Opinion / From the Readers

Investment in rural healthcare

(China Daily) Updated: 2012-07-04 08:17

Comment on "Manifold benefits of a college degree" (China Daily, June 30)

Thanks to Bai Ping for the article that begins: "College is the best investment one can make."

We are students at Georgetown University in Washington DC studying in China at Fudan University for a six-week study program on health and development in China. One of our benefit-cost exercises has been analysis of the very same topic you address in your column: Does the high price of earning a college degree outweigh the benefits of attaining one?

In the top US universities, of which Georgetown is one, we, or to be more precise, our parents pay $50,000 per annum for tuition, room and board, a total of $200,000 over the four years needed to earn a bachelor's degree. As you correctly point out in your column, we also forgo the "opportunity cost" of not earning the average wage of a high school or secondary school graduate, estimated at about $130,000 over four years.

Claudia Goldin and Lawrence Katz, economics professors at Harvard University and authors of The Race Between Education and Technology, report that college graduates on average earn 80 percent more each year than high school graduates. High school graduates earn an average of $32,000 on graduating, whereas college graduates earn an average of $58,000 annually.

Using these figures we estimate that college graduates can expect to earn a million dollars more over their working lives, than they would have earned by not going to college and starting work after high school. This higher income more than compensates for the lost opportunity cost of four years working time, and the very high costs of tuition, room and board at a highly selective school like Georgetown University.

Our analysis of the internal rate of return on our investment in higher education showed a likely 8 percent return on that investment, far better than either treasury bonds or stock market investments. We guess the same will be true in China. Our analysis thus supports the argument in your column.

We are applying similar techniques to analyze the costs and benefits of China's investment in its health service. We found that investing more public resources to achieve better rural health, as the Chinese government is doing through expanded insurance coverage, pays big dividends in the form of more productive workers and longer, more harmonious lives.

Applying the methods of cost-benefit analysis can help guide government choices on how best to allocate scarce resources. More prevention, more focus on positive health results, and support for healthier behavior, better nutrition, fewer injuries in traffic accidents and by drowning, and a reduction in the number of smokers, will help ensure a return to the remarkable health progress that China enjoyed between 1949 and 1999.

William McGreevey, via e-mail

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(China Daily 07/04/2012 page9)

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