The state-run Philippine Institute for Development Studies said Monday the government should further invest in human capital, especially in higher education, to achieve the inclusive economic growth.
In a policy note “Promoting inclusive growth through higher education” by Dante Canlas, PIDS said investing in higher education contributes to growth and urged the government to implement several policy changes to build a critical mass of scientific and technical manpower.
The policy note said the rate of returns for high school and college graduates had a wide gap.
Studies on rate of return to college education support the view that the investment is remunerative, and that individuals can capture the benefits from such investment.
Latest data from the Philippine Statistics Authority showed that electronics and communication engineers had a monthly wage rate of P55,264, significantly higher than the P8,085 salary of unskilled workers.
PIDS said the demand for educated and skilled workers had been increasing and had widened the wage gap between the skilled and the unskilled.
“From a policy standpoint, this suggests that investments in higher education and skills training may help decrease the growing income inequality amid a rapid economic growth,” the policy note said.
“It is thus important for public policy to ensure that access to higher education and skills training required by these new jobs is expanded and equalized. Otherwise, income inequality gets perpetuated as the economy continues to grow,” it added.
PIDS said while the households mainly financed the tertiary education, the government could intervene through the Commission on Higher Education to set up programs that would financially aid the college education expenses.
It said CHED could set up loan program for college education, where the graduate could capture the returns from his or her investments through enhanced lifetime earnings.
PIDS says a student may be more studious in school and will have a drive to find a quality job with better yield to pay up for the loan and support the life he wanted.
The national government can also institute a fiscal policy regime in which the interest paid on student loans is admissible as a tax credit or a deductible expense in paying personal income taxes.
“One major task of the national government is to design a student loan program that minimizes loan defaults. This entails instituting caps on what the student can borrow per year for tuition support, and requiring parents to be co-makers,” PIDS said.
“Options for loan repayment must be incorporated in the design while taking into consideration the ability to pay of the individual over his or her life cycle,” PIDS added.
The policy note said a national loan program must be legislated with the CHED taking the lead in drafting the bill. A matching grant mechanism must be built into the design whereby regional [state universities and colleges], for instance, that are able to institute a loan program with minimal loan defaults can be rewarded with additional grants.
PIDS also urged CHED to start a one-stop shop, in partnership with other implementing agencies like the Department of Labor and Employment, Department of Trade and Industry, and Department of Science and Technology, to ease the transition from college to the workplace.