The National Union of Students had a flop last week with a very poorly attended ‘national day of action’. But they showed smarter tactics in peddling this story to The Age for a slow news Easter Monday.
The story opened this way:
THE Federal Government is under growing pressure to revamp the Higher Education Contribution Scheme, as students seize on research suggesting it could contribute to reduced home ownership, low fertility rates and tax evasion.
None of this ‘research’ should trouble the federal government, or anyone else, at all.
I’ve not seen any statistical evidence showing that graduates are suffering particularly in the housing market. Less than two weeks ago the papers were reporting research that despite high housing prices more young Australians were embarking on home ownership than in the past. I can’t find the paper on which that claim was based, and I am sceptical about whether it is true in absolute terms. But certainly earlier research found (pdf) that once you control for other factors affecting the time of house purchases, such as marriage and children, there hasn’t been a reduction in home ownership among the young (though the increases in house prices in the last few years should put a question mark over whether that would continue to be true in the future).
Regardless of the precise trends, though, as I argued last year there is no case for graduates getting a special first home owners grant. Effectively what NUS is saying is that even though graduates earn more on average than non-graduates, they should get an additional goverment subsidy so that they can further bid out of the market other Australians who did not go to university. Though Kevin Rudd has made the home ownership point himself, I would hope that on thinking more carefully a social democratic government would reject such a regressive policy.
On fertility, The Age says:
A 2002 research paper published in the Journal of Population Research even questioned whether HECS debts could deter people from having babies, an argument that has since been disputed by some social demographers.
‘Disputed’ understates the reaction. As I pointed out five years ago (pdf), the author of that 2002 article, Natalie Jackson, candidly admitted that she was making a ‘case’ for a connection and did not have the data to prove it. My own comparisons, using census data, between cohorts of women likely to have attended university before and after HECS showed no fertility difference between them. But I had no actual information on whether or not they had HECS debts. A 2007 article in the Journal of Population Research used HILDA data that did have a question on HECS debt, and again found that HECS had no discernible effect on fertility.
The idea that HECS contributes to tax evasion comes from this paper (pdf) and other work by the same author. Essentially, it shows that people who do not support HECS are more dishonest than others when it comes to reporting all their taxable income. This is not surprising – opposing HECS indicates an entitlement mentality. While there is something to the ‘tax morale’ literature out of which this research comes, the reality is that many people oppose elements of the tax system, and its effectiveness relies on coercion rather persuasion or a sense of moral obligation. And not having HECS implies that other taxpayers should pay for a student’s education instead, which may not help their ‘tax morale’. Tax cheats should be punished rather than tax laws changed to make them feel better.
So far as I can see, there are no strong arguments for reducing HECS costs – just self-serving claims by interest groups to enrich themselves at the expense of other taxpayers.