Impeachment Scandal's Overlooked Victim: Korea's Higher Education

Until the Choi Soon-sil scandal broke, one of the issues at the forefront of attention in South Korea was the state of higher education. Particularly contentious was the debate about how to handle the progressively decreasing enrollment rate. As impeachment proceedings and economic anxiety have slogged on, this debate has been largely forgotten, despite its central importance in shaping the country’s future.

The problem is conceptually simple. The birthrate in Korea has steadily decreased for the last three decades, resulting in fewer and fewer high school graduates available to enroll in postsecondary institutions. Beginning this year until 2020, the number of high school graduates will decrease by about 9 percent. From 2020 to 2022, an additional decrease of 15 percent will follow.

The future consequences of an aging population, one in which fewer and fewer young people join the workforce, has been discussed at length through a variety of media. Usually, the examples used in these discussions are Japan or certain European countries, all of which have already experienced the first phases in demographic reordering. The economic burdens of a demographically top-heavy society are serious, threatening the integrity of a country’s economy as well as the viability of social programs and retirement.

In the last few decades, several strategies have been employed by various countries to alleviate these burdens. Thus far, discouraging retirement and promoting immigration have been two of the most successful. A host of European countries and even the United States have been able to enjoy sustained economic growth largely because of sustained immigration, which allows for the continued addition of new labor, new consumption, and, therefore, new taxes.

Higher education is another area easily threatened by a top-heavy demography. Despite high levels of investment in research and technology globally, tuition is still the primary source of income for the vast majority of academic institutions. When new enrollments go down, so too does income, putting faculty, facilities, and quality at risk.

For many universities in countries like England, France, and Australia, decreasing populations of native students have been balanced out by opening doors to foreigners. Not only have these universities enjoyed high demand from international students, enough to overcome native losses, but the “international student” label has allowed them to charge even higher tuition, in some cases two or three times more than what a native student would pay. The high popularity of a foreign education, particularly for wealthy Chinese students, has resulted in the formation of a very successful industry.

Japanese education policy, unlike its Western counterparts, charted a very different course during the 1990s. During this period, Japan experienced the first major drop in new enrollments by native students, losing a little more than a quarter of all new enrollments from 1990 to 2000. Instead of opening the door to foreigners, Japanese officials instituted policies to encourage more enrollments by natives, confident market forces would work themselves out. Three factors contributed to this confidence and the resulting divergence in policy.

The first was a cultural conservatism that frowned on the idea of a large influx of foreigners. Calculated into this conservatism was fear of the bad image of giving university slots to foreigners and appearing to take them away from native Japanese. This perception was particularly volatile politically because graduation at that time more or less connected to immediate employment, potentially implying the government was allowing foreigners to take away Japanese jobs.

The second contributor was the lack of English-speaking students and faculty. The common aspect shared among Western universities quick to embrace international students was the ability to teach and learn in a global language: in virtually all cases, this language was English. The Japanese spend somewhere around $8 billion each year for foreign language education, the vast majority of which is ESL (English as second language) training. Despite this investment, very few can speak or write. The same goes for most university faculty, preventing them from teaching international audiences while also requiring the frequent hiring of English translation or editing services when authoring research papers. A colleague of mine in Japan went so far as to say only about 5 percent of all Japanese professors can write their own papers in English. No doubt this was one of the major deterrents in opening more international enrollments.

The final factor had to do with confidence in the continued consumption of Japanese domestic services. As has been noted by others, the Japanese economy is unique in that it has very strong domestic markets. This was even more so in the 1990s. In 1990, the enrollment of high school graduates into domestic universities, colleges, and junior colleges was around 39 percent, even higher than it is for U.S. students enrolled in U.S. colleges today. With the number of Japanese enrolled in domestic technical colleges and other post-secondary institutions added in, this number was 55 percent.

Three economic trends of the time allowed Japanese officials to have confidence that continued domestic consumption would balance out the 26 percent drop in new enrollments from 1990 to 2000.The first trend was Japanese wealth. In 1990, Japan was still the second largest economy in the world with robust average household disposable incomes worth around $29,000 in today’s dollars. The second trend was an increasing willingness of average Japanese to borrow money to invest in themselves: through education, real estate, and stocks. This willingness was demonstrated by a near linear increase in household debt, from about 30 percent GDP in 1970 to about 69 percent by 1990. The third trend was the increasing number of jobs requiring college degrees. This created a natural incentive and pressure for young people to enroll in higher education. This pressure was actively promoted by the Japanese government in concert with the private sector through marketing and expansions of student loan programs with lower interest rates.

From 1990 to 2000, the prediction that domestic market forces, lubricated with student loans, would balance out the loss of new enrollments paid off even better than expected. Not only did Japanese university and college enrollments increase to 51 percent by 2000, enrollments including technical and other post-secondary institutions soared to 70 percent, absorbing any native losses with a surplus. This surplus of new enrollments was reflected in a stunning increase in the number of higher education institutions, from 507 in 1990 to 649 in 2000. This increase persisted until 2010, when the number plateaued at 780.

Given this Japanese model, one must ask how the Korean situation compares. What should Korean educators learn from the Japanese experience and what should they be doing to prepare for their own demographic shift?

The first thing to realize is that the Japanese situation in 1990 was much healthier economically. In 1990, Japanese household debt was a little less than 69 percent of GDP. Korean household debt is currently a shade over 90 percent GDP. This is despite the fact the average Japanese household had more buying power in 1990 than the current Korean household: roughly $7000 more disposable income after adjustments for inflation. This essentially means Korean households are already in more debt on average and have less ability to repay, making the prospect of taking on new loans very challenging.

This added burden can be seen in student surveys, which show about 58 percent of all current Korean university students already have some debt related to tuition or college living expenses. This is much higher than the 40 percent rate of current Japanese students with loans. Although I could not obtain a figure for the percent of Japanese students in 1990 with education debt, I have to imagine it was lower.

Another critical difference between Korea’s current situation and Japan’s in 1990 is the unemployment rate for new college graduates. Japan, with its long tradition of over-employment, enjoyed a college graduate unemployment rate of less than 2 percent in 1990, a figure that still hovers around 3 percent today. Korea’s unemployment rate for new graduates was a whopping 32 percent in 2014 (more recent figures have been hard to come by). This, in many respects, is the biggest problem for current Korean education policy. Unlike the Japanese case, there is no guaranteed incentive an investment in college will actually pay off.

Taken together, the above trends make it difficult for Korea to absorb a large drop in new enrollments following the Japanese model. There simply isn’t enough debt flexibility to make it happen and no obvious guarantee from the student’s perspective that debt can be repaid with timely employment.

In an effort to combat the issue, President Park Geun-hye’s predecessors instituted a series of expansions and reforms in student loan programs to make more money available and at lower interest rates. The key piece of President Lee Myung-bak’s policy was the 2010 “Deundeun Student Loan” program which deferred payments until graduates obtained a job with a certain income level deemed high enough to begin making payments. By 2015, however, it was abundantly clear this policy was a failure because over 71 percent of all students with Deundeun loans had yet to achieve the necessary income status.

Likely recognizing the Japanese model wasn’t going to work, Park’s administration, before the scandals broke, embarked on a two-pronged strategy. The first involved systematically assessing universities and earmarking the lowest performers for punishment. Two forms of punishment were instituted. The first was a denial of public funding and restriction of government loans for students. This, incidentally, allowed the government to significantly reduce its education budget, likely in anticipation of decreasing future tax revenue. The second form of punishment, more drastic, was the forced closure of the poorest performers.

The new policy was met with repressed backlash, especially since the education bureau never disclosed what criteria was being used for the earmarking. Last June, this process led to the forced 2018 closure of two universities: Seonam Medical College and Hanlyo University. Because of the recent political scandals, concerns have emerged about political motivations perhaps being involved. A few netizens even went so far as to joke whether the two schools were targeted because they were the ones who gave Choi Soon-sil the smallest bribes.

Potential entanglements aside, the expectation in the summer of last year was that more orders for closure would follow. This prompted most universities to scramble desperately in an effort to improve enrollment and graduate employment rates, the two figures largely suspected of having the greatest influence on the education bureau’s murky earmarking criteria. Now that the political scandals have broken, the earmarking policy has been put on hold, pending the next presidential election. It remains unclear whether the closure orders for Seonam and Hanlyo retain validity.

The second prong of Park’s strategy was more mainstream, involving government funds to promote the expansion of international enrollments in Korean universities. Given the record high popularity of Korean culture, particularly among other Asian countries, this policy seemed like an obvious opportunity. The details, however, were again met with criticism, particularly in the proposed methods of creating “ghettoized” housing in which foreign students lived separately from their Korean counterparts.

To me, this housing is not the biggest issue. Instead, the bigger problem is the same as for 1990 Japan: a glaring lack of English skills. Despite the fact that South Korea spends about $3 billion more than its Japanese counterparts on ESL training, it remains a fact the vast majority of students, teachers, and professors can neither speak nor write in English, making the creation of international programs with Korean students and faculty problematic. Both Park’s administration and those that came before have approved sizable funds for hiring international faculty, particularly in the sciences, but those investments have largely failed to pan out as most foreign scholars have found Korean university culture to be disempowering, often stating they were treated like “second-tier” faculty or “temporary hires.” Many leave their positions within three years.

Despite these cultural issues, expanding international programs would appear to be the most promising answer for addressing the demographic drop to come. This is especially true when one considers the current peak popularity of Korean culture and the desire for many young internationals to visit. The alternative of closing multiple universities, in addition to being politically unpopular, might end up doing more economic damage in the long run since the average Korean university employs anywhere between one to three thousand people.

Whatever the next Korean president decides to do, the future of higher education hangs in the balance. With important lessons to be learned from the Japanese model, a shift to a more globalized platform of education would appear to be essential for longevity. Whether or not the next administration or even the universities themselves choose to enact such reform remains to be seen.

Acknowledgements: I would like to thank Ms. Parcae Lee and Mr. Seungjin Cha for their assistance in collecting information in Japanese and Korean, respectively.