The intuition that rising university tuition fees are a problem is a powerful one, but in need of persuasive theories and evidence to support it. As research cast more doubt on the idea that HECS negatively affected decisions to attend university, the argument switched to its effects after graduation.
The first serious attempt to do so was a paper in 2002 by a University of Tasmania academic, Natalie Jackson, suggesting that HECS might reduce fertility, as couples, and particularly women, postponed having children to pay off their HECS debt first. Though Jackson herself was cautious, given the data limitations, the idea was enthusiastically taken up by proponents of lower HECS, as I noted in my 2003 paper (pdf) criticising the idea. Subsequent analysis using HILDA data, published recently in the Journal of Population Research, showed that my argument was correct.
Another version of the argument is that, because of HECS, graduates will struggle to buy a home. Kevin Rudd has made this argument, effectively suggesting (as I pointed out at the time) that graduates be given a second first home buyers grant not available to the poor plebs who have to work to pay for their homes, rather than getting a wealth transfer from the Commonwealth.
A third version of the argument, which has come up this weekend in The Age and from commenter Matt, is that HECS debts will distort career choices away from public service type jobs towards employment that will generate the cash flow required to repay loans.
As The Age put it:
Tellingly, from a policy point of view, [law student Diana] Costaras feels the scale of the debt may steer her away from certain career paths, such as working in a human rights role.
Policy analysts fear she is not alone here — that medicine graduates may be steering towards more lucrative specialisations, and away from rural jobs and general practice, in a bid to get ahead financially.
Of course there is a serious shortage of rural medical practitioners now, even though the overwhelming majority of Australia doctors currently practicising had their education for free or at low cost. Clearly these high taxpayer subsidies have not translated into any felt obligation to treat people in areas where a good latte is hard to find. I think we need something a bit more hard-headed than spending huge sums of money on the off-chance that some of its beneficiaries may feel inclined to take jobs that lack the status or stimulation or comfort associated with the inner urban medical labour market.
This is a complex problem, which money alone doesn’t seem able to fix – even when high salaries are offered for regional practice there are often signficant difficulties filling vacancies. Rural medical schools, medical places bonded to regional practice, and greater incorporation of rural clinical training into the medical curriculum are all targeting it.
But to the extent that money is an issue, it should be directly spent on the problem – giving more to those people who change their behaviour, not to everyone. And I don’t see why the money should be spent specifically on HECS relief, as this narrows field to recent graduates (though there is a cost-shifting argument for focusing on HECS debt, if medical employers take advantage of the bonuses for early repayment to deliver a greater financial benefit to their employees than the added salary cost).
An underlying problem is that past policy bungles mean that there is an undersupply of health workers generally; unsurprisingly many medical workers decline to take the less attractive jobs. Unfortunately there are no quick fixes to this problem, but to the extent possible we should increase the supply of medical professionals so that is less of a seller’s market. This has actually been happening to an extent – thanks both to more HECS places and the full-fee degrees. The debate on the cost of university education focuses exclusively on how prices affect demand, overlooking the role of prices in stimulating supply, which is what we lack in this case.
The situation with people like human rights lawyers is rather different. Unlike dealing with sprains and sinuses in country towns for medical students, a human rights practice is appealing for some law students. The question raised by The Age article is whether higher fees would necessitate more lucrative work to service the resulting debt. With income-contingent loans, higher debts don’t have any effect on annual repayments, just on the number of years it takes to repay. So there is no cash flow reason to choose a particular form of legal practice.
Higher fees would, however, presumably enter into the overall calculation of how much a law graduate was prepared to pay – both in university costs and the opportunity cost of not pursuing more lucrative fields of law – to do work that was more interesting or more meaningful. Of the two, the opportunity cost is likely to be the larger for the most talented law students. But what trade-offs people will make is an empirical issue that I don’t think we can answer now in the absence of data.
Unlike in medicine, however, there are far more law graduates than there are first-year places in any form of legal practice. If people want to be lawyers, for the foreseeable future some of them are going to have to take less financially-attractive fields, such as human rights or (more likely) the cases of people whose lives have been stuffed up not by exciting things like oppressive governments but the depressing realities of bad families, bad schools, bad friends, bad relationships and bad luck (ie legal aid cases).
I don’t think there are any knock-down arguments against increasing tuition costs further in these labour market considerations. While there will be some point at which prices start having adverse consequences, we may not ever reach it because market forces will keep prices down.