Another OECD factoid

Regular readers will know that I am no fan of the OECD cringe, the belief that OECD averages set a standard that Australia should follow.

But uncritical use of OECD statistics is made even worse by misleading use of OECD statistics. That’s what ANU Vice-Chancellor Ian Young – normally one of the better VCs in his public statements – does in this opinion piece in today’s Age.

Young says:

OECD figures show that public spending on tertiary education in Australia is about 0.7 per cent of gross domestic product. Clearly, this will rise as the system is expanded in coming years. However, the spending compares poorly with Denmark at 1.6 per cent, Sweden at 1.4 per cent, Norway at 1.2 per cent and the Netherlands at 1.1 per cent.

On average, public investment in tertiary education in these countries is twice that of Australia.

It is no surprise that these countries have been able to develop high value-added export industries, despite high production costs and high exchange rates. These countries also have high social cohesion.

But Professor Young doesn’t explain why public funding of higher education leads to positive results that private funding does not. So we should look at private spending as well.

And if we average the total tertiary education spending as a proportion of GDP in the OECD’s figures in these countries what number do we get? An average of 1.5%, exactly the same as Australia’s total.

As a proportion of GDP the Nordic countries do have more public spending on higher education than Australia. But this is a factoid devoid of policy significance.

20 thoughts on “Another OECD factoid

  1. “That’s what ANU Vice-Chancellor Ian Young – normally one of the better VCs in his public statements”
    Thank god ANU has got him now, but on topic, it’s not devoid of policy significance — you could potentially look at the outcomes of public and private funding models and that way you could see the extent to which different forms of funding really do cause consequences (good and bad). The obvious example is the soft-marking business of late (which I don’t think is very important incidentally), which is presumably at least in part a consequence of private funding in institutions with restricted funding (cf. rich private universities). Alternatively you could look at universities funded mainly by the public, but in countries where people don’t want to pay the real cost, and the effect of this is far worse than anything Australia has seen.


  2. Conrad – Grade inflation is a bigger issue in American private unis than soft marking is here. As I noted in my post about Foster’s paper, while there were slightly unusual results in classes that were mostly internationals, overall it showed tough marking.

    If financial factors are regarded as an incentive issue, it is an overall package of policies. Historically in Australia supply of uni places had been held well below demand, making domestic students quite expendable. That was an appalling incentive structure overall, even though it made it easy to fail students and kick them out.

    But in the publicly-funded demand-driven system starting next year, domestics will not be expendable. One point I agree with Ian Young on is that for the first time we are likely to see supply of places exceed demand, a very radical change to incentives.


  3. “Grade inflation is a bigger issue in American private unis than soft marking is here.”
    Yes, I agree — I was surprised at how low the average marks were also. There are many exceptions, however — Honours marks are almost worthless now in Australia in some areas because of grade inflation — everyone now asks each other for the unofficial ordered lists when dishing out their own scholarships.
    As for things that really do affect quality — I just noticed that Deakin is trying to move to 10 week (!!!) teaching semesters, yet this hardly gets a mention.


  4. Yes, I saw that story about Deakin. I would like to find out more about this, as I see year-round teaching as the big thing that can be done to improve higher ed productivity. OUA courses have four teaching periods of 12 weeks each, so I don’t see why Deakin needs to cut to 10 weeks for three.

    I did Honours more than 20 years ago, and grades were an issue then (us Monash people being convinced Melbourne students were soft marked). And back then people doing Honours in Arts were more interested and able; since then it has become a more standard extra year just to differentiate graduates in the labour market.


  5. Not that I agree with this line of reasoning, but Young could argue that because most of the private spending at Australian universities is by overseas students, Australia doesn’t capture the wider benefits of this spending. Therefore, we should focus on our comparatively low public spending to explain our alleged failure to develop high value-added export industries, etc.


  6. Except that international students are themselves are a high value added export industry.

    In the public unis ‘private’ (ie, including HECS-HELP and FEE-HELP) domestic income was in 2009 still ahead of international fee income, $3.9 billion to $3.4 billion.

    Plus given the sector’s propensity to use exaggerated claims of the benefits of international students in other contexts (eg in getting visa requirements relaxed), the VC’s can’t back out of these claims when it does not suit them.


  7. Very true Andrew, but I presume what Young had in mind (at least in this instance) was tertiary education as an input into the development of some ‘high-tech’ manufacturing-type activity. But in any case, it’s a silly argument.


  8. “but I presume what Young had in mind (at least in this instance) was tertiary education as an input into the development of some ‘high-tech’ manufacturing-type activity.”
    You couldn’t be more right, except that because it’s Ian Young, it would have to involve big machines too. (I’m chuckling to myself right now).
    “Except that international students are themselves are a high value added export industry. ”
    But they’re not big iconic machines, so they don’t count.


  9. It isn’t a “factoid” Andrew.
    It is people who believe Australia should spend more on a particular area than the OECD average.

    In this I agree. Is the OECD average a benchmark we need to overcome.


  10. Admit it Andrew. You’re criticism of Young is motivated by UniMelb-ANU rivalry.
    Young is just doing his job, part of which is to publicly lobby for more money from the government. If he didn’t do this, that would be a legitimate cause of criticism. You should get on to Glyn Davis’ case and tell him to do the same.


  11. S of R – Yes, VCs are fundraisers, so Young is doing his job. The job of classical liberal bloggers, however, is to criticise the weak arguments of rent-seekers. As for ANU versus Melbourne, the Age article in the first link was me taking a public swipe at a U of M academic.


  12. One man’s rent seeking is another man’s bidding in a competitive market place. As for the public private thing, I really doubt that Young has got anything against getting more private money into ANU. I fact I wouldn’t be surprised if his next Age article is about how student fees should be deregulated. He’s just making one argument at a time.


  13. S of R – I think this is classic rent-seeking – since I am yet to see any even slightly persuasive argument as to why public money will produce benefits that private money will not, this is simply about the higher education sector trying to strip resources from taxpayers or other possible beneficiaries of the same money.

    Not that I am worried about Young being persuasive where it counts. The universities have been running nonsense like this for 60 years, and nobody in Treasury has bought it yet.

    I just observe that other people not so familiar with rent-seeking tend to fall for this argument, so I am doing a public service in pointing out its flaws:)


  14. nobody in Treasury has bought it yet.

    Really? In that case, why haven’t they tried to persuade governments that students should pay US type fees, not the highly discounted ones they are paying, with the discount reflecting the public benefit of their education?


  15. Because they are worried about HELP costs blowing out, as much public funding as tuition subsidies. Occasionally public funding does increase, eg under the Coalition 2005-2008 (2008 flowing from 2007 Budget). But no government has ever accepted an OECD benchmark, and OECD levels have had nothing to do with it.


  16. Rob – I don’t know the precise figure you are asking for, but it is a good question. The OECD does not provide disaggregated data, but on my quick calaculation international student fees were about 0.18% of GDP in 2007, the last year reported by the OECD.
    As almost always, reading the technical notes casts further doubt about the genuine comparability of the figures.
    It is direct expenditure on higher education institutions, so in Australia’s case this understates public spending because HELP subsidies are counted as paid to households. It would also exclude YA.
    However it may overstate numbers because it includes research spending. Some countries tend to concentrate research more in dedicated research organisations than universities.
    With the international student income, work we have been doing at U of M suggests that there is a significant subsidy to local students, plus the retained human capital you mention by international students who stay in Australia.


  17. Thanks Andrew. I guess I’m looking for an indication of how much ‘tertiary education’ goes on in Australia compared with the rest of the OECD.


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