Category Archives: Higher education markets

Should we have central allocation of student places for low ATAR students?

Plan B higher education reform ideas are everywhere at the moment. Higher education consultant and former higher education bureaucrat David Phillips has a proposal for the problem of drop-out rates among lower ATAR students. His idea is that rather than these students being included in the demand driven system, places for them should be allocated to universities with good track records in supporting them.

I agree that we have a problem here, but I don’t think this central planning response is the right one.

A minimum ATAR cut-off was one of the ideas circulating in 2013, and something we considered in the review of the demand driven system. We didn’t go with this idea. One of the reasons was the inherent limitations of what central planners can know. While the non-completion rates of lower-ATAR students are too high, based on the historical evidence 50 to 60 per cent of them do finish their qualifications. ATAR breaks down as a predictive tool because a range of other personal and institutional factors are likely to be the difference between completing and dropping out. The knowledge needed to predict is held largely by the prospective student and the higher education provider. This is far too decentralised for a central planner that has to go with clear rules.

There is also a big problem with the large numbers of students admitted to courses via entrance tests, prior vocational education and other alternative measures. For these applicants, we don’t have the ranking of ability provided by ATAR. The capacity of the central planner to say which of these students should be in the demand driven system and which in the allocated system is even weaker than it is for ATAR.

Even if we could determine a fair and efficient cut-off point, there are still other problems. One of the arguments for the demand driven system is that it allows for experiments, innovation and competition. It lets providers think of and try out new ideas for assisting particular student groups. The central planning model of just rewarding institutions with historic success would kill this dynamism.

The other difficulty is the weakness of the Commonwealth as a central planner, which in turn influences the incentives of any of the players. With the existing sub-bachelor allocated places, the rules for allocation changed regularly before the system was effectively frozen due to Budget constraints. This kind of uncertainty works against investment in the field, because arbitrary actions by government could wipe out the financial gains.

We would have to be wildly optimistic to think governmental processes of the future would be better than in the past. Politics is increasingly dysfunctional and the bureaucracy has been weakened by successive ‘efficiency dividends’ and revolving door senior appointments limiting corporate memory. The beauty of the demand driven system is that that they only have to get the broad policy framework right once, and after that the system can adapt on its own, without relying on government.

Is the prospect of higher fees deterring university applications?

The number of applications to university for courses commencing in 2015 has attracted more interest than usual, due to the controversy over higher education fees. Some data has already been released by individual tertiary admission centres, but it is now available in consolidated form. The figures are preliminary, reflecting applications made as of October 2014. Based on recent history, there will be tens of thousands more applications lodged after this date. I am still seeing plenty of university advertising aimed at that goal.

There is a particular complication this year in Western Australia. A change to the school starting age in 2003 has flowed through the school system, leading to a Year 12 cohort that was only about 60 per its normal size. This makes the WA figures hard to interpret, and the report presents trend data with and without WA.

Without WA, school leaver applications are up 2.2 per cent. Possibly this could be interpreted as saying that the fear of fees has had little or no impact on demand. That’s probably right, although the apparent upward trend may be due to people who would have taken a gap year starting in 2015, so that they get at least one year on the fixed student contribution rates. We also don’t know exactly how many students completed Year 12, so we cannot calculate an application rate.

Non Year-12 applications are down 6.5 per cent. However, this may not mean anything at all. For non-Year 12 applicants, there is a longer-term structural shift away from using tertiary admission centres and towards applying directly to universities. Since 2010, the number of TAC non-Year 12 applications has declined every year, while the number of direct applications has increased.

The report also raises the possibility that the demand driven system might have reduced a backlog of unmet demand for higher education. It is plausible that as people who had unsuccessfully applied to higher education in the past get admitted the pool of higher education hopefuls will diminish. And as more people get into university straight from school, there is a smaller potential market for mature-age higher education.

While these theories may be right, it is still possible that there will be no decline in overall non-Year 12 applications when we get the direct applications data later in the year.

If the demand driven system survives it will be our best yet test of theories in this area. Under the old system, the supply of places was always well below demand. Unless there was a huge decline in demand any price sensitivity would not show in enrolment numbers. We therefore had to use applications data to assess underlying demand. But applications are an imperfect proxy for a serious intention to pursue higher education. Large numbers of people reject the offers they receive, raising questions about whether some apparent demand for higher education is really just keeping options open, or contingent on an offer for a very specific course. Actual enrolments in a system without supply constraints will be a better guide to the true level of demand for higher education.

Higher education applications slightly down in 2014

After some long delays, the 2014 applications report is finally out. It shows that for the 2014 academic year the number of applicants (as opposed to applications) went down, although only by 300. Offers continued to increase, so that now only 14 per cent of applicants don’t get an offer, compared to 20 per cent in 2010. The first half 2014 enrolment data shows that these offers translated into enrolment increases.

unique applicants

These results won’t do much to dissuade the people arguing that admission requirements have dropped too much. In 2010, fewer that 2,000 offers were made to applicants with ATARs below 50. In 2014, more than 7,000 such offers were made. Only half of these offers were accepted. Evidence in the demand driven review suggested that a reasonable number of the people who do accept don’t make it to the HELP census date (about a month in; if they drop out before they do not incur a debt and are not counted in enrolment statistics). And only a bit over half who make it to the first census date are likely to complete, if earlier low-ATAR cohorts are a guide.

Although enrolments continue to grow, a softening of demand is sensible given the weak graduate employment market.

Scholarship scepticism confirmed

Eighteen months ago I was much less full of praise than others for Graham Tuckwell’s $50 million scholarship donation to the ANU. I said:

Like many scholarship schemes, the Tuckwell scholarship will go to people who already have plenty of potential that is unlikely to go to waste. They will go to university anyway, find mentors anyway (one of the claimed benefits of the scheme), and make something of their lives. They are not the people who need help.

Instead, these scholarships are used for essentially wasteful positional competition between universities. The ANU will use the Tuckwell’s scholarships and the associated publicity to try to take top students away from Sydney, Melbourne and other universities that buy talented students .

The announcement today of the 2015 scholarship winners highlights my point. The schools represented from my home state of Victoria (below) hardly suggest that the scholarships are opening up opportunities for the under-privileged. Instead, they are the ANU poaching students from the University of Melbourne.

Melbourne Grammar School, Westbourne Grammar School, Geelong Grammar School, Melbourne High School, Geelong Grammar School, Ballarat Grammar School St Kevin’s College, Presbyterian Ladies’ College

As I said last year, there are much worse ways a rich man could spend his money. But there are also much better ways.

Update: A reader who likes empirical data has sent me the socioeconomic background data of the successful schools. Three of the students are from schools that have more than 25% of their students from low SES backgrounds. But that isn’t enough to change the overall picture of massive over-representation of the top quartile.

SES schools

What other degrees do science graduates hold?

This morning The Conversation ran another article by me on the employability of science graduates.

I used some data from the ABS Learning and Work survey. Unfortunately access to their micro-data is not free, but it does allow more detailed exploration of graduate qualifications and outcomes than most other sources. Most ABS surveys, for example, just ask about a respondent’s highest qualification. Learning and Work asks about multiple qualifications.

Learning and Work estimates that there are about 348,000 people with a bachelor degree in science. However, 35 per cent of the report as their highest degree either a postgraduate degree in science or a degree in another field. The most common other fields were education, management, health and IT. [Note: The figures in the table were corrected on 24 June. The figures in the text were correct.]

corrected science

So while employment prospects in some disciplines are sometimes not great, people often adapt to this by seeking higher or different qualifications that improve their job prospects.

Science demand keeps increasing, despite a higher student contribution

Science has been one of the most popular university courses over the last few years, with strong increases in applications year after year since 2009. The demand shift coincided with a slashing of student contributions by about 40%. This had seemed to be a possible exception to the general empirical rule that changes to student contributions don’t affect demand (some of the history is in Graduate Winners, pp 77-79).

As part of a long series of measures to reduce higher education spending, science student contributions were put back up to pre-2009 levels for 2013, an 80% price increase in one year. If the discount was driving demand, we would expect to see higher student charges reduce demand. New statistics released today show that this has not happened.

In fact, as can be seen in the chart below, numbers continued to grow strongly. They were up another 4%, in a market that was up only 0.5% overall. Only agriculture grew by more in percentage terms, and only health grew by more in absolute numbers. Science offers increased by 3.3%, with overall offers up 0.6%

science apps Read more »

Misreadings and criticisms of Graduate Winners

The AFR published a response to Graduate Winners from Caroline McMillen, VC of the University of Newcastle. It provides an opportunity to respond to misreadings and criticisms.

Article starts, my responses in block quotes:

Access to a high-quality university education is the key to a stronger Australian workforce, economy and society. In turn, these are all important contributors to establishing a stronger place for Australia in the world.

An accessible university education is essential to ensure that Australia in what has been called the Asian century becomes a beacon for innovation and competitiveness.

The proposals contained in the Grattan Institute’s Graduate Winners report would jeopardise that future.

The report, which was made public last Monday, presents in measured language a reductive future for higher education in Australia, where students are motivated only by their graduate earning potential and the state withdraws its funding from what is currently recognised as a world-class university system.

Incorrect: The report shows (pages 56 to 59) that interest in the field of study is the top reason for choosing a course, and that a financially-based motivation model cannot explain why so many students with good ATARs choose humanities and performing arts, which have relatively poor employment and income outcomes.

The proposal is to shift the entire benefits and the risks of undertaking a university degree onto each individual student.

Incorrect: The report recommends a 50% cut in tuition subsidies for most courses; the taxpayer further takes risk through the HELP repayment threshold of $49,000 a year.

Read more »

All government-subsidised undergraduate science students to pay more

Rather surprisingly, last night’s budget was pain free for universities. But their students were not entirely spared. The previously announced decision to restore previous student contribution amounts for new science students was extended to include continuing science students.

While in my view the discount for science students should never have been offered, the change again highlights the problems caused by the instability of higher education policy, with constant introductions and withdrawals of incentive policies. DEST/DEEWR/DIISR incentive programs rely on the naivety of the punters to work, because anyone who observed this policy area over time would assume that incentive policies lack long-term credibility, and not change their behaviour.

(Of course prospective students are unlikely to follow this detail, so temporary discounts may work. Oddly, a couple of articles (here and here) in today’s budget coverage repeat the Ian Chubb/ government line on science – too little demand for science university places, too little supply of university places, and too few scientists. The evidence does not support any of these propositions. A 2012 report on university applications showed not only that for the third successive year science experienced very large increases in applications and offers, but that science was doing exceptionally well in the 90+ ATAR group. And the argument that we are short of science graduates is not evident in any employment survey.)

Higher ed price problems not fixed

The ‘demand driven’ funding policy starting next month combines deregulated places with regulated prices for student places. This is a potential problem. When the government no longer allocates places between institutions and disciplines the prices universities receive for each place are a key steering mechanism. If the price they receive is unattractive, they can not take Commonwealth-supported students.

The base funding review commissioned a study of costs, and it was able to shed some light on prices relative to costs, as they were in 2010. The figure below shows median, mean, maximum and minimum teaching and scholarship costs in a sample of eight universities.

Read more »

Getting into university is becoming easier

DEEWR has finally released the 2011 applications data. This confirms my point last week that the government’s claim that the 2009 cut to student contributions had no influence on demand is unsupportable on the evidence (but still being supported by sector representatives in the media late last week). Since 2008 overall applications minus science were up 12.4%; science was up 42.5%. We can’t know for sure why science demand increased so much, but we certainly can’t rule out price effects.

I’ve also been interested in tracking the scores of applicants admitted based on their year 12 results. Combining the latest with earlier application reports, we can see that the strongest growth in acceptances is for applicants on scores 50.05-70, up from 14.4% in 2004 to 23.6% in 2011. However, that group’s share of all applications is unchanged on 24%. What’s changed is their chances of receiving an offer and accepting.

The 2011 report shows that among home state applicants in the 50.05-60 group application rates as a % of school leavers with results in that range are increasing. It will be interesting to see if this continues. Except for Open Universities Australia (which largely operates in a full-fee market) most higher education advertising is directed at people how have already decided to go to university, but not which university to attend (or perhaps course to take). This is logical given the system prevailing in recent decades, with the number of available places held below demand.

With the new uncapped system for public universities from next year, I wonder if marketing will change – that to fill empty capacity universities will start marketing to people who had not seriously considered going on to higher education. If that occurs and is successful, we will see higher application rates among weaker school leavers.