National and Private Universities: An Unfair Competitive Structure

At some point, it became fashionable to put “National” in front of a university’s name. Andong University became National Andong University, Gyeongsang University became National Gyeongsang University, and Mokpo University became National Mokpo University. This is a recent development. Anyone who knows these schools already knows they are national universities, so why did they go out of their way to brand themselves as “national”? As university enrollment quotas have come to exceed the number of prospective freshmen, universities are struggling to raise their freshman enrollment rates. That is because it is the most important indicator of revenue. Naturally, the more students a university has, the greater its financial capacity.

There is a rational—and powerful—reason these universities, which had always been national universities, suddenly wanted to emphasize that they are “national” institutions. In Korea, tuition at national universities is far lower than at private universities. According to the average tuition for four-year general universities and colleges of education in 2022 announced by the Ministry of Education and the Korean Council for University Education, the average at private universities was 7,523,700 won, while at national universities it was 4,195,700 won. National university tuition is only 55.7% of private university tuition. In other words, it is a little over half. If so, is such a tuition gap fair?

In fact, the tuition gap between private and national universities has existed for a long time. Private universities have had to cover everything from faculty and staff compensation to university operations and scholarships with tuition revenue, whereas at national universities, faculty and staff hold civil servant status, so their compensation is separately allocated from the national treasury. That is why national universities can keep tuition much lower. For reference, in the financial structure of private universities, faculty and staff labor costs amount to 74% of tuition revenue. It is easy to infer that national universities have greater financial leeway than private universities.

Of course, not all universities are the same. Students each have universities they want to attend, and, all else equal, they prefer schools with stronger reputations and a better fit for their career paths. Such preferences generally align with college admission scores. Put simply, universities become stratified into those attended by students with high College Scholastic Ability Test scores and school records, those attended by middle-tier students, and those attended by lower-tier students. As of 2022, the nation’s 194 general universities and colleges of education can be said to form more than ten layers, ranging from the so-called SKY universities to the lowest-ranked group. If so, tuition differences among these university groups are inevitable—if the market is functioning.

And yet, strangely, in Korea there is almost no tuition difference by university tier. Excluding institutions with different characteristics, such as Korea National Open University, theological colleges, and cyber universities, Eulji University charges the highest tuition at over 10 million won, while Busan National University of Education charges the lowest at around 3 million won. A gap of 7 million won may appear large enough, but it is not. A closer look at the statistics reveals an interesting point. Among the list of 42 universities from Busan National University of Education, which has the lowest tuition, to Korea National University of Arts, there is not a single private university.

In Korea, tuition differs not by university quality level, but by whether a university is national or private. What does this mean? At universities of similar quality attended by students with similar academic records, among tuition, distance from home, and career path—the factors commonly said to matter most in university choice—tuition is likely to have an overwhelming influence.

Given that the quality of professors, the content of educational services, and educational conditions or environments are nearly equalized between national and private universities, the price advantage enjoyed by national universities is nothing less than an enormous privilege that private universities cannot possibly have.

Of course, in the past, the number of students far exceeded university enrollment quotas, and any student wishing to attend university had little choice but to attend either a private or a national university. For that reason, there was less criticism of the privileged price advantage enjoyed by national universities. This was also a time when universities competed far less intensely than they do now to fill freshman seats. It may have been a comfortable period for universities, but it was also a period in which university competitiveness gradually declined. The competitiveness of Korean higher education is markedly low relative to the country’s level of economic development.

Now the situation has changed. Universities are engaged in all-out competition to attract even one more freshman. Some of this is extremely short-term, such as admissions strategies, but universities are also paying attention to investment in facilities, expanding student convenience spaces, and making efforts to recruit excellent professors. They run a variety of extracurricular programs for students and even employ career counselors who kindly advise students one by one, calling each by name. Compared with university services several decades ago, the difference is night and day.

What wipes out all of these tearful efforts by universities at once is precisely the tuition gap between national and private universities. If you were choosing for your child, where would you send them: to a private university requiring 7,523,700 won, or to a national university requiring 4,195,700 won, assuming the schools were of similar quality? A difference of 3,328,000 won is bigger than one might think. For reference, the average monthly wage of Korean salaried workers in 2021 was 3,271,000 won. The unfair competitive structure between national and private universities is having a fatal impact on the university system. If current trends continue, private universities can never win competition against universities in the same region with similar admission-score levels. No effort to enhance university competitiveness can work. Students are choosing universities based on tuition.

There is one more issue. The incentives of faculty and staff at national universities, who hold civil servant status, cannot but differ from those of faculty and staff at private universities, who must worry about compensation. Imagine who is more likely to make greater efforts at innovation. Human beings respond to incentives. The result is the relative marginalization and slide toward crisis of private universities, which strive fiercely to survive, and, on the other side, the relative stability and lack of innovation of national universities under the superior privilege of low tuition. In such a system, there can be no guarantee of qualitative improvement in higher education services across Korea as a whole.

In 2023, are Korean universities really engaged in fair competition? If the Ministry of Education, after a long while, is rolling up its sleeves to reform university regulations, this is the very first issue it should address. The regulation that constrains the competitiveness of Korean universities, produces the unfair structure among them, and hinders innovation is the nearly twofold tuition gap between private and national universities. At a time of rapidly declining school-age population, all universities are struggling. The statistics themselves indicate that a substantial number of universities will have to close. But that reality must not be allowed to turn into a structure in which, merely because of the unfair competition created by tuition differences, only national universities enjoy overwhelming superiority in each region. Experience shows that in difficult times, ideas and movements of creativity and innovation often spring forth instead. So in the years ahead, while some universities will disappear, truly excellent universities should also emerge.

What, then, should be done? Korea has too many national universities. If the government is to remain involved in higher education, which is a private good, it should no longer operate national universities and place educational products in competition with private universities. The government should concentrate on areas of higher education that are truly necessary, and for the rest, whether through corporatization or some other means, national universities that provide the same educational services as private universities should be moved into the private sector. In that way, efforts at innovation among universities and competition to improve the quality of university education should become far more intense than they are now. In an already uncertain era, the private sector in higher education must not face a fiercely competitive market while national universities enjoy an easy monopoly market. Economics textbooks explain that the greatest harm of monopoly falls on consumers, who must endure unfair prices. Seen in this light, the greatest victims of the unfair competition between private and national universities in Korea are also students and parents. It is now time to properly reform university regulation.

Hyukwoo Lee, Professor, Pai Chai University

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Original title: 국립대학과 사립대학, 그 불공정 경쟁구조

Author: Hyeok-woo Lee

Date: 2023-03-09

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=25446