Higher Education and Higher Salary Are Getting Unaffordable

Mohammad Nur Rianto Al Arif
Professor at UIN Jakarta

Once a vehicle for upward social mobility, the university degree has transformed into a luxury commodity, locking out the very demographic that drives global consumption.

Decades ago, higher education was universally viewed as the ultimate "ladder of social mobility." It was an institutional engine that allowed the child of a working-class laborer, a small-scale farmer, or a street vendor to break through economic barriers and emerge as a doctor, a software engineer, or an economist. The campus was a democratic sanctuary where intellect overrode origin. Today, however, that foundational narrative has collapsed.

Higher education has systematically drifted from an instrument of equal opportunity into an aggressively expensive commodity. As tuition fees skyrocket, mandatory campus levies adjust upward, and the cost of student living in major urban hubs explodes, the purchasing power of the global middle class is facing an unprecedented squeeze.

Inevitably, the demographic catching the sharpest edge of this crisis is neither the ultra-wealthy nor the ultra-poor. The wealthy remain insulated from tuition hikes, while the lowest-income brackets retain access to state-sponsored safety nets, affirmative action grants, and needs-based subsidies. Instead, it is the middle class that finds itself paralyzed by a brutal paradox: they are deemed too rich to qualify for financial aid, yet they are far too poor to afford the actual cost of a degree.

This crisis cannot be analyzed in a vacuum detached from macroeconomic realities. In emerging economies like Indonesia, data from the Central Bureau of Statistics (BPS) reveals a stark warning sign: the nation's middle class is in a state of rapid contraction. In recent years, millions of citizens have slipped down the socioeconomic ladder, falling into the precarious category of the "aspiring middle class." This economic regression is a toxic cocktail of post-pandemic scarring, wage stagnation, food inflation, and a deeply volatile job market. Given that the middle class contributes to over 81% of national consumption in developing markets, their financial erosion directly threatens domestic macroeconomic stability.

This exact friction is mirrored and amplified in the United States. The American middle class has spent the last two decades watching tuition inflation wildly outpace average household income growth. Whether in the suburbs of Ohio or the urban centers of Jakarta, the structural squeeze is identical. To understand why this inflation is so persistent, economists point to a structural phenomenon known as Baumol’s Cost Disease.

Introduced by economist William Baumol, the theory explains that sectors like education inherently struggle to achieve radical leaps in labor productivity compared to manufacturing. A professor lecturing a theater of 40 students today performs essentially the same task as a professor did 30 years ago. Yet, to retain talent, universities must increase wages in line with the broader economy. Combined with the rising costs of research technology, expanding campus administrative payrolls, and the fierce global competition to build luxury student amenities, the price of education naturally compounds faster than its productivity.

In developing countries, this inflation has been exacerbated by the state systematically withdrawing its direct fiscal support, forcing public universities to transition into autonomous corporate entities. To survive, institutions have transferred the financial burden directly to students via tiered tuition frameworks.

While these tiered systems were theoretically designed to create equity. forcing wealthy families to cross-subsidize low-income students. Thus, the execution has heavily penalized the middle class. On paper, a middle-class household income might look robust to an automated university algorithm. In reality, that same income is already aggressively cannibalized by mortgages, healthcare costs for aging parents, and the basic survival expenses of multiple dependents.

When a student from such a family is hit with a premium tuition bracket, the household enters a state of severe financial distress. In major educational hubs, tuition is merely the tip of the iceberg; when bundled with skyrocketing rent, transport, digital device requirements, and mandatory textbook fees, the aggregate cost of a four-year degree quickly spirals into a six-figure debt sentence.

In classical economic theory, higher education is treated as a calculated investment in human capital. An individual defers immediate earnings and incurs debt with the rational expectation of capturing higher wages in the future. Today, the yield on that investment is heavily questioned.

The global labor market is mutating at a terrifying pace. Millions of college graduates now face the bleak reality of overeducation—a structural mismatch where an individual's academic credentials far exceed the skill requirements of the available jobs.

As Artificial Intelligence, machine learning, and advanced automation rapidly dismantle traditional entry-level white-collar roles, households worldwide are asking a dangerous question: Is the astronomical cost of a university degree still worth the diminishing economic return? This skepticism is a rational response to an era where household income growth has crawled, while the cost of admission has surged exponentially.

The ultimate danger here is not fiscal; it is societal. When higher education becomes cost-prohibitive, elite universities become the exclusive playground of the economic upper class. This triggers a permanent, hereditary reproduction of social inequality. Wealthy children capture elite credentials, secure high-paying legacy roles, accumulate generational wealth, and pass the same institutional access down to their offspring. Meanwhile, the middle and lower classes are structurally locked out of the opportunity loop. The university ceases to be an engine for social mobility; it becomes an instrument for class consolidation.

For developing countries currently sitting on a "demographic dividend" where the majority of the population is of productive working age. A youth bulge is only an economic blessing if the labor force possesses high-value human capital. If higher education remains financially inaccessible to the massive middle-class core, the demographic dividend will not catalyze a transition into a developed economy. Instead, it risks transforming into a volatile social liability: a generation of underemployed, disenfranchised youth.

To stay afloat, middle-class families are deploying desperate financial survival strategies. They are completely liquidating their generational savings, deferring homeownership, raiding their retirement portfolios, and accumulating high-interest consumer debt. While these maneuvers might successfully push a child through graduation in the short term, they fundamentally compromise the long-term financial resilience of the household backbone.

Global models offer varied pathways out of this deadlock. The Nordic blueprint (Finland, Norway) treats higher education as a public good heavily subsidized by the state to keep tuition non-existent. Germany explicitly waives steep fees, viewing university access as a critical public infrastructure investment. Australia utilizes a progressive, income-contingent loan system where graduates only begin repaying their study debts once their income crosses a specific professional threshold.

While developing countries cannot copy-paste Western models wholesale, the global consensus is clear: higher education must be treated as a strategic national investment, not an isolated individual liability. To restore the broken social contract, global policymakers must prioritize a comprehensive six-part structural reform:

1. Expand Middle-Class Financial Assistance: Pivot financial aid frameworks to include partial, tiered grants for vulnerable middle-class brackets, ensuring aid does not abruptly cliff-edge.
2. Implement Income-Contingent Financing: Restructure student financial systems away from predatory commercial loans toward fair, income-sensitive repayment structures that mitigate default risks.
3. Enforce Absolute Cost Transparency: Mandate universities to publicly itemize and justify institutional expenditures, driving corporate accountability and administrative efficiency.
4. Escalate Sovereign Investment: Ensure that constitutional education budget mandates are directed strategically toward expanding physical seat capacity and subsidizing operational costs at public institutions.
5. Dignify and Scale Vocational Pathways: Robustly fund trade schools, professional certifications, and technical tracks. In an AI-driven economy, a highly specialized two-year technical credential is often far more bulletproof than a generalized four-year degree.
6. Forge Corporate-Academic Synergies: Incentivize the private sector to co-fund research, provide paid apprenticeships, and establish direct-to-hire pipelines, bridging the gap between classroom theory and market demand.

Ultimately, the crisis of escalating tuition is not a debate over line items, budget deficits, or administrative fees. It is a battle for the soul of national mobility.

A resilient, healthy society is one that allows its youth to dream to the absolute limit of their intellectual capacity, entirely unburdened by the financial realities of their birth. When the university becomes an exclusive luxury enclave, it compromises the core principle of equal opportunity that underpins modern democracy. The global economy desperately needs a robust, spending-capable middle class; conversely, the middle class requires affordable, world-class education to maintain its economic footprint. If education remains a hoarded commodity, the future global workforce will fracture. But if the gates are held open, the university will reclaim its rightful title: a sanctuary of hope, where destiny is determined by effort, and every dream has a legitimate path to reality.

This article was published in Kompas on June 12, 2026.