Cost Sharing in Higher Education - Graduate Tax

Another commonly suggested measure is to tax the employers employing educated manpower. The case for this method is made on the ground that the employers get the benefit of educated workforce while not paying for their supply in any way. However, the method has a weakness in terms of the possible effect of substitution i.e. employers opting to recruit less educated persons in place of educated ones.

This may aggravate the already high incidence of unemployment among the educated youths. However, it is also felt that the benefits of employing the educated workforce will be duly weighed by the employers as higher order works which are technologically superior can be performed only by them. In view of this, even though some substitution effects may be expected to prevail, the rationale of taxing the employers based on the type of manpower employed is advocated for its other positive attributes.