Government confident unis will accept a bad deal

DEEWR’s latest higher education newsletter, published today, mostly summarises prior announcements. But there was one statement worth noting:

The Government will announce the details of the review of base funding levels in 2010. While it is for the review to consider the appropriate level of base funding, … early estimates of over enrolments for Commonwealth supported places in 2010 suggests that universities will increase their number of Government funded places while being funded at current rates.

What this effectively says is that the government does not need to increase per student funding rates because universities will be stupid enough to keep enrolling more students even while the government keeps slashing their real funding.

I despair at the lack of political strategy and skill in the higher education sector.

Should unis ignore the government’s peformance funding?

Though the federal government plans to stop telling universities how many students to enrol in which disciplines, its plans for university ‘performance funding’, detailed today, show that the urge to micromanage doesn’t go away, it just shifts to different areas.

There will be new targets for enrolment of low SES students, retention rates, pass rates, overall and teaching satisfaction, students’ self-assessed generic skills, employment and further study outcomes, with warnings of other possible future indicators to replace the more manifestly inadequate on this list. Two of these – a new ‘University Experience Survey’ for first years and wider use of the Graduate Skills Assessment test – would involve additional form filling-in and testing for students.

The targets will be adjusted to the circumstances of each institution, so ‘success’ against the targets is likely to depend as much on the skill of the university negotiators in getting easy targets as anything subsequently done to achieve them.

Though the goals may sound good, this is not necessarily the case. Continue reading “Should unis ignore the government’s peformance funding?”

Government spending on higher education

A commenter asks about how much Australia spends on higher education.

The main source for this is the DEEWR portfolio budget statement (outcome 3), with the DEEWR Annual Report also containing useful information. After taking out money coming from the Education Investment Fund, the budget for direct grant spending on higher education for 2009-10 is about $5.6 billion. Information on government subsidies per student by field of study can be found in the ‘further resources’ section of this site for university administrators.

More historical data (latest 2008) on funding for individual universities is available in the annual university finance reports. Unfortunately DEEWR has ceased timely publication of the previously annual higher education report so it is very difficult for the general public to find information on arrangements for a particular university.

However information on direct grants understates total higher education related spending. Continue reading “Government spending on higher education”

Do ‘social returns’ justify higher education subsidies?

In his Henry tax review paper, Andrew Leigh says:

The principle that education subsidies should be increased (or graduate taxes decreased) if there is a social return to education fails to hold only in very special circumstances.

These ‘special circumstances’ are that

1. Subsidies or taxes would be ineffective, i.e. would not increase educational attainment.
2. Everyone is already getting the maximum level of education.
3. Lumpy investments, e.g. where the optimal level might be 1 year of post-compulsory education but only 3-year degrees can be purchased.

But is circumstance 1 really so ‘special’? As noted in an earlier post Andrew’s empirical evidence suggests that circumstance 1 may common rather than special. Continue reading “Do ‘social returns’ justify higher education subsidies?”

How education subsidies can reduce educational participation

In a paper for the Henry tax review on the impact of the tax-transfer system on education and skills, Andrew Leigh concludes:

Contrary to theoretical predictions, I find no significant evidence that more
generous [educational] subsidies or lower tax rates on the rich have the effect of raising educational participation.

The economics of human capital provide the contradicted theories. Human capital economics assumes that the decisions of potential students are sensitive to the private financial benefits of investing in education. If these benefits are made higher, then all other things being equal we will see more people invest in education.

One way of increasing private benefits is to offer subsidies, or more subsidies where they exist already. If part of the cost of education is met by subsidies (mostly from the taxpayer, but also from private philanthropy) lower future private financial benefits will be needed to earn an adequate rate of return on the educational investment. The justification for this is that there are positive ‘externalities’, or spin-off benefits, from having more educated people. Continue reading “How education subsidies can reduce educational participation”

Should students specialise early or late?

The National Bureau of Economic Research has recently released an interesting paper on early subject specialisation at university (similar looking ungated papers here).

Author Ofer Malamud takes advantage of differences between English and Scottish higher education to examine an interesting natural experiment in early versus late specialisation. In England, students generally choose a specialised field of study on admission to university. In Scotland, however, they choose a specialisation after two years of more general subject choice. However, graduates of both university systems enter a common UK employment market.

Malamud finds that Scottish graduates are more likely to work in occupations related to their course specialisation than English graduates. He theorises that the Scots use their early years to discover their talents and interests, and therefore make better choices of specialisation. The English, by contrast, may complete the specialisation they started, but because some chose the wrong field they are more likey to look for work in other areas.

Though the findings are interesting, I don’t think there are any major public policy implications. Continue reading “Should students specialise early or late?”

Graduate unemployment and over-qualification goes up

The latest issue of ABS Education and Work, out today, shows that we are charging towards Julia Gillard’s target of 40% of 25-34 year olds having a university qualification by 2025. Only last May, the government’s higher education policy document said:

The current attainment rate for bachelor degrees for 25 to 34 year olds stands at around 32 per cent, and under current policy settings this is likely to rise only slightly, to around 34 per cent by 2025.

But Education and Work says that we had reached 34% (34.6%, to be precise) as those words were being published. There could be some sampling error involved, but the combined effects of more educated younger cohorts aging, continued mature-age education, and a large migration program heavily biased in favour of graduates means that a reasonably strong growth rate was always likely. If government forecasters using 2008 data can’t predict what will happen in 2009, what hope have they of being right about 2025?

Education and Work also brings bad news for the argument that we are very short of graduates and must produce lots more. Last year, 26.3% of graduates with jobs were working in occupations that did not require a degree. This year, it has gone up to 27.4%. Graduate unemployment has gone up from 2.1% to 3.4%. Admittedly, 2008-09 was not a good period for the labour market overall. But if the boom years up to 2008 couldn’t do much to utilise our graduates better, it suggests our policymakers should be cautious about promoting a large expansion in university enrolment.

Warped HELP priorities

Buried in the Mid-Year Economic and Fiscal Outlook was a change to the FEE-HELP loan system. From July 2010, the ‘administration charge’ (more accurately, debt surcharge) for fee-paying undergraduate students will increase from 20% to 25%. So for example a student borrowing to finance a $10,000 fee would incur a debt of $12,500 rather $12,000.

While I don’t object to the HELP scheme being put on a sounder financial basis – lending money at zero real interest is an expensive business – targeting just this group is highly anomalous.

Since full-fee undergraduate places are being phased out of public universities, this change hits students at TAFEs and private providers. The TAFEs and private ‘feeder colleges’, institutions offering diploma programmes that articulate into bachelor courses, are exactly the kinds of higher education providers a government wanting to improve access to higher education should be encouraging. They give second chances to people who didn’t get the Year 12 scores they needed, or mature age students returning to study after a long absence.

On this year’s estimated FEE-HELP lending to students at TAFEs and feeder colleges, this change will cost them about $1.5 million a year. Continue reading “Warped HELP priorities”

Spin on university funding

In responding to a claim by former Monash Vice-Chancellor Richard Larkins that fees should be deregulated, one of Julia Gillard’s spokespeople asserted that

The government has invested a substantial amount of additional funding in the tertiary and research sector that will not just arrest the decline in real funding that occurred under the Coalition but actually begin to turn it around.

Note how the tense changes mid-sentence. Somehow the money they have invested already will at at some point in the future stop real funding declining.

In their first budget, virtually all the new higher education spending was just squeezing out private spending, by cutting student contributions for science and maths and abolishing full-fee places.

In their second budget, all but $82 million of the $533 million in new spending for 2009-10 came from abolishing Coaliton programmes or raiding the Coalition-established Education Investment Fund. Continue reading “Spin on university funding”

Better applications needed as well as better uni selection

The Sunday Age‘s letter page had a mixed reaction to last week’s story about widening entry criteria to university courses, especially by using aptitude tests (based on this report released later in the week by the U of M Centre for the Study of Higher Education).

But none criticised the proposal for more aptitude testing. America is the home of aptitude testing for tertiary admission, and there it has long been controversial, accused of socio-economic and cultural/racial biases. The CSHE report is hopeful that aptitude testing might dilute the SES biases of using school results for admission, but they couldn’t offer strong evidence that this was the case, and note that whatever the admission system middle class people are likely to do better. Though aptitude tests are increasingly being used here, I think we are short of the evidence base needed to recommend their spread, rather than continuing to watch as individual universities experiment with their use.

The perspective I thought was missing in the CSHE report – perhaps because it is largely a literature review, and reflects the work of past researchers – is that of the applicant. It’s largely about how universities select students, rather than how students choose which institution to apply to. So it focuses on universities finding out more about students, rather than students finding out more about universities, their academic prospects, and what jobs they might get on completion. Continue reading “Better applications needed as well as better uni selection”