This morning’s Higher Education Supplement in The Australian gave the lead story to various interest groups complaining about the Budget decision to reduce Commonwealth subsidies to commerce students by about $1,000, with universities being allowed to increase student contribution amounts by about $1,200.
“It is hard for us to see how this is going to attract more people into doing those courses. In fact, it might turn them away.”
… said Geoff Rankin, chief executive of CPA Australia, which represents 112,000 finance, accounting and business professionals. …
It is a great worry to us,” University of Western Sydney vice-chancellor Janice Reid said.
“It will be a significant disincentive for students who might have seen a bachelor of business or bachelor of commerce as a viable alternative to a bachelor of arts or a general degree in the humanities.
As usual, these arguments assume that prices have a big impact on which courses students choose. Yet a study (pdf) released a couple of years ago put the average income premium from a business undergraduate degree, compared to a Year 12 qualification, at $542,000. The maximum extra cost that could be imposed on a student would be 0.66% of that. Prospective business students who can’t work out that the course is still a good deal have no aptitude for financial reasoning and – as Janice Reid suggests – should perhaps do Arts instead.
In reality, is is unlikely that anyone who was seriously interested in a business career would do Arts to save a few thousand dollars. Just as Labor is naive to think that people will change their career plans to science or maths for small sums of money, these complaints about the policy shift for business degrees misunderstand the decision-making process of potential university students. People look for courses and careers that will interest them, as it is entirely rational for them to do – a lot of their future job and life satisfaction will depend on it. This is why we see only small shifts of market share in applications over time, despite changes in price relativities in 1997 and more modestly in 2005.
Cost – including opportunity cost – affects the attend/don’t attend decision. If there was price competition in the sector, it would probably influence which university students applied to enter. But its effect on discipline choice is minor, on those with multiple or under-developed interests who can be swayed by factors other than their own hoped-for careers.
The test will be next year’s applications. I’ll put my prediction in now. Applications for business degrees will not move outside the normal +/- <1% market share we see for most disciplines each year.