Who should get the sandstone premium?

In The Australian yesterday Australian Catholic University VC Greg Craven argued against deregulation of student contribution amounts.

I’ll leave his equity and participation arguments for another day. But part of Craven’s objection is that he thinks the Group of Eight universities will be able to charge more than other unis, and he doesn’t like that idea.

Craven’s main argument seems to be that though Group of Eight universities argue for more funding on the basis of teaching quality, there is no guarantee that additional fee revenue will in fact be spent on teaching. Instead, Group of Eight unis will charge more because of their historical prestige and spend some of the money on other things, especially research.

Fees charged to international students certainly suggest that there is sandstone premium. I did a quick comparison of 2010 international fees in five sandstones (UQ, USyd, UMelb, UAd, UWA) and seven lower-prestige institutions (Victoria Uni, UWS, USA, ECU, Canberra, ACU). The sandstone premium ranged from 10% in education to nearly 80% in commerce/business courses.

I’m prepared to believe that on average Group of Eight universities do put more resources into each student. But I’m not so sure I believe that it is typically 40% plus more than other unis, as these figures suggest. So it looks like there is a prestige component in the fee.

The way I see it, there is prestige attached to these degrees that means their market value is well above their cost of delivery. The question is who benefits from it. At the moment, domestic students with Commonnwealth-supported places are getting that prestige for free. Under fee deregulation, the sandstone universities would capture more of the value via fees and spend it at least partly on research.

Is that a problem? Though the money is not being spent directly on students, what they are buying is the university’s reputation, which is in turn substantially based on their research. It’s similar to buying designer brands, where part of your money is buying the marketing that makes your purchase fashionable. The difference is that in the university case some of research funded through buying prestige might lead to public benefits. It’s status seeking with a positive spin-off.

Except of course for VCs of other universities. There is only a limited amount of education prestige, and the more the sandstones have the less there is for the other universities. They hate that. They hate it so much that they would rather take on the financial risks to their own institutions from fee regulation than see their status rivals get richer.

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Disclosure for non-regular readers: I work part-time for a Group of Eight university.

16 Responses to “Who should get the sandstone premium?

  • 1
    TimP
    November 5th, 2010 08:03

    Makes sense to me. A fair chunk of the money spent on a university degree is nothing to do with getting education or training, but with the prestige of the piece of paper. An example from my local TAFE is that it offers several courses with and without certification that are around 20-30% different in price. So around a quarter of the money you pay at one of the least prestigious institutes in the country is pretty much purely for the prestige. It seems reasonable that a significantly more prestigious institute should charge more for the prestige.

  • 2
    Peter Patton
    November 5th, 2010 10:32

    I think you might be conflating “prestige” and “student quality”. I would pay more according to how smart the students are. I would sooner work in a shop than pay to go uni with dumb people.

  • 3
    Andrew Norton
    November 5th, 2010 10:49

    PP – Student quality is an element of prestige that makes the value of a sandstone degree exceed its cost by a significant margin.

    Conceptually perhaps it raises different issues, since the the students who generate the good also consume it. Perhaps the uni has less of a claim to the surplus.

  • 4
    Club Troppo » Missing Link Friday – 5 November 2010
    November 5th, 2010 11:25

    [...] at sandstone universities paid more, would they get a better standard of teaching than they do now? According to Andrew Norton, the universities would probably spend much of the extra income on research rather than teaching: [...]

  • 5
    Peter Patton
    November 5th, 2010 11:36

    I suppose, I would pay zero to attend any of those non-G8 places you listed, but many people would [and obviously do] find attending those places to be a significant plus, and thus paying makes sense for them.

    Though, I’m not sure if I could jiggle that pricing fact, and its implications, to argue that those people paying the same amount to attend SCU/USQ as I would pay to attend U.Syd, would also be the result of deregulation.

  • 6
    Peter Patton
    November 5th, 2010 11:53

    Andrew, one metric you might want to look at [if you haven't already] is what happens when a university department is suddenly allowed to charge a lot more per student. Two situations are obvious:

    1. Universities which can charge full fees for postgrad courses – such as M.Commerce/Economics – which are largely made up of advanced undergrad courses.

    2. The switch from LLB to JDs.

  • 7
    Andrew Norton
    November 5th, 2010 12:53

    PP – I think prestige can only be measured between institutions. I did look at LLB/JD at some unis that have both, with JD premiums ranging from 0% to 31% over LLBs, average 12%. This may reflect perceived greater value of p/g qualifications, less price sensitivity in JD markets, or a belief that because JD programs can often be completed more quickly the lower opportunity cost allows for higher fees.

  • 8
    Peter Patton
    November 5th, 2010 13:00

    Did you find any change in teaching following increased fee income?

  • 9
    Andrew Norton
    November 5th, 2010 14:02

    There are no public measures of teaching at that level. Given that in these cases there is some internal competition between LLB and JD, an interesting further study would be to see how they differentiate them.
    When U of M ran a concurrent JD and LLB, they were strongly differentiated, with the former having smaller class sizes and faster completion.

  • 10
    Brendan
    November 5th, 2010 19:37

    The JD/LLB premium might have to do with greater perceived student quality in the JD program. These students are more mature and probably more committed to a career in law than their LLB counterparts. This probably makes for better classroom discussion and networking opportunities.

  • 11
    Jo
    November 6th, 2010 18:20

    Really Brendan? The reputation of Melbourne JDs is considered inferior to the old LLBs. There are people in the JD who got terrible ENTERs and had pretty ordinary undergrad degrees but still get a full-fee place with many of the people who would have done the LLB now going to Monash or interstate

  • 12
    Andrew Norton
    November 6th, 2010 19:06

    Jo’s point confuses two largely separate things: the quality of the course and the prior abilities of the people who take it (largely because there is some educational value in fellow students).
    There are pros and cons of a graduate school model, but one undoubted pro is to ease one of the ugly sides of meritocracy – the people who got high marks in Year 12 and believe they have a right to enter elite professions via the highest prestige courses. The JD (and other graduate school) entry systems open things up by widening the criteria and letting people who did better at uni than they did at school have a strong chance.

  • 13
    Peter Patton
    November 7th, 2010 08:50

    Brendan/Jo

    With the exception of Melbourne, the new JD programs do not replace the undergrad combined law degrees (BEc/Law, Arts/Law). They replace the previous 3 year graduate intake LLB degrees.

    It makes intuitive sense that between these two degrees, average student quality would decline, for the old LLB degree could not charge local students full fees. For the new JD degrees, 50% of the class pays HECs, 25% are local full fee payers, and 25% are international fee payers. OTOH, as Andrew notes, the unis have heavily marketed these “new” JDs, particularly the new bells and whistles, such as very small classes, JD student only classes (no undergrads), and the successful linking of the “new” degree with the US.

    Whether or not all these balance the lowering of student quality due to full fees remains to be tested. As does the pricing of these new bells and whistles.

  • 14
    Andrew Norton
    November 7th, 2010 17:42

    PP – Though as I think noted in a previous discussion, there are no rules on the fee composition for JDs (or for that matter LLBs, for internationals).

    It’s not clear to me that for the ‘mature’ U of M JD there will be any decline in student quality compared to the LLB, since it will be made up of people who are proven university performers, not just demonstrating potential though year 12, plus they will have had an aptitude test, and not just doing law because they could get in.

    In the first few years of the new U of M JD it might have been a bit easier, because there was no competition from the Melbourne Model undergraduates who had always intended to do law. That won’t apply from 2011.

  • 15
    Robert Wiblin
    November 9th, 2010 15:05

    Are you worried that higher fees at Go8 universities would get high enough to discourage smart but low SES folk from attending?

  • 16
    Andrew Norton
    November 9th, 2010 16:22

    Rob – The limited evidence to date is that there is no substantial difference in the way high and low SES people see their educational choices.
    Perhaps if there is a substantial component of G8 fees that does not produce economic returns there might be different views – high SES may be more willing to pay for current consumption (a good time) or status goods.
    But this is pure speculation, and if true may suggest that not going to G8 is not a disadvantage for people who do not value these things.