Is there a higher education ‘market failure’ in engineering?

An article in yesterday’s AFR education supplement (not online, sorry) reported mining industry representatives criticising Labor’s proposed demand-driven higher education system.

Chris Walton of APESMA said

Engineering is the pin-up to demonstrate that a demand-driven system will be a disaster for this country. … It’s the classic example of market failure and the consequences of that market failure for this country are very concerning.

In reality ‘market failure’ – or at least, other than a failure of markets to exist – is not likely to be a major issue here. In a paper I wrote for NCVER a couple of years ago I showed that university applications do respond to labour market shortages. Objective evidence of shortages of engineers emerged over 2003-04, and with a lag of a year demand for engineering courses grew from 2006 (from applications that would mostly have been made in 2005).

Figure: Engineering applications and offers

Source: DEEWR. Continue reading “Is there a higher education ‘market failure’ in engineering?”