On Monday in the AFR I was calling (again) for a more market-driven higher education system. In the Budget tonight the government is taking some very messy first steps in that direction.

Under the current system, each public university (plus a few private institutions) signs a funding agreement (read, ‘agreement’) with the Commonwealth. This sets out the number of Commonwealth-supported student places the university must provide, and in which disciplines. If universities enrol up to 5% more than the target number, they get to keep the student contribution, but get no Commonwealth money. If they enrol more than 5%, for the excess they must pay the student contributions to the Commonwealth. Clearly, this has been a strong disincentive to expand – even if student demand is high. Once all Commonwealth places in a course have been filled, universities are allowed to offer full-fee places up to 35% of domestic enrolments. In a small number of courses, this too has represented an artificial restraint on university expansion.

These restraints are now going to be relaxed. It sounds like the funding agreements will be more genuine negotiations – I infer this from the statement that the Commonwealth will continue to require universities to take Commonwealth-supported places in some fields, such as nursing, teaching and medicine, implying that they will not be forced to accept them in other areas. Universities will now be able to enrol 5% more than their target number and get full Commonwealth (and student, as before) funding for them. Beyond the 5%, they will get the student contribution amount only. This is an incentive to expand, for those universities that want to – a good thing.
Continue reading “Some perestroika in higher education” →

The latest report on unmet demand for university places shows that the number of ‘unsuccessful eligible applicants after discounting’ is down for the third year running, to 13,200. Among school leavers who did OK in their exams unmet demand is very low. Of the 68,916 home state school leaver applicants with an ENTER of 70 or above, just 964, or 1.4%, did not get an offer.

It’s fair to say that at the aggregate level unmet demand isn’t now much of a problem – especially when we consider that some of those considered academically ‘eligible’ in the discounting process, those with an ENTER of 53 or above and all those applying on another basis, probably would not be offered a place even if there were no quotas holding down the number of places universities could offer (a point I expand on in my recent CIS paper).

It’s when the applications, offers and acceptances data is examined in more detail that we begin to see problems. As I argued in my CIS paper, and which the 2007 statistics show again, there are persistent patterns of over-supply relative to first-preference applications in some fields (agriculture and science) and under-supply in others (eg in medicine, dentistry and veterinary science 50-60% of applicants with ENTERs of 90+ do not get offers).
Continue reading “The problems low ‘unmet demand’ conceal” →

This week Treasury Secretary Ken Henry launched a Treasury Working Paper called ‘HECS for TAFE: The case of extending income-contingent loans to the vocational education and training sector’, by Bruce Chapman, Mark Rodrigues and Chris Ryan. This is an idea I have supported myself; there is no intrinsic reason why where a course is placed in the Australian Qualifications Framework should determine whether a student should have to pay up-front or being able to take out an income-contigent loan. As with many aspects of policy, the difference is due to a quirk of history rather than principle. In the 1970s, the Commonwealth acquired funding responsibility for higher education, but vocational education was left with the states. So HECS was introduced in 1989 to help the Commonwealth discharge its resposibilities, but vocational education was left as a state responsibility.

While I support the principle of not differentiating between vocational and higher education, I would not support the version of income-contigent loans apparently proposed in the Chapman et al. paper. Their calculations seemed to be based on a straight application of HECS, but they are vague (apart from a footnote which only semi-clarifies the situation) on how they would handle the current debt surcharge element of HECS-HELP.

At universities, students paying their student contribution amount up-front get a 20% discount. Or to put it another way, if you don’t pay up-front you pay a debt surcharge of 25%. (eg say a subject costs $1,000. If you pay up-front with a 20% discount you get $200 off, leaving a price of $800. If the real price is $800, $200 extra is 25% more.) For full-fee students, the surcharge is more obvious. If undergraduate full-fee payers take out a FEE-HELP loan, they pay the advertised price plus 20%.
Continue reading “HECS for TAFE” →

This morning’s papers ran a lot of pre-launch publicity for the Melbourne Model, the University of Melbourne’s new approach to higher education that was officially launched today and will be phased in from 2008.

Over time, the number of undergraduate degrees will drop to six: Arts, Science, Environments, Commerce, Music and Biomedicine. Most professional courses will be taught in graduate schools, with a dozen of these new Masters-level courses starting in 2008, and more to follow in subsequent years.

I’ve said little about this on the blog, as part of a general effort to keep separate and conflict-of-interest-free my roles as an employee of the University of Melbourne and as a higher education commentator. I’ll keep avoiding public discussion of the merits and demerits of the changes (though of course I think that there should be more choice in Australian higher education, with the market rather than the Commonwealth deciding what is offered). Plenty of other people have been offering their views on the substance of the changes at Melbourne. But there are a couple of contextual policy points worth making.
Continue reading “The Melbourne Model” →

Universities … should be accountable to the taxpayers who sustain them…

Universities have a responsibility to demonstrate to taxpayers that they are efficient and well governed.

Education Minister Julie Bishop, in a speech to the Australian Financial Review Higher Education Summit last week.

That’s certainly how the Commonwealth sees universities – as federal government institutions that spend the Commonwealth’s money and are therefore ‘accountable’ to it. But one immediate problem here is that universities are not federal government institutions, but (with the exception of the ANU) creations of state legislation with accountability mechanisms, mainly in reporting information, established by state governments.

Another way of looking at is that the Commonwealth is simply a major client of universities. This is an analysis they have impliedly encouraged, by moving away from block grants, which universities could spend on very broadly defined purposes, to funding of programmes with specified outputs. For example, instead of providing a block grant for teaching, as occurred until 2004, the Commonwealth now specifies – sometimes down to specific courses at specific campuses – how many student places universities will provide. If the Commonwealth is simply a client of universities, it is entitled to ensure that the university supplies the number of places it said it would, but has no authority beyond that, just as when you order something from a retailer you are entitled to get what you pay for, but not to instruct them to reduce the number of people on their board of directors.

But instead of seeing the Commonwealth as a customer, Bishop sees it as a shareholder entitled to tell universities how to run their business:

The sector needs to continue its governance reforms so that taxpayers can be assured that the institutions – in which they are effectively shareholders – are being run efficiently.

Continue reading “Is the Commonwealth a university customer or shareholder?” →

One theory as to why over-education can be bad for you is that people form expectations of life after study that are not subsequently met. But this assumes that people do in fact expect higher education to pay off in the labour market. We can investigate this by looking at surveys on reasons for wanting to go to university.

In 1994, a survey of year 10 to 12 school children planning to go to university found, in a open-ended question, that 86% gave answers relating to their career prospects. Some gave answers consistent with careers not being paramount (‘to be better educated’, 15%; ‘interesting courses’, 3%), but as they could give multiple responses some may also have had vocational rationales for study.

A 1997 ABS survey of people actually enrolled in higher education found that 96% gave a vocational reason. Broken down by field of study, the proportions ranged from 90% in ‘society and culture’ (an annoying ABS category that includes the humanities, social sciences, fine arts and, for some unknown reason, law) to 100% in architecture and education.

A 1999 survey of first-year students, which asked about how important various reasons for enrolling were, found the following ‘important’ ratings: ‘studying in a field that really interests me’, 96%; ‘to improve my job prospects’, 86%; ‘developing talents and creative abilities’, 73%; ‘to get training for a specific job’, 74%; ‘expectations of my parents and family’, 23%; ‘few other opportunities because of the poor job market’, 18%; ‘being with my friends’, 14%.

In 2005, the ABS Education and Training Experience Survey found that 75% gave as their ‘main’ reason for their current study something related to work, and 19% nominated ‘interest or personal reasons’.
Continue reading “Why do people go to university?” →