About Nick: i am an economist based in malaysia. I write about development economics, while sneaking in a pop culture reference or two.

Rethinking Public Scholarships in Malaysia

Published in The Edge Malaysia, 13 March 2017.

In the Prime Minister’s Budget Revision in January 2016, one of the most hot button topics was the scaling down of four Jabatan Perkhidmatan Awam (“JPA”) scholarship programmes, namely the National Scholarship Programme, the Special Engineering Programme to France, Germany, Japan and Korea, the Bursary Programme and the First Degree Programme. The response to the reduction of government expenditure on these programmes was, unsurprisingly, scathing. After all, scholarships are meant to develop human capital for the future of Malaysia; reducing it would mean a more shallow talent pool, moving forward.

I have previously argued in a prior article in this newspaper entitled, “Empathy and Policymaking” that that particular criticism of this move by the government required a bit more nuance. Economics is the study of the distribution of scarce resources to unlimited wants. As such, if there is some provision allotted for scholarships, there is still an argument to be made on how one would choose to allocate the scholarships. In the circumstance of limited resources, can we not envisage a way in which the JPA scholarship allocation could be stretched further? Could we not get more bang for our scholarship buck?

Before I tackle that question, I think it is appropriate to share a short anecdote. I am a (very grateful) JPA scholar. I obtained my JPA scholarship 13 years ago in 2004. At that time, to obtain a JPA scholarship, a student is required to go through an interview session with the JPA officers. Before my interview started, I was hanging around with my friends waiting for the interview to begin. Another friend, let’s call him C, was dropped off by his father, who I’ve known for a reasonably long time. C’s father then asked me outright, in public, in front of everyone else, “Your father makes good money, why are you applying for a scholarship?”

I will fully admit that I was lost for words. People were staring – and let’s not forget, my receipt of a scholarship would mean one less scholarship for everyone else and so, these were my ‘competitors’ to an extent – and I was a flummoxed 16 year old. I did not respond to C’s father but I did reflect on it later. I remember feeling defensive – while it was true that my father was a successful SME businessman, a scholarship is supposed to be based on merit; if I deserved the scholarship because I was better qualified than others, then I should receive the scholarship over those others.

I have since reflected many times over on that experience. As I have grown older, my view has, unsurprisingly, become more nuanced. On the one hand, I still believe that scholarships need to be merit-based and that high caliber students should have the right to compete for scholarships regardless of their household income levels. On the other hand, I have also seen truckloads of Economics studies showing that key life outcome variables such as educational attainment, school performance and personal income are strongly significantly correlated with family income. In short, richer kids are almost universally associated with better scholastic performance. This makes sense – their parents could afford special tuition fees, provide a more conducive environment for learning, live in better neighbourhoods with better schools and teachers, spare the children the burden of working to support the family’s income.

Therefore, when we hand out scholarships, are we actually handing out scholarships that de facto reward a student’s superior household income? Of course, not all rich students achieve scholastic brilliance, but the correlation is very strong in research studies. Should we not therefore include some function of household income into the scholarship allocation decision function? As my boss says, looking at company revenue is important, but we should look more closely at the company’s return on equity (“ROE”). In other words, there are significantly more challenges to a poor student in achieving straight A+’s in SPM vis-à-vis a rich student. Furthermore, a poor student who achieved even straight A’s in SPM may have overachieved for her starting point in life compared to a rich student who achieved straight A+’s.

I should be careful to note here that I am not suggesting that we give scholarships only to high-performing poor students at the total expense of high-performing rich students. Rather, I propose the following. Suppose you have a set amount of scholarship expenditure to give each student, RM X. What if, instead of giving rich student R and poor student P the same scholarship amount X, we say, “R and P, because you are both outstanding students, we want to give you both scholarships. However, R, since you are rich, we will fund half of X for you. P, since you are poor, we will grant you the full X.” It doesn’t have to be Half or Full either. It should be a spectrum, beginning from X with the allocation reducing downwards as a student’s household income increases, to – in this example – half of X as the minimum allocation on pure merit to high-income household students.

Under this scheme, the government can achieve two objectives. First, its expenditure on scholarships can go further, covering more students, as not every student gets the full X. This can also be true of bursaries and other such programmes. Second, I firmly believe one of the government’s main roles is to remove arbitrary advantages citizens may have over one another. The rich kid did not choose to be born into the rich family and likewise, the poor kid did not choose to be born into the poor family. Those are just the circumstances of their lives, and like everyone, they should try to make the most of what they have. The government, on the other hand, should work to reducing, as much as possible, arbitrary advantages that different citizens enjoy. Thus, scholarship-providing agencies such as the JPA can help to increase social mobility and improve B40 life outcomes via such a measure.

One may argue that merit is merit and to deny a super-talented student a full scholarship just because he happened to be born into a rich family is discriminatory. Point well-taken except for the fact that, universally, household income is strongly correlated with scholastic performance. Did the student do well because he is outstanding in and of himself, or did he do well because his family happened to be wealthy? It could be both, of course and hence the need to have a minimum scholarship just for pure merit. This practice, by the way, is common in most elite United States private universities. For instance, Harvard College provides full financial aid to students whose annual household income is $65,000 and below, with the financial aid reducing as household income increases. I would recommend that JPA consider such a policy to ensure that as many outstanding students as possible get to obtain some scholarship for their education, regardless of cost pressures or family circumstances.

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