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
This is an occupation with a history of boom and bust; past downturns in mining and/or construction have left engineering graduates with poor prospects. This probably helps explain why analysis of census data on occupations of people with engineering qualifications shows that they have a wide variety of jobs.
I share concerns that with an unreformed price mechanism a demand-driven higher ed system may lead to some perverse consequences. However we should also be sceptical of industry claims of skills shortages caused by too few qualified people. That they don’t offer sufficiently attractive and reliable wages and conditions and graduates go work elsewhere is not a ‘market failure’, it is markets operating normally.