Never choose a simple scheme when there is a complex alternative: that, unfortunately, seems to a maxim of higher education policymaking. It was on display again yesterday morning at a Group of Eight forum on higher education and social inclusion.
In her presentation (ppt), Sydney University Deputy Vice-Chancellor Ann Brewer suggested an ‘equity trading scheme’ to encourage universities to enrol more students from low SES backgrounds. I must admit she lost me on the detail of how it would work, but presumably it would mean that those universities (like, I suspect, her own) that failed to meet their equity targets would have to buy credits from those that had more credits than they needed.
There is a much simpler way of dealing with this problem, which is to fix the market design of the whole Commonwealth funding scheme. At the moment, the total number of Commonwealth-supported places is largely fixed overall and for particular institutions. This means that all the specific proposals for recruiting low SES students she and other presenters offered would operate in a zero-sum game. The only way to increase low SES numbers is by decreasing numbers from other SES groups.
Universities have weak incentives to spend large sums coaxing under-prepared low SES students into university when they can take bright, well-educated upper-middle class kids who apply without needing encouragement. Brewer is right that the incentive structure would need to change before this would happen. But there is a simpler option than an equity trading scheme: just deregulate the market.
Instead of recruitment being a zero-sum game with a fixed number of places, it could expand to meet all demand, regardless of SES backgrounds. This in itself would do more than any other policy measure to enrol the current group of low SES students interested in higher education. Indeed, we can be pretty confident that the significant increase in the number of places in the last few years will continue to increase low SES shares of commencing students. There is a leading indicator of this in the statistics on accepted offers by Year 12 score, with the below-70 group continuing to increase its share of the total.
The added competition taking away all quantity restrictions would create would give universities more of an incentive to recruit in innovative ways. Brewer herself suggested colleges that provided pathways to universities through diploma courses. But the for-profit higher education sector has been doing this for years. Why? Because they have an incentive to tap into markets left vacant by the public sector.
Vice-Chancellors at the forum, Ian Chubb from ANU and Alan Robson from UWA, were endorsing moves by universities to relax the emphasis on Year 12 results to let more low SES students in. But the reason they are doing this is not, despite their spin, principally altruism. It is because a combination of soft demand in some areas and the new Commonwealth-supported places means that some institutions are having trouble meeting their enrolment quotas.
Wanting to help the poor is a nice sentiment. But it is self-interest that moves universities the most, and it is that self-interest that policymakers need to harness. A market scheme, in which universities are directly rewarded for enrolment success and punished for enrolment failure, will focus their minds far more intently and with much greater simplicity than an equity trading scheme.