the situation in the labor market.

“I believe that the number of applicants and labor market prospects should affect the number of students for which HEIs receive compensation. This contrasts with the conclusions of the government study on this issue presented last year (SOU 2019:6), but there are good reasons for introducing such a model,” according to Mats Bergman, professor of economics.

However, he does not believe in giving the various parties in the labor market greater influence over the supply of education or focusing more on labor market forecasts. It is better to keep an eye on the so-called education premium and see how different programs affect future wages, Mats Bergman argues:

“The education premium has historically served as a stable and accurate indicator of which professions are in demand in the labor market. Hence, it should be highlighted in study counseling while also perhaps be taken into account when distributing the education budget between HEIs.”

In certified professions with a limited wage dispersion, such as teachers and nurses, the education premium does not represent a good measure of the needs of society. This means that other policy instruments may be needed. Teaching and health care programs are already being promoted politically, and Mats Bergman believes that such measures should continue. In some cases, furthermore, he argues that new stimulating measures may be needed.

“There are important programs, such as for teachers, where the number of applicants is so low that it hardly makes sense to increase the funding. One approach might be to forgive student loans upon graduation or after a few years of employment in the profession in order to increase the number of applicants,” says Mats Bergman.

At the same time, he cautions against having unrealistic expectations that HEIs should train highly specialized labor exactly corresponding to the needs of the labor market. Rather than further specialization, Mats Bergman argues in favor of an American model in which it is easier for students to alter their educational path over time.

about the author

Mats Bergman is a professor of economics at Södertörn University.