Second-rate rent seeking

The Australian Vice-Chancellors’ Committee may have changed its name to Universities Australia, but so far at least nothing else seems to have changed. Their recent media releases contain more of the second-rate rent-seeking that has long marred the organisation’s public advocacy.

Last week, in their tradition of ‘good first step’ reactions to government initiatives, they welcomed a small extension of student income support and issued a media release repeating their call for:

“Firstly all scholarships and bursaries (regardless of their source) to be excluded from assessable income for the purpose of student income support; and

“Secondly, a reduction in the age of independence for Youth Allowance from the current 25 years to 18 years over the next term of parliament,”

There is no mention (and nor was there when the proposal was first made in August) of how much these changes might cost, how important this proposal is compared to other higher education spending options (let alone other alternative uses of the money), or other implications of the changes.

As Universities Australia realises, because they have also recently set up a review to look into the continuing relatively low enrolments from low SES background students, university students tend to come from affluent families. There is little case, in my view, for these young people to be eligible for welfare if they are living at home.

And while many people are concerned that the hours students are working might compromise their academic results, policymakers need to keep in mind that university students are actually an important part of the workforce in some industries. Employers will be very unimpressed if students decide to take welfare instead.

As readers may recall, I am not a fan of the many university scholarship programmes driven by status competition between the universities. While I don’t think they should be stopped from offering scholarships, nor do I think they should encouraged by letting students double dip, with scholarships plus welfare if Universities Australia had its way.

Then there was this brazen attempt yesterday to use a report on postgraduate earnings to argue:

“Recent policy announcements by political parties across the spectrum provide welcome recognition of education’s role as a principal driver of economic growth.

“Universities Australia believes that public funding for universities should be viewed as an investment in the nation’s prosperity, not as a short-term cost,” Professor Sutton added.

Universities Australia urges all political parties to support major re-investment in core university teaching, to adequately complement investment from non-government sources.

“This will ensure that Australia continues to produce highly skilled and work ready graduates that will strengthen the Australian economy,” Professor Sutton said.

Actually, the coursework postgraduate market is a case study in how things have become much better since the goverment cut its funding and regulations and left things to supply and demand. Though fee-paying enrolments have slowed down in recent years, that was after double-digit growth rates most years from the mid-1990s to 2003, while undergraduate numbers stalled or even dropped.

And if postgraduates are earning good money, with average starting salaries of $65,000 a year for Masters-degree holders according to Postgaduate Destinations 2006, and are enjoying strong earnings growth according to the ABS, why does anyone need a handout? Far from students needing public funding, most don’t even take out the free-money FEE-HELP loans the government offers them.

Subsidising currently unsubsidised postgraduate coursework would not only be a waste of taxpayers’ money, if it came with regulation like that that goes with undergraduate funding, it would make things worse by unnecessarily restricting growth and causing misallocation of places between disciplines, as occurs for undergraduates.

How ironic it is that the organisation representating universities comes up with such intellectually feeble claims for cash. The only thing that can be said in their favour at this point is that they perhaps realise they have a problem, having appointed public policy academic Glenn Withers as their next CEO. He starts next month. Perhaps Universities Australia should take a vow of silence until he arrives.

6 thoughts on “Second-rate rent seeking

  1. I absolutely agree with you Andrew that students should not be allowed to double dip by getting full income support payments on top of scholarship money. Student payments have a very generous income test by income support standards (over $6,000 a year without reduction in payments, compared with about $1,600 a year for someone on unemployment benefits). So if the scholarship in question doesn’t pay enough to fully meet a student’s living costs, there is always the option of topping up from student payments. Treating scholarship income favourably as the Vice-Chancellors suggest would also be really unfair to the vast majority of students who have to go out to earn their income by toiling in supermarkets and fast food joints.

    On the age of independence issue, I don’t really see any need to reduce it to 18, though I think 25 is a bit too high. I haven’t looked at any data recently, but I suspect that there are very few dependent Youth Allowance recipients over the age of 21, anyway. The previous Labor government set it at 22, which ensured that the large group of young people who went straight from school into a three-year degree didn’t qualify by the time they finished.

    Over the years I have come to the conclusion that the best thing to do would probably to continue to treat young people as dependent children (who could therefore attract assistance through the FTB system in the same way as other dependent children), until such time as they establish their financial independence, when they would become eligible for income support in their own right.


  2. BG – Uni students are classed as dependants for FTB purposes, but it is a choice between YA and FTB. Some would be better off taking the FTB option (provided their parents passed on the cash), others the YA option.

    I haven’t seen YA data by age – very little data at all is published. There are still 80,000 or so undergrads aged 22-24, but I don’t know what % get it through being declared ‘independent’ by other means.


  3. I personally thinks its crazy that there are different allowances for people over 18 dependent on weird rules like having been unemployed for a certain amount of time (or whatever the current rules are). We should treat 18 year olds like independent adults, as we do in every aspect of life, and if the money they want is a fuss, then simply lend it to them rather than give it to them.


  4. Andrew – yes they can qualify their parents for FTB, but the amount that their parents get is paltry compared with what they might get for a younger child. Even the maximum amount of ‘dependent’ YA for a young person living at home is less than the maximum FTB for a 15 year old. And if the rationale of both payments is to meet basic living costs, I can’t imagine a convincing argument for that kind of difference.

    I think that it is the inadequacies of dependent YA that have led so many young people (and probably their parents as well) to conclude that the only sensible course is to take a year or two off in order to qualify as independent.


  5. Conrad – the whole point of Youth Allowance was to get rid of different rules for young people depending on whether they were students or unemployed. But you still have to have some way of determining which young people should reasonably be regarded as dependent on their parents and which young people should be entitled to support in their own right.

    The three most common ways of achieving independence at by earning a certain amount over at least an 18 month period, being married or in a de facto relationship for at least 2 years or proving that it is not reasonable for you to be supported by your parents (usually because of parental abuse of family relationship breakdown). While you can have an argument about the exact criteria that you use to determine whether a person has demonstrated financial independence, I think that is by far the least problematic independence criterion. I don’t really regard it as creating moral hazard, for example, unless you really think that there is moral hazard in getting a job.

    While I have some personal sympathy with the argument that young people should be treated fully as adults once they turn 18, giving them full rights to adult income support would be rather too costly from any government’s point of view. And while you could make it all a loan as you suggest, I’m not really sure that is the best way to go, especially if you are prepared to give young people income support if they do things other than study (leave school and become unemployed, have babies, etc).


  6. While the 25 y.o. age of independence is excessive, I think the 26K (now 30K) threshold is a bigger problem, I can see a family earning that sort of combined income struggling to subsidise a child’s study for 3-5 years.

    I lived at home when I was an undergrad and remember working every uni holidays, and near the end of each second semester having to find someone kind enough to chip with a $20 or so here and there, it was a pretty tight existence (and finding someone’s forgotten photocopy card was always mana from heaven in those days). I think the AVCC (sorry Universities Aust) should maybe focus more on raising the threshold up to 40 or 50K, rather than the age of independence it would be more targetted at needy students, although the age of 25 is a bit anachronistic.

    Interestingly, I remember a few entrepreneurial people at uni who did the dole + 3 subjects option in undergrad, I’m not sure if this was for their final year or whether this was throughout their study, but I’m guessing that if they did just less than the F/T load that they probably completed their degree at the same time as those that did the gap year to earn Austudy. Plus less subjects per semester should offer more time, and better opportunities to maintain a high GPA, thinking back then we tended to assume anyone below a credit average was unemployable. Seriously though you’d have to be thick or lazy these days not to get at least a credit average.

    I’d prefer governments focused on income support than on lessening HECs, I think this is more offputing than a referred debt


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