Fulfilling an election promise, this year’s budget contained:
$562.2 million over four years to encourage students to study maths and science and compensate universities. From 1 January 2009, the maximum annual student contribution amount for maths and science will be reduced to the lowest ‘national priority’ rate for new students.
As I pointed out when Labor first announced this plan in early 2007, it rests on two false assumptions.
The first assumption is that choices between broad academic disciplines are driven by relative prices. There is no evidence in the history of changing HECS levels that this is the case. A moment’s reflection explains why: for most people, a choice of course is a career decision, and who in their right mind would choose a field that did not interest them to save a few thousand dollars in eight or nine years time (when their HECS repayments would finish earlier than would otherwise be the case)? And for students motivated by money, a few thousand dollars in tuition costs is not going to change substantially the lifetime earning relativities between occupations.
The second assumption is that demand influences supply, when due to the quota system of allocating university places it has very little influence. For universities, the only shifts that are reasonably easy to make are within so-called ‘funding clusters’. The main other discipline in science’s cluster is engineering, but it would hardly make sense to shift places from a field with a tight graduate labour market to science, which offers relatively poor employment prospects (make that three false assumptions; we don’t need more science students). The number of science students is driven by the historic number of places allocated to science, not by demand for science courses.
Given the usual year-to-year stability in market share between disciplines this is a surprising result, but further evidence that if a swing is on fiddling with prices isn’t going to make a difference. It will be interesting to see what happens in other states.
But I think we can pass judgment on the policy now: the government has wasted $562 million of taxpayers’ money on its incorrect intuitions about higher education.