OECDitis, again

Yesterday Education Minister Julia Gillard announced a major review of higher education policy, to report by the end of the year. The terms of reference are sensible enough. But I hope we will get over the bout of OECDitis on display in the Minister’s speech to the AFR higher ed conference.

As I noted last year, OECDitis is the modern-day version of the cultural cringe, except that now it’s not England that sets the benchmark for Australia, it is the OECD average. Whether or not other OECD countries are actually getting good outcomes, or if they are whether doing the same thing would work in Australian conditions, is all irrelevant. We must at least be the same as the OECD average.

So according to Gillard:

Between 1995 and 2004 public funding of tertiary education increased by an average of 49 percent across the OECD but declined by 4 percent in Australia. ….

Australia is now starting to fall behind our competitors in graduations in critical areas. We are now below the OECD average for the proportion of graduates in science and agriculture, and way below them in engineering, manufacturing and construction – 7.2 percent compared with 12.2 percent. In Korea the figure is 27.1 percent – four times Australia’s density.

Part of the decline in real public spending was due to the below-inflation indexation method adopted by the Keating government and maintained by the Howard government, but most of it would have been due to differential HECS. Compared to the European economies that dominate OECD averages Australia has higher user pays for government-sponsored services but partly as a result also much lower tax. According to another OECD publication released earlier this month, Australians end up with higher returns on their educational investment than countries like Sweden where education is ‘free’. Who gets the better financial deal? (Yes, Russell, I know you think the Swedes.)

Another curious aspect of OECDitis is the strange assumption that spending in Australia isn’t real until a bureaucrat sitting in Paris confirms it. 2004 was quite a while ago, and higher education funding has increased considerably since then, as Gillard’s own Department could tell her. If budget speculation is a guide, only this year will the cash stop flowing.

And do we actually need to match Korea and produce four times as many engineers as we do? Even with the boom, many of them are unlikely to find work as engineers in Australia. Do the Korean engineers find appropriate work? Is the percentage high because they have too few graduates in other fields? We aren’t told. But if the foreigners do it, it must be right.

I don’t disagree with Gillard that the higher education system needs major change. But I don’t think looking at OECD averages in isolation from analysis of the performance of other countries, or the relevance to Australia of policies designed for different economies and government structures, tells us anything very useful.

13 thoughts on “OECDitis, again

  1. Andrew, on your general point about the OECDitis, I cannot agree more, especially now that OECD membership has grown dramatically in the last decade and covers so many developing countries as well as developed ones. Country averages are in any case a silly benchmark, as I have found when looking at social indicators.

    But, without being able to access the full report, where exactly is that information about “the higher returns to education investment in Australia than other countries like Sweden”? Can you help by posting the statistical back-up please and how it is arrived at?


  2. Fred – Though the details are in a pay-to-view chapter of Going for Growth, the relevant figure and brief description can be found at p.13 of the file you download on this page, on the link ‘handout for journalists’. It is 2001 data, so rather out of date. I think the Australian estimate would be revised upwards now, at least for men whose full-time work lets them take advantage of tax cuts.


  3. Andrew, do you think Gillard understood the corollary to having a lower proportion of engineering/science graduate than the OECD average: namely that we must therefore have a higher proportion than average in arts/law/commerce?

    Is she implicitly stating that they want to reduce places in those areas, and revive manufacturing and engineering in this country (obviously up to OECD levels)? Given the efforts put in over the past 20 years to reposition Australia for a service economy, having a fewer than average proportion of graduates in science/engineering should be seen as a relatively successful policy outcome.


  4. Russ – From the data I can quickly put my hands on, engineering graduates have slipped from 6% of all graduates in 1986 to 5.4% in 2006, though it would be 4.9% without overseas students. So not a huge change in relative terms. In absolute terms, a 171% increase overall. For graduates, engineering has been a cyclical occupation, with times of quite low rates of finding engineering jobs. Clearly Korean proportions on our overall output of graduates would lead to poor graduate outcomes at most times.


  5. The education outcomes in Going for Growth puzzle me. It appears that, by comparison with other OECD countries, Australian secondary schools perform relatively well (p. 10) and our students get relatively high returns from tertiary education (p.13). Yet our kids get relatively low gross wage premia from “higher education” (p.12). At first blush, I am not able to reconcile these results.


  6. Fred – I will take a more careful look at the full report during the week, but wage premia is on an hourly basis, while the returns data is presumably total income. Graduates work much longer hours than non-graduates (ie more have jobs and they work longer hours in those jobs).


  7. “At first blush, I am not able to reconcile these results.”

    I wondered about that too. However, read the captions carefully. One is gross wages (where Australians don’t do well), and one is adjusted for tax (where Australians do do well). My bet is that a big factor that is causing this is what the the top rate of tax is — it isn’t surprising that countries with high rates are to the left on this measure.


  8. The “OECD” fetish is the latest form of cultural cringe. Before it used to be “biggest in the southern hemisphere.”


  9. Surely looking at the OECD is a good idea. But it should be for outcomes and not for inputs.

    The US displays the opposite. Americans appear to never look outside the US for ideas. When it comes to things that don’t work well in the US, like health, it’s a pity they don’t look more overseas.

    Why are science/engineering graduates seen as something we need to have more of. Nothing at all against them, I am one myself, but it seems to show a remarkable distrust of people’s own choices. Could it be that people know better themselves than the ‘planners’ do for some reason?


  10. Pedro

    I agree. But the way pollies “magpie” a few points from an OECD PR blurb really makes any public debate they ignite quite worthless. What does it mean when Julie Gillard says, “Australia is below the OECD average in government investment in higher education?”

    The other one the AEU uses is “the current UNDERfunding of public schools.” What on earth could that possibly mean? It could mean anything. But it works as it dutifully trotted out in newspaper columns and blogs across the nation.


  11. Conrad – Yes, that would be a factor too – part of my original point that the ‘cost’ of attending university can only be assessed relative to benefits, and the long-term tax rate is likely to be more significant to that than the charges paid. A few years ago I calculated that the 2005 tax cuts would quickly wipe out the 2005 student contribution amount increase for male graduates (women would take longer, due to a mix of lower-paid occupations and part-time work keeping them below the income levels at which the benefits of tax cuts were significant).


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