The financial benefits of higher education

The ABS has an interesting new publication out today on the financial benefits of higher education.

ABS anlayst Hui Wei uses data from the 1981, 1986, 1991, 1996, 2001 and 2006 censuses to provide estimates of rates of return for investment in higher education. In the figure below, the rates are based on post-tax earnings of graduates compared to someone who finished their education at year 12 (say a Year 12 completer earned $800 a week and a graduate $1,200 a week – the graduate premium would be $400). The graduates are aged through the census of the stated year (eg it assumes that a 1996 graduate would at age 40 earn what a 40 year old graduate earned in 1996).

The costs are assumed to be the opportunity cost of four years out of the workforce with no earnings in that time, plus direct costs such as HECS.

Continue reading “The financial benefits of higher education”

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?”

Should student contributions be paid upfront?

In starting work on a paper about the student loans scheme, one thing I wanted to investigate was a finding of a survey of first-year students (pp.71-72) that a significant minority – ranging from 23% of those aged over 25 to 38% of 19 year olds – work while studying ‘to save for repaying future HECS-HELP or FEE-HELP debts’.

I wasn’t sure that this would be the right financial strategy for students with cash to spare while studying. The apparent incentive in the HECS-HELP scheme is to pay on enrolment. If a student pays at least $500 upfront, he or she will get a ‘bonus’ of 25% on the amount paid. In one of the examples I use below, an Arts student with an annual charge of $5,310 who paid $2,000 upfront would have $2,500 wiped from their balance, leaving $2,810 to be paid off through the tax system.

If a student makes a later voluntary repayment using their savings they get a bonus of 10%. For example, once they already had a debt they could pay $2,000 and get $2,200 taken off their balance. Could the benefits of saving the money and accruing interest compensate for the bonus shrinking from 25% to 10%? Continue reading “Should student contributions be paid upfront?”

A left-familist misreading of the data?

The left-familists were given free run by the Fairfax papers over the weekend in responding to the ABS’s latest report on working time arrangements.

The SMH article opened with the statement that

THE claim that working hours are becoming more family-friendly is a myth, new figures suggest, with Australian workers having less opportunity to negotiate flexible work arrangements than they did the best part of a decade ago.

Of course there is no such myth; we’ve been endlessly told the opposite by the advocates of more labour market regulation.

The SMH‘s claim that ‘the number of workers who negotiated an agreement for flexible hours with the boss – either formally or informally – fell from 40 per cent to about 30 per cent’ looks like it might be a misreading of the statistics or coming from a change in the question or both. Continue reading “A left-familist misreading of the data?”

Are your uni days the best of your life?

The SMH yesterday wrote up this report which, as many other analyses have, finds graduates are not happier than other people (though the research is mixed on this; some studies do find a benefit, and in the 2007 Australian Survey of Social Attitudes sample graduates are happier).

Education and happiness in the school-to-work transition by Curtin University’s Michael Dockery is especially interesting on the question of graduates and happiness because it uses the the Longitudinal Surveys of Australian Youth (LSAY), which tracks the same individuals over time. They start when the respondents are in Year 9 and finish when they are in their mid-20s. This lets us see happiness over time and the possible effects of changing circumstances.

Happiness relative to mean, by educational attainment

Source: Figure 2(b) in Education and happiness in the school-to-work transition, published by NCVER

What this shows is that people who will eventually get undergraduate degrees start out with above average happiness and end up with slightly below average happiness. People who will eventually get postgraduate degrees are the happiest in 1997, but only average in 2006. By contrast, those who destined for lower qualifications are relatively unhappy in 1997 but happier (relatively, and in asbolute terms) in 2006.

Continue reading “Are your uni days the best of your life?”

Some implications of a large temporary population

Because the number of people with Australian residence rights crept up with little public awareness or debate, our thinking about what this means for them and for the permanent population is not well developed. Some observations:

1. The distinction between temporary and permament residence is important in eligibility for a wide range of welfare rights. It is part of the dispute about whether international students should receive public transport concessions. I have argued in the past that as temporary residents international students should not be entitled to this taxpayer subsidy – that choosing to study here gives them no claim on public funds.

Commenter caf has suggested that the fact that many international students go on to acquire permanent residence rights complicates this argument. Another complicating factor is the claim that given that temporary residents pay taxes, why should they not all also receive government services? While international students aren’t likely to be paying much tax if they are observing the work conditions of their visas, section 457 visa holders will often be paying significant amounts of tax.

2. Does a large population with residential rights but not voting rights have broader political implications? Continue reading “Some implications of a large temporary population”

Hong Kong observations

Some observations from my recent trip to Hong Kong:

1. Hong Kong’s number one economic freedom ranking would come as no surprise to anyone who just wandered its streets, without examining any economic laws. There’s more street advertising in Hong Kong than anywhere else I’ve seen in the world, and more commerce that spills onto the street in the numerous street markets. I liked the colour and light of the advertising, especially as it distracts from one downside of little regulation, a large number of very ugly and unimaginative (but presumably cheaply constructed) buildings.

2. Despite this economic freedom, Hong Kong’s free-market think tank, the Lion Rock Institute (chaired by my expatriate friend Bill Stacey), does have something to do. HK is currently debating introducing a minimum wage. Perhaps the high A$ at the moment makes this look worse, but a report issued while I was there found that the median wage in HK was only just over A$8 an hour, way less than the Australian minimum wage (though prices seemed generally lower than here). Given that HK’s per capita GDP is greater than Australia’s, this suggests very high income inequality. Continue reading “Hong Kong observations”

Is long service leave an anachronism?

As of close of business this afternoon, I am on long service leave. But is this an anachronistic institution?

Certainly long service leave’s historical rationale is no longer compelling. It began in South Australia and Victoria in the 1860s as a scheme that allowed civil servants 6-12 months leave to go home to Britain after 10 years service in the colonies. Given the lengthy transit times a substantial period off work was necessary to make the trip to Europe. Obviously this is no longer the case.

It wasn’t until the 1950s that long service leave became widespread in the private sector, and it is now a statutory right. No other country incorporates such a right into their labour market regulations.

Criticism of long service leave is not confined to free marketeers. Some people say that changes in labour market conditions towards more casual and contract employment mean that long service leave is less relevant. Continue reading “Is long service leave an anachronism?”

Will the WorkChoices scare campaign work again?

Earlier in the week, Pollytics blog reported an Essential Research poll finding that most people believe that Tony Abbott would bring back WorkChoices. Labor has been dusting off its old anti-WorkChoices rhetoric to take political advantage of this.

But will the same scare campaign work twice?

Though many WorkChoices policies persisted well into the Rudd government’s first term – indeed some aspects of their re-regulated IR system didn’t start until last month – the stories of workers being ripped off by bastard bosses using WorkChoices over the last couple of years have been hard to find, certainly much harder than the anti-WorkChoices ACTU advertising before Howard’s defeat would have led us to believe.

Indeed, the WorkChoices era in the Australian labour market was remarkably good. Unemployment sank to 30 year lows before the GFC hit. Despite claims that bosses would use their new powers to ‘unfairly’ sack workers, involuntary job losses dropped to very low levels. Continue reading “Will the WorkChoices scare campaign work again?”