Will Australian universities be hit by an employment domino effect?

For the last decade or so, Australian universities have been funded by what has been called a reverse Colombo plan – a reference to the post-war scheme that brought thousands of Asian students to Australia on scholarships. Back then, Australians funded Asian education. Now, Asian students fund Australian education through the fees they pay. Without them, the Australian higher education system would collapse.

Obviously, students from much poorer countries than Australia like India and China – our two largest markets – are not doing this because they altruistically want to fund the human capital of middle class Australians. Many of them come here as students because they want to migrate. A 2006 survey of international students by Australian Education International found that about two-thirds of them planned to apply for permanent residence.

The ease with which international students have been able to migrate has owed much to the growth in skilled migration quotas during the Howard years (and continuing in Rudd’s first year), combined with rule changes favouring former international students. Historically, migration levels rise with employment levels, and the Howard government was no exception to this pattern.

The flipside of this, as Kevin Rudd noted on 3AW earlier in the month, is that migration levels fall as employment levels fall. In Campus Review this week, I am quoted pondering the implications of this for higher education. There could be a domino effect: higher unemployment here reduces the need for imported skills, and increases already growing public opinion against migration. This leads the government to cut the skilled migration program. This reduced opportunity to migrate leads some international students to abandon or defer their plans to study in Australia. And in the last domino fall, Australian universities hit new financial crises as a result.

This would narrow the options available to Australian policymakers. To survive on the domestic market, Australian universities need either or both of significant increases in government funding or significant fee deregulation. The previous government, and the Rudd government in its first budget, avoided both in favour of a lax migration program. Perhaps Labor will keep the migration tap open rather than reform higher education. If unemployment rises, however, the political costs of this status quo strategy will increase. Crises produce previously impossible outcomes – think bank nationalisation – so perhaps this one will do some good in higher education at least.

13 thoughts on “Will Australian universities be hit by an employment domino effect?

  1. If the government changed those rules it would be a disaster, and not just for universities (or, for that matter, if the OS students just started going home). At a glance (perhaps you have the figures), there appear to be entire segments of the job market that are reliant on university courses which very few Australians want to do these days, like some types of engineering.
    Personally, my bet is that even if the government reduces the immigration numbers (which seems likely), they’ll still allow as many OS students in as before by keeping the large number of entry points given to people with Australian degrees.


  2. If this happened it would be a good thing. We now have the sham situation where international students are doing graduate diplomas in agricultural science (theory only) in CBD campuses just to get the immigration points.

    Universities have gotten bigger because they think big is good. To cover their costs, they need to fill their classes and campuses with students. To do this they have to trail their coats to attract students of so-so quality, both domestic and international. The international students see this is as a back door opportunity to immigrate.

    I’ve got nothing against international students. For my part, they can fill all the places at Australian universities, if they are good enough. But how about we cut the worthless universities, the worthless courses, the worthless academics and the worthless students?

    Migration and higher education are each much too important for one to infect the integrity of the other.


  3. If this is the catalyst for further deregulation of University fees, then bring it on. I can’t imagine a government spending more on Higher Education during tough times being looked at fondly.

    If we are lucky now that the the surplus has half been burnt through we’ll see a tighter budget next year with some sacred cows being slaughtered.


  4. But how about we cut the worthless universities, the worthless courses, the worthless academics and the worthless students?

    A voucher scheme would do exactly that. The other point that needs making is that a lot of the international students are good, and cutting ‘worthless’ students would involve cutting Aussie students too.

    All up this sort of thing is fun to watch – nothing like a discussion of universities to turn egalitarians into elitists. 🙂


  5. Conrad – Presumably they would change the rules in ways that did not cut off migrants we actually need. This could be done via the Skilled Occupation List, by taking out professions we no longer need. Engineers are currently the third-largest group of professionals we are importing, after accountants and IT people. Last year they represented about 40% of the addition to the engineerning workforce (not counting those here on section 457 visas). Most were offshore applicants; I am not sure what % are former international students.


  6. FXH – I didn’t see the connection. VU and LaTrobe cutbacks are likely to be unrelated to the crunch. Those universities with large endowments are likely to cut-back discretionary expenditure. MU, for example, has been cutting back on Arts Faculty staff for some time.


  7. The DEEWR 2007 uni finance report says that VU and La Trobe both had investment earnings under $5 million for 2007. The bigger factor is that they have received indexation of Commonwealth and student contributions of 2.1% when inflation is running at 5%, so a significant real cut.

    The real interest (gasp, given where I work) is at the Group of Eight universities. They have the same general cuts as everyone else, plus they are losing domestic undergraduate fee-paying student profits, plus they are much more exposed to the investment market (U of M $140 million in investment earnings in 2007).


  8. “Universities have gotten bigger because they think big is good.”

    Get your facts right Spiros. A big driver for universities getting bigger is because the government told them they had to, not because everyone actually thought it was good.


  9. Conrad, if you think that your typical vice chancellor isn’t an empire builder, then you are dreaming.

    Sinclair, don’t be too smug. In a truly market based system, it’s not obvious your university, or at least your department in your university, would end up as a winner.


  10. So be it. The chips fall where they do. I’m quiety confident through. In my school about 80% of our budget comes from non-government sources. The loss of the 20% or so might break us, but as I say, ‘quietly confident’. 🙂


  11. Yes, I’d be pretty confident about RMIT too. In the domestic market, it is only slightly behind Monash and Melbourne in 1st preference applications when there is no price competition; if the other two became relatively expensive it could successfully pitch itself as a value-for-money brand. And in the market test of international students, it has more than any other university if you count offshore as well as onshore.


  12. “Conrad, if you think that your typical vice chancellor isn’t an empire builder, then you are dreaming.”

    I’m sure the typical VC is Spiros, but I still find it hard to imagine many would have thought “let’s create a hulking bureaucratic monster” and ended up with something like what Monash is today. You can look at the universities in the US to see what level of expansion would have happened “voluntarily” to get some more reasonable idea of what level of expansion might have otherwise occurred. I don’t have the numbers here, but it’s generally the McDonald’s end of the market that had massive expansion when the State didn’t ask for it in the US. Given this, I find it hard to imagine places like Melbourne and Sydney would be anything like what they are today without government intervention. You can look at places like UQ as an example, where the goal is now to reduce student-staff ratios, not senselessly increase them (and I assume Melbourne is similar). One of the fun things you can think about is whether this was done for any reasonable reason, or whether it was done because it is now part of some of the “top-XX universities lists” criteria.


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