Transcript Higher Education in Europe: Crisis and Opportunity

Higher Education in Europe:
Crisis and Opportunity
Howard Davies
Director
London School of Economics
Microsoft Government Leaders Forum
Lisbon
31 January 2006
Two subjects, linked by the Lisbon Agenda
– the status of EU universities
– the contribution they can make to European
competitiveness, directly and indirectly
European Universities do not feature strongly in international league tables, from
Shanghai …
Shanghai Jiaotong University Top World’s
Universities by region 2005
Canada, 2
Asia, 2
Other Europe,
4
Australia, 0
United
Kingdom, 5
United States,
37
Source: Shanghai Jiaotong University
…to London
THES World’s Top 50 Universities by region
2005
Canada, 3
Asia, 8
United States,
20
Other Europe, 5
Australia, 6
United
Kingdom, 8
Source: Times Higher Education Supplement
Public, and especially private investment is lower than in the US or
Australia…
Total investment in higher education as a
percentage of GDP 2002
3
2
private expenditure
1.5
public expenditure
1
0.5
tr a
lia
ly
Au
s
Ita
y
G
er
m
an
ce
Fr
an
U
ni
te
d
K
d
S
in
g
ta
te
s
do
m
0
U
ni
te
% of GDP
2.5
Source: Education at a Glance 2005
…and expenditure per student is lower
Total expenditure per student on higher
education, excluding R&D, $PPP
Germany
France
Britain
Australia
United States
0
5
10
15
20
25
$ '000
Source: OECD
20 years ago, expenditure on British students was above the US, now it is
well below
Unit funding per student in real terms in
UK and US (private) Universities
Unit Funding (£'s)
12,000
10,000
8,000
UK
6,000
US
4,000
2,000
0
2002
1982
Year
In the UK, research income from business rose in the 1990s but has now flattened
off
Higher education income from UK industry
and commerce
Source: HESA FSR 1997-2004
Private American universities have massive endowments
University endowments in the US & UK 2002 in
£ millions
12,000
10,000
8,000
6,000
4,000
2,000
0
Harvard
Yale
Princeton
Stanford
Cambridge, UK
Oxford
Glasgow
LSE
Fewer EU citizens will have degrees than those in the US or Australia
Stylised international skills projections
to 2020
27
50
62
43
14
33
51
48
52
41
Below upper secondary
20
ng
do
m
Au
st
ra
l ia
G
er
m
an
y
Fr
an
ce
18
25
38
U
ni
te
d
Ki
U
SA
2
16
Upper secondary
43
31
35
10
Tertiary
Ita
ly
40
Ja
pa
n
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Note: Columns may not sum to 100 due to rounding.
Source: Leitch Review International Projections
Europe is making efforts to make its universities more attractive
The Bologna Process
1998

1999
2001
2003
2005
Sorbonne
Declaration
“strengthen
international
competitiveness of
European higher
education”

Bologna
Declaration
“ enhance the
attractiveness of
European higher
education
worldwide”


Creation of
European
University
Association
Prague summit

Berlin
summit

Bergen summit
In spite of lower employment rates…
International comparisons of employment
and unemployment rates
…EU productivity performance still lags the US
The Macroeconomic picture on productivity Relative total factor productivity (US indexed
to 100)
120
100 100
100
85
84
80
77
81
70
78
60
40
20
0
U.S
Germany
Manufacturing sector
France
Market Economy
U.K.
Source: O’Mahoney and
De Boer, 2002
The UK and France, in particular, have a tail of poor performers
Management practice assessment scores show
greater intra-country variation than inter-country
variation (% of companies, by management practice score)
U.S: Average = 3.39
1
2
Germany: Average = 3.2
3
4
5
1
2
2
4
5
U.K: Average = 3.07
France: Average = 3.13
1
3
3
4
5
1
2
3
4
5
But weak management is also a major reason
Management practice scores across
countries
US
3.39
Germany
3.2
France
UK
3.13
3.07
Management practice alone
can account for 10-15% of
the U.S. – U.K. productivity
gap
Source: Corporate assessment interviews;
McKinsey/LSE analysis
Competition and new business creation are important factors…
Consistency with selection and vintage effects
when split by competition
Implications
0.15
• Higher
competition tends
to eliminate poorer
managed firms so
average
management scores
are higher
0.1
0.05
0
• Younger firms
appear to be
deploying better
Management
practices
-0.05
-0.1
-0.15
2
4
6
8
10
High competition
15
25
40
50
100
Low competition
Corporate assessment interviews;
McKinsey/CEP analysis
…as are labour regulations
Negative effects of labour regulations
Index of firing and dismissal costs (Botero et al 2005)
US
UK
0.22
0.63
Germany
1.06
France
1.29
• Regulatory “bite” significantly higher when manager has been in the job for a long time
• Implies regulations may enable workers and managers to block change
• Older workers and managers dislike change
• Heavy firing costs may provide them with the security to oppose change
Conclusions
• Many EU Universities are not globally competitive
• Enhanced investment in Higher Education would help
with the ‘Lisbon Agenda’
• Needed investment is likely to come from diverse
sources, including business and individuals: both
students and alumni
• Universities need greater freedom to charge and raise
income
• Universities can also make a contribution to
understanding the sources of competitiveness