Dutch society attempts to construct its institutions in a way that would accommodate its members equally well, regardless of gender, race, or age. There are fiscal stabilisers in place – progressive income tax, numerous subsidies for assorted life situations, and respective tax exemptions. With regards to taxation, there is an additional peculiar component involved: the tax rates that the residents are subject to contract their income by approximately half of its gross amount. This sends a rather interesting message from the authorities that could be read as ‘first, give your earnings to us, and then we will decide how to handle it’. There are perhaps multiple dimensions in which the merits of such system could be discussed, but given the foundations of Rostra Economica, I would like to pay special attention to one component of the Dutch social system: the higher education system. Having been inside the system for over two years, I have been presented with an invaluable opportunity to experience the policy consequences first-hand.
In the recent protests of student youth in The Hague, the participants expressed their dissatisfaction with the abolition of student financing and transformation of the funding scheme into a loan-based system. This showed how crucial government subsidies are for the Dutch students and how high the existing level of dependence on them is. One of the main slogans adopted by the protesting students was ‘Education is a right, not a privilege’. The validity of that argument is not unlikely to be doubted by anyone familiar with the alienability of even far more basic human rights under particular circumstances. The level and composition of social welfare has rather been a product of a social contract between the government and the population as opposed to a fixed and an inseparable component. Perhaps the time has come for the respective composition to be reassessed, and here is why.
Student financing allows for virtually every Dutch youngster to lead an undemanding student existence with very little trouble. Combined with free public transportation, it creates an environment in which the only obligation of an individual that remains is to obtain sixes in their courses, thus to remain enrolled in their educational institution. Such an incentive scheme naturally attracts people that would not under other fiscal circumstances be interested in obtaining tertiary education. This results in a deadweight loss, since the demand for higher education is artificially pumped up by a very generous financial accommodation scheme. The value of the deadweight loss is hardly negligible. A real-life implication of such a policy is in the fact that in order to be entitled for a rather substantial monetary transfer every month, one is only required to possess an enrolment declaration. When someone is offering you 300 euros on monthly basis solely for the trouble of walking to the nearest university and providing your details, there is hardly a reason to refuse. It can of course be argued that a student entitled to the donation is also required to pass their subjects. However, given the very loose expulsion policies of Dutch universities, it would demand exerting a very high level of effort to actually be forced to leave. UvA sets a very informative example, with the actual impossibility of a dropout in case of receiving a positive Binary Study Advice. After the first year, there are no strings attached, the cookie is henceforth free.
However the impact of the Dutch approach to student motivation would not be so detrimental without the second pillar of student egalitarianism – the guaranteed admission to a university of choice provided attainment of a sufficient score in the final exams at high school. The combination of student financing and guaranteed admission translates very peculiarly into the language of incentivising. In essence, the social contract that a prospective student faces now declares that the effort of passing high-school examinations and walking to the nearest university does guarantee an appetising lump-sum transfer, plus free public transportation, plus the right to pretend to social student housing in case you are too grown up to face your inexorably ageing parents on daily basis. The only reasonable question that comes to mind is: why not?
There are objections to the presented line of reasoning, with argumentation mainly revolving around the proposition that the lump sum received by the students is insufficient to ensure an independent existence. Namely, a student would find it difficult to find accommodation that would allow them to stay within the budget. Although this is true, the argument itself is invalid. When we consider provision of the amount of money to its natural opposite, non-provision, we may see that if the notion of leaving the parents household is so engrained in the Dutch culture as frequently posited, the people truly motivated to leave would have to find monetary sources independently. They would have to work in either case. However, in absence of student financing, those seeking independence and not caring for higher education per se could proceed directly to the labour market without enhancing the deadweight loss. As opposed to the situation when shorter working hours are complemented by an undemanding side-job – remaining enrolled in a university. However, there is an alternative to the composition of the student housing market that seems significantly more economically plausible. In absence of the government transfer, the demand for independent habitat would return to its natural level, and more Dutch youngsters would consider it a more appropriate option to actually learn to tolerate their parents.
Incentive schemes are a crucial notion behind public policy and welfare provision, the neglect of which is detrimental for any society, specifically in the long run. Removing individual responsibility in the consumption of goods such as education does devalue it, which is something that a society should not want to experience. For those concerned with equal opportunity, please bear in mind that you have to be Dutch to obtain the money. Very undiscriminating indeed.