Category: Higher education finance

Misreadings and criticisms of Graduate Winners

Andrew Norton5 Comments

The AFR published a response to Graduate Winners from Caroline McMillen, VC of the University of Newcastle. It provides an opportunity to respond to misreadings and criticisms.

Article starts, my responses in block quotes:

Access to a high-quality university education is the key to a stronger Australian workforce, economy and society. In turn, these are all important contributors to establishing a stronger place for Australia in the world.

An accessible university education is essential to ensure that Australia in what has been called the Asian century becomes a beacon for innovation and competitiveness.

The proposals contained in the Grattan Institute’s Graduate Winners report would jeopardise that future.

The report, which was made public last Monday, presents in measured language a reductive future for higher education in Australia, where students are motivated only by their graduate earning potential and the state withdraws its funding from what is currently recognised as a world-class university system.

Incorrect: The report shows (pages 56 to 59) that interest in the field of study is the top reason for choosing a course, and that a financially-based motivation model cannot explain why so many students with good ATARs choose humanities and performing arts, which have relatively poor employment and income outcomes.

The proposal is to shift the entire benefits and the risks of undertaking a university degree onto each individual student.

Incorrect: The report recommends a 50% cut in tuition subsidies for most courses; the taxpayer further takes risk through the HELP repayment threshold of $49,000 a year.

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Why do university lobby groups under-sell their product?

Andrew Norton4 Comments

As expected, my Graduate Winners report generated plenty of controversy. Two of the university lobby groups put responses on their websites (Universities Australia here; Innovative Research Universities here). A couple of VCs added hyperbole to the sober complaints of their representative organisations:

Administrators and students alike have hit out, with Central Queensland University vice-chancellor Scott Bowman likening it to a “funding regime of which North Korea would be proud”.

Australian Catholic University vice-chancellor Greg Craven slammed the report’s focus on numbers while failing to recognise the wider community value of higher education. “This seems to be a calculator with a personality disorder,” Professor Craven said.

One common criticism was that Graduate Winners does not count every possible public benefit of higher education (though it has the most detailed empirical analysis of this issue yet published in Australia, it is true that not every public benefit claim was investigated). But you would struggle to realise from just reading the lobby group reaction that Graduate Winners also has generally very positive news about graduate prospects. The vast majority of graduates do well financially out of their degrees, and enjoy other non-financial benefits as well. And there was no criticism for not pursuing this issue further.

In other words, the VCs appear to think that total course cost increases of between $7,000 and $19,000 for most courses would have disastrous effects and must be loudly fought, but lifetime benefit, including financial gains from their services averaging hundreds of thousands of dollars, were not worth mentioning.

I think this one-sided reaction reflects the history of higher education in Australia, and mindsets that have not changed despite the underlying realities having substantially shifted.Read More »

Are low SES people more worried about fees than other people?

Andrew Norton7 Comments

My new Grattan report, Graduate Winners: Assessing the public and private benefits of higher education was released tonight (Canberra Times covering it already).

The basic argument is that given high private benefits, higher education will generally be produced with or without a tuition subsidy. Therefore we can start phasing down tuition subsidies. I suggest 50% over 4 years for most disciplines.

The usual reaction to such suggestions is that the low SES people in particular will be put off higher education. I report the contrary Australian evidence. There is interesting English evidence in this report. What the English have done is far more radical than anything I am suggesting. Except for the clinical and lab subjects, they haven’t cut 50% over 4 years. They have cut 100% over 1 year. Combined with some scope for overall funding increases for universities, some student charges will nearly triple.

For the school leaver group, overall demand dropped by one percentage point of the age cohort compared to 2011, or about 15,000 people (like Australia before 2012, the UK has a capped system with demand exceeding supply, so this will have no effect on the total number of students). Read More »

Which Labor education minister made the most difference for working class people?

Andrew Norton3 Comments

In education, nostalgia for the era of Gough goes on and on. This piece of it in The Age yesterday prompted several supportive letters today.

Access to higher education did expand under Gough, but his reforms was not as significant as many people imagine they were. Through a patchwork of scholarships and subsidies from both levels of government and from universities themselves, only a minority of students paid fees in the early 1970s. The average fee for those who did pay was $480, or $3,000-$4,000 in current dollars. Many also received financial assistance; Gough replaced this with a means-tested income support scheme TEAS, the predecessor of today’s Youth Allowance.

The clarity of what Whitlam did probably accounts in part for what people believe today. Though most bright school leavers who wanted to go to university would already have done so pre-Whitlam, the financial pathways were made much clearer by Whitlam’s reforms.

Overall, higher education enrolments expanded from 206,500 in 1972 to 287,700 in 1976 (first year of the Fraser government, but it came to power too late in 1975 to affect enrolments). Less than a third of the increase was in universities, with most new students going to the colleges of advanced education. Numbers had been growing steadily since the 1950s, so some of this growth would probably have occurred anyway.

A lack of consistent data makes it hard to tell exactly what opportunities Whitlam created for working class people. My reading of various sources is that the absolute number of working class students probably went up in the following years. But their proportion of total enrolments went down. The reason for this was simple. University entry usually requires school completion, and very few working class people did that. Therefore it was middle class people who were best placed to take advantage of expanded places in higher education.

The late 1980s and early 1990s were the turning point for improving working class higher education participation. School completion rates had increased dramatically during the 1980s, and the big HECS-financed John Dawkins led expansion in university places gave them somewhere to go. Dawkins and the most Labor state education ministers of the 1980s were more important than Whitlam in opening up education for people of all classes. Gillard is responsible for another wave of expansion since 2009, which also seems to be bringing in low SES students in large numbers.

Yet there is almost no nostalgia for Dawkins, and the state ministers are largely forgotten. Gillard’s time as PM will obscure her successful period as education minister. They all lack Gough’s charisma, and his simple message eloquently put.

Two views on prices

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[Tertiary education minister] Senator Evans warned that fee deregulation would increase costs to students and threaten access.

“Increasing fees is what deregulation is about,” he said.

“It is about allowing the universities to charge more.

“We would see a reduction in participation as people were priced out of the market’.

– The Australian, 6 June 2012

Ms Gillard says she wants to tackle rising childcare costs, but does not think capping fees will work.

She says that would prevent centres raising their fees if their costs go up for legitimate reasons.

– ABC radio news, 7 June 2012

All government-subsidised undergraduate science students to pay more

Andrew Norton4 Comments

Rather surprisingly, last night’s budget was pain free for universities. But their students were not entirely spared. The previously announced decision to restore previous student contribution amounts for new science students was extended to include continuing science students.

While in my view the discount for science students should never have been offered, the change again highlights the problems caused by the instability of higher education policy, with constant introductions and withdrawals of incentive policies. DEST/DEEWR/DIISR incentive programs rely on the naivety of the punters to work, because anyone who observed this policy area over time would assume that incentive policies lack long-term credibility, and not change their behaviour.

(Of course prospective students are unlikely to follow this detail, so temporary discounts may work. Oddly, a couple of articles (here and here) in today’s budget coverage repeat the Ian Chubb/ government line on science – too little demand for science university places, too little supply of university places, and too few scientists. The evidence does not support any of these propositions. A 2012 report on university applications showed not only that for the third successive year science experienced very large increases in applications and offers, but that science was doing exceptionally well in the 90+ ATAR group. And the argument that we are short of science graduates is not evident in any employment survey.)

Should the government redistribute student fees between universities?

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In an AFR op-ed today (not behind a paywall – things are improving), Macquarie Uni VC Steve Schwartz suggests some egalitarianism for universities.

If fees are deregulated, the more prestigious universities would charge higher fees than others. Schwartz suggests that if they did, their government subsidy should be reduced, and redistributed to other universities.

The reason is regulatory – the new Tertiary Education Quality and Standards Agency is imposing standards on all universities, but it is hard for the poorer universities to match the standards of the wealthier universities.

I doubt TEQSA will require all universities to be the same. A university licence to operate depends on meeting minimum standards, not being identical to all other universities. That said, there is a tendency in the standards released to date to codify common practices, some of which are of doubtful necessity. If this continues, the universities in the best financial position to try new things will tend to set the standards over the long term. Read More »

Department of Corrections

Andrew NortonLeave a comment

For those who downloaded my Grattan report, Mapping Australian higher education, there was an error in table 8 on page 50 which lists funding rates for Commonwealth-supported places. The maths and science rates did not include $3,499 in transitional funding paid for students enrolled in 2009 or later, who paid a student contribution amount reduced by that amount. The correct numbers are in a revised version of the report.

Further complicating matters, these student contributions will be put back up next year, so assuming that the required legislation is passed future calculations should take this into account. Other than via indexation the total won’t be affected, but the student contribution will go up, and the Commonwealth contribution will go down.

The HECS-HELP handout nobody is taking

Andrew Norton3 Comments

Back in 2007, I thought that Labor’s election promise to introduce HECS remissions for people entering specified occupations might have something going for it, at least compared to other mechanisms for steering labour market preferences via higher education funding.

It’s not paid unless the graduate actually enters the desired occupation, and provides near-term financial relief, which is more attractive than cuts to student contributions – which effectively mean that someone entering first year will typically gain financially in 8 to 12 years time (when they finish repaying earlier than they would have otherwise). (The ATO site on the scheme is here.)

However a report in The Australian this morning shows that only 405 people applied for the benefit for 2009-10, and only 232 were approved.

This is consistent with some analysis of graduate occupational choices by Graduate Careers Australia, done at my request comparing the first year of the program (2009) with the year before. Statistically, the two years were identical in the proportion of graduates entering the occupations being favoured by the government. I did not publish the data at the time because GCA argued that the scheme was new and that 2009 was a bad year for graduate employment, so more people could have tried to enter those occupations but failed (though if there are no jobs anyway, a policy aimed at increasing demand for non-existent jobs is not necessary).

The 2010 data should be examined, but the very small numbers claiming the benefit suggests that this scheme is so unsuccesful that the government can’t even give money away (far more than 232 would have been able to claim just for pursuing the career they were going to pursue anyway).

Perhaps this policy escaped the last couple of rounds of higher education cuts because its failure meant its costs were much lower than anticipated. But as the government is imposing cuts on the public service, getting rid of a complex and bureaucratic policy that is not obviously achieving anything would make sense.

Higher ed price problems not fixed

Andrew Norton1 Comment

The ‘demand driven’ funding policy starting next month combines deregulated places with regulated prices for student places. This is a potential problem. When the government no longer allocates places between institutions and disciplines the prices universities receive for each place are a key steering mechanism. If the price they receive is unattractive, they can not take Commonwealth-supported students.

The base funding review commissioned a study of costs, and it was able to shed some light on prices relative to costs, as they were in 2010. The figure below shows median, mean, maximum and minimum teaching and scholarship costs in a sample of eight universities.

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