The idea of the government forgoing HECS payments for graduates who do things it wants seems to be growing in popularity. Maths and science graduates who become teachers will have half their HECS repayments refunded. Then there was the 2020 Summit proposal for a community corps funded by discounting HECS repayments. And in The Australian this morning a Law Council suggestion that the federal government pay all or part of law graduates’ HECS debts in return for agreeing to work in regional centres.
What this means, in effect, is that the Law Council wants the federal government to subsidise legal services in regional areas. But it is hard to see why legal services should be subsidised on a regional/city basis, rather than as at present through legal aid on an assessment of the client’s financial situation.
I’d have thought that there is a fairly simple market solution to this problem: if there are too few lawyers in country towns, then the price of legal services in those places will rise and attract more lawyers to them.
This HECS reduction proposal also has the same problem as all its equivalents. If we are going to spend money attracting people to particular occupations, activities or areas, why restrict the pool of potential applicants to those who happen to have a HECS debt? If the jobs are unattractive, surely we need to cast the net as widely as possible? Funding via HECS reductions may be slightly cheaper than direct wage subsidy, because the real value to taxpayers of the HECS debt is less than its face value, but the price for the broader program objective is that the potential applicants will be the least experienced people with the relevant qualifcation.
The Australian article also contains the usual complaint about how much HECS law graduates pay. Using census data, I did some calculations this week on the earnings premium of law graduates compared to other graduates. Or at least I tried to, but I hit a problem: more than half of male law graduates from their mid-30s to mid-50s ticked the highest census earnings category, of $2,000 a week or above, making it hard to know how much they actually earn. My conservative estimate is that the median law graduate woud have career earnings of $700,000 more than graduates generally.
These very strong earnings figures help explain why regional law firms may be having trouble recruiting. They also explain why any reduction in HECS for law would be highly regressive.