Are low SES people more worried about fees than other people?

My new Grattan report, Graduate Winners: Assessing the public and private benefits of higher education was released tonight (Canberra Times covering it already).

The basic argument is that given high private benefits, higher education will generally be produced with or without a tuition subsidy. Therefore we can start phasing down tuition subsidies. I suggest 50% over 4 years for most disciplines.

The usual reaction to such suggestions is that the low SES people in particular will be put off higher education. I report the contrary Australian evidence. There is interesting English evidence in this report. What the English have done is far more radical than anything I am suggesting. Except for the clinical and lab subjects, they haven’t cut 50% over 4 years. They have cut 100% over 1 year. Combined with some scope for overall funding increases for universities, some student charges will nearly triple.

For the school leaver group, overall demand dropped by one percentage point of the age cohort compared to 2011, or about 15,000 people (like Australia before 2012, the UK has a capped system with demand exceeding supply, so this will have no effect on the total number of students).

The figure below looks at 5 SES quintiles, using a geographic measure (the red line is the lowest SES group). Applications from low SES groups responded less than from high SES groups. It is also interesting that numbers started declining from the trend in 2011.

Low SES people are often assumed to be irrational – spooked by fees or debt, and unable to determine their long-term interests. Whether or not that is true generally, those who make it to the end of school are different. The evidence from Australia and elsewhere is that given their realistic options school leavers across the SES spectrum make very similar choices.

  1. I’m not sure that you can conclude this — the pattern looking the same doesn’t imply that you can conclude the effect occurred for the same reasons across the different groups.

    An alternative explanation is that in the low SES groups, the affect of the fees really is stopping them going, and this is probably already one reason their numbers are so low. Thus you are stopping an already marginal group from going. Alternatively, members of the high SES may be making rational choices, but those that are then not going are not from a marginal population in terms of ability to pay. Thus, in one case, you are stopping a group that may well have succeeded but didn’t go due to money, and in the other you are simply stopping a group that may not have been successful anyway.

    Also, I’m not convinced that giving some subjects great discounts compared to others is a great thing — you’re basically forcing groups for whom price is more important (i.e., low SES ones) into certain areas, and this is potentially excluding them from lucrative careers in other areas (and hence increasing social mobility). Its also another area of government based morality (this is better than that) applied carte blanche across educational fields (c.f., particular degrees).

  2. Conrad – This study did not have any info on school results, which our main paper does. While this research should be replicated, my starting hypothesis would be that by year 12 SES itself has no effect on university participation, with the differences explained by school results.

    As for discounting subjects, I think that is a valid point. For example, I think the science discount sent a ‘wrong’ signal to prospective students, as there are safer options for people with these kinds of interests and aptitudes. However, generally the assumption that prospective students are idiots who cannot make broadly sensible decisions is not in my view supported by the data. Given their realistic options, most people seem to make broadly sensible decisions, in terms of either or both of their interests and future earning prospects.

  3. Bit pragmatic. I found in one report the statement that students enjoy student life to be so funny and ill-informed. Have you been to a campus lately? Public good would be an interesting thing to measure. If one subscribed to conspiracies, that’s saying let’s teach drones bricklaying, forget philosophy, we want ‘real’ men building apartment buildings for the foreign investors, that’s the public good, not sitting around like the Greeks did in Ancient times talking. On the surface it just seems to be bitterness and punishment of those that have the ability to go to university. It comes from those who work at boring jobs and find at retirement their life was for nothing. Hard work equals resentment and to enjoy your career seems ‘unAustralian” to use a typical populist phrase. If one can prove public good then I’d consider it, but I hope you did not get government funding for this obviously bitter report because people were out there learning, enjoying life and contributing to themselves and others whilst others toil in the hot sun on roads or sit in offices playing politics and then get all bitter about it and take it out on others because they could have had education and a chance at something better. Pay more? Somehow I doubt that will happen until you define public good and when you do you will cause an apartheid in education. Why not get out there and help the homeless instead of sitting in offices writing reports that show bitterness and blame because one chose to sit in a dusty office instead of going to toga parties. Did you get a degree? Is this report for the public good? The bricklayer is good the arts student bad so we should pay for the bricklayer’s education? No.

  4. I wonder whether the effect will not be an immediate one which affects low ses applications (it would seem that choices to attend university are made earlier in schooling), but rather a delayed one where low ses school students become less inclined to believe higher ed is possible leading to a decline in applications 3 + years after the changes.

    As an aside I have found it interesting that the issue of fee deregulation has been conflated with your central premise of reduced government contributions which are quite distinct concepts. Perhaps the sector would have a better chance of getting fee deregulation if it took on board your model as a stepping stone, with the money saved going to research and infrastructure in the short term.

  5. How much of the effect of this policy change would be transfer versus efficiency gain do you think Andrew?

  6. Matt – I think the current marketing effort to expand enrolments will increase low SES applications regardless of what is going on politically. The campaigns against fee increases seem to contribute to a small drop in demand, but after a couple of years economic reality re-asserts itself.

    Rob – I think this policy change has minor higher ed micro implications, with perhaps some increased effort by unis to prove value for money. It is mostly about transfers – if spent wisely, I think there could be much greater value for the public dollar. If refunded as tax decreases, it is a fairer distribution of income.

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