Removing tertiary fees increases inequality

Justin Stevenson writes:

It is important to realise that most government expenditure (approximately 83 per cent) is spent equally on all New Zealanders – a form of a universal basic income mainly provided through services instead of cash.

The big ticket items are public healthcare, compulsory primary and secondary education, superannuation, and core government services such as roading, law and order, and defence.

Even without NZ’s slightly progressive tax rate this results in a transfer of wealth from the richest to the poorest as those above the average income pay more tax than they get back in services, and vice versa. This is generally seen as a good outcome as it helps to alleviate inequalities in society.

Government expenditure on tertiary education is an exception. Those studying clearly receive more benefits than those that do not and, while technically available to all, attendance in tertiary education is highly correlated with the social status of one’s parents.

Therefore, government subsidies are effectively a regressive tax where the richest have their education subsidised by the poorest. In NZ, those who do not study at tertiary level miss out on approximately $1000/year (or $80,000 over the average lifetime) in government benefits.

And those who get a degree earn an extra $1.5 million extra in the average lifetime. So Labour’s policy is to steal from everyone to give the rich.