The curse of the 1970s strikes again

The curse of the 1970s struck twice yesterday. In talking to The Australian, Kevin Rudd again indulged his nostalgia for Whitlamesque free education, while stopping short of promising to bring it back:

the Opposition Leader says he also feels uneasy that young Australians do not have access to free tertiary education, which he received in the 1970s under Gough Whitlam’s reforms.

But ….Mr Rudd said the need for economic responsibility precluded a return to free education.

Instead, he promised to ease the burden of the Labor-introduced Higher Education Contribution Scheme, which he said was out of control and prevented children from working-class families from going to university.

But as readers of this blog know, that idea has been persistently discredited. Last year there was the Cardak and Ryan paper that showed for their sample (of young people) that nothing mattered except Year 12 results. The cruder postcode indicator used by DEST also shows that the proportion of low SES enrolments has been flat since statistics started being collected in the early 1990s, despite two significant price increases since (and the absolute number is well up).

In the SMH, students are complaining that:

universities are increasingly charging students for costs they used to cover, students say.

Universities should bear the cost of material necessary to pass each course, said the president of the National Union of Students, Michael Nguyen.

“A lot of the cost is now being put onto students and that seems unreasonable.”

Naturally we should be sceptical of claims about ‘trends’. A comparison of student finance surveys carried out by the AVCC in 2000 and 2006 suggests that most of the increase in total costs is due to computers rather than specific university charges. But the need to have up-front charges reflects the consequences of the price control that Michael Nguyen (and Natasha Stott Despoja, also quoted in the article) support. Textbooks, field trips, etc really should be bundled into the tuition fee and deferred through HECS-HELP. But when tuition charges are based on numbers picked out of the air in Canberra, universities understandably prefer to pass on what costs they can rather than make cuts elsewhere to balance their books.

22 thoughts on “The curse of the 1970s strikes again

  1. I don’t know why Rudd wants to revive this issue of free university education or the related issue of more generous universal subsidies for tertiary students. There are better ways for governments to target low income families to help their childrens’ education.

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  2. Fred – isn’t that quite clever politics: it doesn’t lose him a vote, and it endears him to people who have never been happy with the reintroduction of uni fees. Given that people say Rudd is just another John Howard, he is differentiating himself by displaying these sympathies.

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  3. So the surveys so far seem to indicate that taking on a HECS debt doesn’t have a huge impact on willingness to go to uni. But do you think there’s a tipping point? A HECS debt for a 5 yr band 3 course maxes out at around$45k at the moment. But what if we went to your suggested liberalised price model? Where the standard debt at the moment is around $10-$15k, what happens if it rises to $30-$50k? A law degree at $80k?

    I was happy to take on a five year law degree at $30k, but I’m not sure if I’d make the same choice if I had to pay twice that. And I’m curious as to how sustainable such a massive expansion of the income-contingent loans scheme would be.

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  4. Matt – From a public policy perspective, it doesn’t necessarily matter that some people are put off by cost. Prices serve useful purposes in steering consumption. Higher prices mean that those who value a course more will do it.

    The equity concern, in my view, should be less that some people will be put off, than the types of people who will be put off may vary signficantly between SES backgrounds, other factors being equal.

    So far, there is no evidence that responses to prices vary by SES. Would-be students presumably look to their future income rather than their current income.

    Logically, there must come a point at which the likely returns do not warrant the expense. But there is no evidence that we are close to that yet.

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  5. I’d hate to see your sample size looking at low SES kids and whether they actually do a certain course based on the debt they get (versus say they would do the course). There are many courses where there are essentially no low SES students — which I guess gets back to Fred’s intial point, that if you are worried about this, you should be more worried about actually how low SES students might ever have this problem.

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  6. The data is on attend/don’t attend, rather than whether students are in their first-preference course. It would not rule out low SES students not applying for higher-cost courses because of the price, though given the general pattern of behaviour I think our starting assumption should be that this is probably not the case. The main reason that there are so few low SES students in some courses is their school results. Birrell’s Victorian research showed that independent schools in Victoria produced nearly 1,000 more 90+ ENTER students than the government schools in 2003, despite having less than half as many students in Year 12.

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  7. Andrew, You keep referring to the Cardak/Ryan paper which is hardly definitive about the issue of the effect of budget constraints on educational choices.

    Year 12 results will reflect educational investment decisions taken in the senior years of school and these might indeed reflect budgetary issues. If you come from a poor family – even with access to HECS – you will realise that your possibilities for entry into education are limited by your family income and make lower investments.

    The cost of university is the cost of fees and the cost of living. Most students have heavy work commitments these days to fund their eduicational costs – a source of degradation of university teaching outcomes.

    Almost all kids who go to University of Melbourne come from private schools and families with high incomes.

    In my generation of students access to university was guaranteed for all able students by very low fees and the possibilities of teachers or Commonwealth scholarships. If it was not for the existence of this facility – and my knowledge prior to my HSC that it existed – I probably would not have planned to go to university – my family would not have been able to afford it.

    It seems to me that we have never lived in an age where education is more important to Australia’s future as a nation. I am constantly disappointed by attempts to promote cost-recovery and other such ethics in education. This pursuit seems to me both mean and short-sighted.

    I think John Howard is failing in the opinion polls today because he (i) has been slow to act on climate change and (ii) has not seriously addressed Australia’s higher education programs.

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  8. HC,

    I wish I believed you were right on (ii), but I think that the average Australian couldn’t care less about higher education. The only thing they seem interested in is that it should somehow be “fair”, where fair is defined as not charging fees, which of course solves nothing. It seems to me that either the Commonwealth comes up with the money (which it obviously won’t), or people pay as individuals. Its either that or we end up with all the problems we have now — which is going to become more and more problematic given that current demographic trends across countries mean that Australia will be less likely to be able to use immigration to solve the problems of a relatively poor quality training system.

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  9. Harry – Your intuitions on this are probably dominant in the general public, and certainly hold sway in the Opposition Leader’s office. Yet we can confidently say that the empirical evidence overwhelmingly points in the other direction. I keep referring to Cardak and Ryan because it is the highest quality research, in that it includes ENTER scores, but we can also include:

    * ACER research on parental background looking at cohorts born in 1961, 1965, 1970 and 1975

    * census data on 18-19 year olds living at home which shows rising proportions of students from lower class backgrounds attending univerisity comparing over the 1991-2001 period (ie including the big differential HECS increase of 1997)

    * DEST postcode data showing a stable proportion of low SES students since 1991, despite two significant price increases in 1997 and 2005

    * university admissions centre data showing 95%+ application rates for students with 90+ ENTERs, though it has dropped off a little recently, but this is probably due to the trend towards later starting ages that I have discussed in other posts

    None of these data sets are perfect, and in particular all but the DEST data are focused on school leavers. But none of them match your intuitions.

    The issue of school motivation is a complex one, and there is evidence (including Cardak and Ryan’s paper) that low SES students are less likely to meet their potential than high SES students. But the idea that uni costs feed back into school decisions is hard to substantiate. For example, the school leaving rate was flat for about a decade after free tertiary education was introduced in 1974, though in theory we would expect this to encourage people to complete their school education.

    Also contrary to the theory, school completion rates kept rising after HECS was introduced in 1989, and started rising again after differential HECS in 1997.

    Nor is there any real evidence to support the theory that students are working to fund their educational costs, a point I make in the post above. Student finance surveys going back to the mid-1970s show that students consistently spend about 10% of their money on education-related items. As I said, computer costs pushed it up a bit between 2000 and 2006, but arguably most of them would have bought computers with internet connections anyway. It’s an expense that has to be met, but not an additional expense of studying.

    As for Howard failing in the polls because he has not addressed higher education issues, that also lacks any evidence. In this week’s Nielsen survey, education generally only rated 12% as a most important issue, and we know from previous research that only about 15% of those who rate education as important nominate higher education as their concern.

    And so far Rudd has offered universities less than nothing – lost revenue from full-fee undergraduates being abolished and and pointless handouts to people who were doing maths and science subjects anyway. You wouldn’t have thought it possible to have worse higher ed policies than the government, but somehow so far that’s what he has.

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  10. Andrew, I’m not sure what your answer is to so many high-profile, informed, intelligent people (now incl Rudd) who say that but for a fee-free way to university they well might not have been able to go there.
    “school completion rates kept rising after HECS was introduced in 1989, and started rising again after differential HECS in 1997” but what else might have influenced this – a recession and lack of alternatives? loss of unskilled jobs previously available? government changes to school leaving ages?
    “census data on 18-19 year olds living at home which shows rising proportions of students from lower class backgrounds attending univerisity” – I still think one reason more ‘lower class’ kids are getting to uni is because of the symbolic power that free universities had in changing ‘lower class’ expectations. Also wondering how many ‘lower class’ kids get into law at UWA say, as compared to how many are getting into courses in librarianship or laboratory technology at ECU or Curtin.

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  11. Russell – There are many ways to solve the cash flow problem. Free education is one – but not an efficient or fair one. Loans are a superior technology.

    I think the deterioration of the full-time teenage labour market largely explains rising retention, which encouraged teenagers to acquire more education to improve their labour market prospects. Most stopped short of university, of course, but the brighter kids increasingly thought it was a good idea. The partially HECS-financed increase in places made it a possibility for many.

    The fact that the school retention rate did not respond to free education suggests that its overall symbolic power was minimal. The practical reality of finding jobs is likely to be the more significant factor.

    I don’t think we need very complex economics to explain what is going on here. The opportunity cost of further study dropped (few jobs anyway). For the kids who think they can pass university, ie those with better school results, the financial benefits of study are likely to vastly exceed HECS. Therefore HECS has little or no effect on their decision to go to university.

    The empirical data is consistent with this theory. All the arguments about high price sensitivity, debt aversion etc assume that these kids are too stupid to work out what is good for them. On the contrary, anyone capable of passing at university can work this all out for themselves.

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  12. Russell and Harry both make a reasonable point that it probably matters well before you get to university whether you think you’ll be able to afford it, and for low income kids in particular this means that the combination of the (fees + financial aid) system is likely to matter a lot.

    It is not particularly simple to calculate the benefits of a university degree, let alone attendance. There are no doubt several hundred academic papers on the topic, and there’s still enough disagreement that there are routinely media articles and statements by politicians etc that we have too many kids at uni and too few tradespeople and high schools need to encourage trades more. There’s evidence (from Canada) that low income kids are particularly likely to overestimate the costs and understate the benefits relative to kids from higher income families. Actually, even figuring out what the costs are in Canada for a hypothetical student is pretty much beyond me, the system is so complicated. Australia is way better on that front, I think.

    By the way, despite strong theoretical support for the notion, there’s almost no empirical evidence that govt subsidised loan programs make a difference to enrolments (I’m trying to pull some data on this out at the moment). So it’s not at all clear that arguments that high fees + loans solve the problem of lower enrolments among poorer kids is based on better evidence than arguments that zero fees will do the job. I remain more sympathetic to the fees+loans, but I do think my reasons for this are rather more theoretical than empirical.

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  13. Christine – High fees and loans are not designed to ‘solve’ the problem of lower enrolment among poor kids. From my perspective, they are designed to solve the problems that come from state mismanagement of universities through price control and conditions attached to grants, as well as my general objection to higher-than-necessary taxation.

    But in Australia and elsewhere, as you know, there is a strong ideology of educational access that includes a belief that fees matter. To show that there is no evidence that this is the case is important to removing barriers to reforms that are necessary for other reasons.

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  14. One of Rudd’s apparant reasons for wanting to reintroduce free tertiary education was that people of his vintage had enjoyed it, and it didn’t seem fair that younger people had to pay. So, because he got an unfair hand-up (relative to his peers of the time who did not go to uni), the same horizontal inequity should be reintroduced now – on some intergenerational fairness notion! This is bizaare.

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  15. With a HECS-style loan scheme under which repayments are income contingent, anyone can afford the fees. Thus, I do not accept the underlying premise of your question.

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  16. Tom – did you read what Rudd said?:
    “I wouldn’t be here if not for a free tertiary education,” Mr Rudd said”
    People don’t think the way you would like them to.

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  17. Russell, Rudd is full of it. He got a free education. Fine. He is really comparing his experience with the circumstances that previously prevailed, not the HECS system that we have since adopted. Does “I got a free education, but if there were such a thing as an income-contingent higher education loan back then, I would still have taken advantage of it” sound implausible to you? Under HECS, everyone can afford the fees. Everyone.

    BBB

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  18. BBB – that’s a good point. But I don’t necessarily agree with you – law, medicine, engineering etc graduates who go on to famously well paid careers will be able to easily pay off the debt – the public perception is that they will be rich. But if your university option is librarianship etc leading to a very ordinary paying job, the idea of having the debt is a different matter.

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  19. Andrew E – A DEST study from the late 1990s found low SES background students had lower rates of completion, but their regression analysis found that it was only significant for students entering on a non-TER basis. It doesn’t say what factors eliminated the difference for school leavers, but presumably lower initial TER (a significant factor in the overall completion rates) and perhaps part-time study.

    An ACER study a couple of years ago found big differences based on ENTER. Their study was of the educational progress in late 2001 of people who had been in Year 9 in 1995. 23% or those with an ENTER <70 had dropped out, compared to 5% of those with an ENTER of 90+. 12% of kids with a university-qualified parent dropped out, compared to 19% with a parent who had not finished secondary school. That relationship remained significant after controlling for other variables. However, parental occupation was not significant after controlling for other variables. School background was not significant either, after controlling for other variables.

    Having a NESB was a significant positive for retention. NESB students are also over-represented in enrolments. Presumably both reflect the selection effect, with people who migrate being ambitious for their kids.

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