Will student demand guide higher education well?

Last week’s Age education section ran this piece suggesting that a demand-driven system of higher education wouldn’t work.

Yesterday they ran my partial op-ed response to this; it doesn’t seem to be on the Age website but it is up at the CIS website.

The point I took up was this:

The tendency of students to prefer prestigious courses such as law highlights the question of how the government will ensure a student-centred system delivers the right mix of graduates to tackle Australia’s skills crisis.

But demand for law degrees also highlights another danger. Under a demand-driven system, popular fields of study could push out other, less-popular but no less important study areas.

Some key points from my response:

* the major graduate skill shortage (in the health professions) was not caused by a lack of demand; but by a lack of supply due to government restrictions;

*applications for vocational courses typically follow the labour market anyway

* there is always strong demand for non-vocational courses

* if there were shortages caused by demand shortfalls, the regulatory response will probably fail, since trying to steer students into government-approved courses by limiting their options is unlikely to work – it will cause people to not take courses, drop out, or not pursue the career the government wants

* persuasion is the best way of steering preferences, which is consistent with a demand-driven system.

I’ve never seen demand as a major problem in the new system. The main question in my mind was whether without a proper price mechanism there would be sufficient incentives for higher education providers to meet the demand.

But with vice-chancellors seemingly recklessly indifferent to price signals perhaps my concerns were exaggerated, at least until the money runs out….

11 thoughts on “Will student demand guide higher education well?

  1. The main problem as I see it is that the demand-driven system as promised deregulates just one of the three main dimensions.

    University funding from 2012 will follow the students – up or down. As you never tire of pointing out, this will not be accompanied by the price deregulation required to let student demand truly drive the delivery of undergraduate education. I am not hopeful that the base funding review will deliver anything of substance in this regard, but surprises do happen. (also changes of govt from time to time 🙂

    But the other missing link is flexibility in staffing. The rigid IR framework, laws and collective agreements willingly signed by VCs mean that internal resourcing can’t move as quickly as it should in response to demand changes – in particular these IR factors will make it hard to terminate inefficient ‘vanity’ courses (and indeed whole departments) which will no longer be rendered marginally viable by a government-imposed scarcity.

    There will have to be a trade-off; more flexible work practices will be essential. The irony for Labor is that increased casualisation of the academic workforce over the longer term is likely to be the price paid for this incomplete system of demand-driven funding.


  2. Mookster – I agree staffing is a big issue, though I think the level of ‘flexibility’ is a negative too. The level of casualisation and fixed term contracts is already huge, which makes universities unattractive employers.

    Part of this flows from the medium-term nature of many research projects, much flows from the structure of the academic year.

    Teaching all year round is an important change needed to create full-time jobs and reduce casualisation.


  3. “the major graduate skill shortage (in the health professions) was not caused by a lack of demand; but by a lack of supply due to government restrictions;”
    I’m not convinced of this one, because it assumes that demand will remain the same even if prices are pushed up. The evidence for this is that some of the courses that are in short supply are postgraduate ones, where universities already can theoretically train as many people as they want as well as charge what they want — yet we don’t see great expanding numbers everywhere. The obvious reason many health related courses are not expanded is because they are expensive to run as clinical training places are hard to find, now often need to be paid for, and clinical staff are expensive. Even 30K a year, which is what the price is now for some courses, wouldn’t cover costs in many cases, hence no expansion (how much do you think it costs to employ a doctor or dentist who would earn a few hundred thousand a year in private practice, for example?). Once you get up to the real cost (let’s say 80K a year), you are going to have serious political problems, and demand will not remain the same. I also think that, given the age structure of universities, once the current round of clinical staff who started a career in much better conditions retire, this problem will be come worse, not better, as staff will be harder to find (unless universities allow clinical staff with non-Aus training from places like China & Iran, which I think would mean the various regulatory bodies would need to also recognize their qualifications).
    “it will cause people to not take courses, drop out, or not pursue the career the government wants”
    I think I’m becoming less convinced by this one also, although I don’t know what the solution is. I think there is a proliferation of courses that teach less and less that are deliberately marketed at 18 year olds and are not necessarily in anyone’s long term interest.


  4. Conrad – It’s true that demand will surely drop as prices increase. It hasn’t happened to date on any significant scale in undergrad markets because the prices are still very cheap compared to the benefits for most people.

    There is no published demand data for p/g, so it is harder to know what is going on. Full-fee enrolments grew rapidly for the decade up to 2005 and then stablised (though due DEEWR’s inefficiency we only have data to 2008). But commonwealth-supported p/g places started growing rapidly in 2006 so there is probably substitution going on.

    Can you tell me more specifically what the postgraduate demand-constrained courses are. I have never seen any reports of these.

    I put the low-paid health professions, esp. nursing, on the list of degrees for which there is a theoretical case for public subsidy.

    But this issue is at a tangent to my post: I was critiquing the idea that quasi-coercion of students was a viable option in steering the system. Price incentives are persuasion mechanisms.


  5. “Can you tell me more specifically what the postgraduate demand-constrained courses are. I have never seen any reports of these. ”
    In terms of demand constrained post-gradaute courses in health or health related areas at current prices, how about, just off the top of my head, podiatry, audiology, speech-language therapy, and possibly educational psychology.


  6. Conrad – Thanks for these leads. So far as I know this is a completely unexamined area, reflecting the woeful state of higher ed research.


  7. Yes, it is a woeful state. I only know about those through random converstations I’ve had with people and because of where I’ve worked.

    The alternative way to look at it would be to get a list of professions supposedly in short supply and then examine whether any universities have expanded their courses in those areas. My bet is that there would be lots of little specialities you wouldn’t have thought of that are in need (especially ones servicing the growing older population). Given most universities are desperate to expand, I think it would be surprising if they didn’t expand courses where there was demand and they could make money at the current government funding levels.


  8. The way I have approached this in the past (for u/g) is to look at the graduate employment surveys plus skills shortages lists. There are some skills shortages that have little or nothing to do with recent supply of graduates, as they are for more experienced people.

    At a national level I have data on enrolments to a narrow field of study and course level so I could investigate at least some of the fields you have mentioned.

    I would have to approach institutions for demand data, though the claim that more would apply if costs were lower is near impossible to investigate.

    With p/g opportunity cost becomes an increasing issue. If you already have a career taking time out can be very difficult.


  9. The key broad conclusion of the empirical analysis is that the market-competitive constellation of policies is associated with the most attractive combination of policy outcomes: high participation rates in higher education, reasonable quality in public higher education, and a healthy private sector providing choice to students, all at only average levels of taxpayer spending (per capita) on higher education and well below-average levels of taxation overall.


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