Category Archives: Higher education

Higher education spending in the 1970s compared to now

According to former PM Malcolm Fraser,

Education is the best and most important investment that this country can make. I am not sure that our governments understand this message adequately. Over the last 20 years, governments have actually withdrawn from the funding of education and much of that has been replaced by dependence upon full fee paying students from overseas.

That might have been true for a while in the 1990s and the first half of the least decade. But not in more recent years, as the slide below shows. Some expansion under the previous planned higher education system, and then a surge from the demand driven system, has seen public funding expand very significantly.

subsidies last 10 years

And what happened when Mr Fraser was Prime Minister, from 1975 to 1983? Spending did go up for a while, but was then reduced. It was a period of stagnation in higher education attainment. Fraser faced significant budgetary constraints, as have most of his successors as PM. Read more »

The case for including for-profit higher education providers in the demand driven system

Reaction to the report of the demand driven review, which I co-authored with David Kemp, has been pretty positive overall. But our proposal to extend Commonwealth supported places to non-university higher education providers, especially those operated on a for-profit basis, is attracting some negative comment.

Professor Greg Craven, vice-chancellor of Australian Catholic University, said:

There is a basic psychological difference between a statutory body (university) ploughing money back into the enterprise and a private college whose modus operandi is to make a profit.”

Whether or not that is true, a higher education system needs to be robust to the weaknesses and variability of human motivations. Indeed, the public universities themselves are a case study in the limitations of a ‘just trust us’ model in higher education.

As the report discusses (pages 9-10 especially) the universities were for a long time, and still are to a lesser extent, able to get away with poor practices in teaching. This showed in the abysmal results of the first national student surveys conducted in the mid-1990s. Things have improved since through a combination of public information, government programs and incentives, market competition, and more recently regulation.

The report recommends that all these measures apply to the non-university providers as well. Indeed, they have another layer of scrutiny that the universities lack, which is that their courses need to be individually approved by the Tertiary Education Quality and Standards Agency. It also recommends extending the University Experience Survey to the non-university providers, and publishing the results on a replacement for the MyUniversity website to make it easier for potential students to compare courses. Read more »

Did free university education increase higher education attainment?

This year marks the 40th anniversary of Gough Whitlam’s free higher education policy. It continues to be the subject of considerable nostalgia. But did the policy increase higher education attainment? The answer to this question is quite complex.

The figure below is from the 2011 census. It shows lifetime higher education attainment rates by the year in which each one year age cohort turned 18. Contrary to some expectations, from 1974 a period of growth comes to an end and attainment plateaus for a decade, before growth resumes again in the mid-1980s.

attainment census
Note: Citizens only

The 2010-11 ABS Learning and Work survey shows the same pattern. With this survey I can restrict the analysis to Australian qualifications only, which helps explain why attainment levels for the free education generation are a little lower than in the census.

attainment L&W

The reason for this is not that the number of higher education places went down. There was an increase during the Whitlam years. But higher education attainment is affected by both the number of places and the overall population. In the 1970s the 1950s baby boom was reaching higher education age (slide below), which meant that many more people were trying to get into higher education.

age cohort

In this context, free education may have been counter-productive. It is focused on demand for higher education, but the supply of higher education has nearly always been a much more significant policy problem than demand. This can lead to the paradox of public funding: attempts to increase demand for higher education through cutting its cost can lead to lower higher education attainment. With finite public resources, the more governments spend per student the fewer the students they can support overall.

This was a key insight behind the creation of the HECS system in 1989, and as the first two slides above show spreading government support over more students contributed to a long period of growing higher education attainment.

Will the new Student Start-up Loan save money?

Today the Liberals introduced legislation for Labor’s conversion of the Student Start-up Scholarship into a new income-contingent loan, the Student Start-up Loan.

Overall, its design is closely linked to the Higher Education Loan Program (HELP). However, people who take out SSLs will not have to start repaying until after they have repaid their HELP debt. Potentially, that is not for a very long time.

Experience with the former Student Financial Supplement Scheme, under which students could trade in $1 of income support for a $2 loan, suggest that there is significant adverse selection with income support loans.

From figures given during discussion of closing the SFSS down in 2003, I estimate that about $2.7 billion was lent between 1993 and 2003. The Department’s annual report for 2012-13 says that $1.8 billion is still owed, of which they class 63% as doubtful debt. Doubtful debt for HELP is estimated at 23%.

Presumably this is from a mix of people taking out loans they never expected to repay and income support entitlement being a proxy for other characteristics that put people at above-average risk of being bad debtors.

In this case, the Commonwealth can’t be financially worse off. This is a loan replacing a grant, so long as repayments exceed administration costs they will come out ahead.
Read more »

Does HELP kill price competition?

In The Australian this morning, Bruce Chapman returns to one of the few topics on which we disagree: whether there can be price competition under an income-contingent loan scheme.

“Price competition is not on because the behavioural responses are close to nothing,” Professor Chapman said. “Governments should set the fee where they think it’s fair.”

We need to be careful here in distinguishing different circumstances.

I think Bruce is largely right for the school leaver market and the yes/no decision as to whether to go to uni. This has been confirmed again by recent British experience. Despite a near tripling of average fees, demand from 18 year olds is at near-record levels.

But that is not the same as saying that prospective students do not take price into account in comparing similar programs. The figure below compares MBA costs at different unis in the Melbourne and Sydney markets (Melbourne’s MBA is very expensive, but its pricing structure is so confusing that I have not included it on annualised basis). There are fairly predictable patterns based on reputation and prestige. But Deakin, RMIT, UTS and UWS get themselves into the market by charging more affordable fees.

MBA fees

It has to be true that HELP fosters higher fees. As with any loan system, it increases the number of people with enough capital to buy. But that does not mean that particular institutions will not compete on price. Strict price control is unlikely to be desirable, because it puts less-prestigious unis at a competitive disadvantage and limits scope for product innovation.

To me the policy question is whether supporting the very high fee courses with HELP is sensible investment in human capital, or whether it is just supporting largely wasteful status competition between universities.

New book on the Dawkins higher education revolution

Last night The Dawkins Revolution 25 Years On, which I co-edited with Simon Marginson, Julie Wells and Gwil Croucher, was launched by the Chief Scientist, Ian Chubb, with a right of reply by John Dawkins himself.

In my chapter on the Coalition, I described Dawkins as the most important education minister yet to hold office. Gillard’s combined tenures as education minister and then prime minister might yet see her take that title, but for now it is both the scale and durability of what Dawkins did that puts him in the top position.

These include:

* The mergers of many institutions and the transformations of former colleges of advanced education and institutes of technology into universities (discussed in chapters by Simon Marginson and Ian Marshman and Gavin Moodie).

* The introduction of HECS (discussed in a chapter by Bruce Chapman and Jane Nicholls).

* The introduction of a system of setting funding rates by discipline that is still the basis of today’s rates (discussed in a chapter by Ross Williams).

* A substantial expansion in student numbers (discussed in a chapter by Richard James, Tom Karmel and Emmaline Bexley).

* Increased the role of competitive grants in funding research (discussed in a chapter by Gwil Croucher and Frank Larkins).

* Contributed substantially to the opening up of Australian higher education to international students, including a prior period as trade minister (discussed in a chapter by Margaret Gardner).

* Started deregulation of postgraduate coursework markets.

Most reforms since then have built on the foundations of Dawkins. As I argue in my chapter, the 1999 Kemp reform proposals (which I worked on as his higher education adviser) were the only major attempt to over-turn Dawkins in favour of a more market-driven system.

Those reforms were destroyed after the Cabinet submission was leaked to Labor. Ironically, it was Labor ten years later that introduced a version of the ‘voucher’ system proposed in 1999.

Should the HELP debt be sold?

The government is now hosing down yesterday’s speculation that the accumulated student HELP debt will be sold.

There are good financial reasons for not selling, as Matt Cowgill explained yesterday. Investors would only buy the HELP debt if they could get it for less than they thought it was worth, in which case the government should not sell unless it is desperate for cash. But for now at least financial markets are willing to lend to them at low interest rates.

I believe that there are also good political reasons not to sell now. HELP’s costs are very high, mostly at the moment due to a prediction that 19% of new loans will not be repaid (at p.93 of the portfolio budget papers). Due to the low interest rates government is paying at the moment that is not currently a big expense. But with total debt likely to be over $30 billion now, even small increases in government bond rates can translate into major additional outlays.

These costs need to be brought down. But rule changes to benefit investment banks will not be an easy political sell. It’s hard enough to sell public interest rule changes that help bring total government spending back down towards total government income.

New data on the close link between SES and university attendance

I’ve criticised the government’s exclusive focus on attracting more university students from the lowest 25% of geographic areas, as measured by an index of education and occupation. I had found several data sources suggesting that educational achievement in the second-lowest quartile wasn’t much better than in the lowest quartile.

Today the ABS released an update to its online 2011 census package that lets us classify students according to their socioeconomic status ($$$ if you want access). I calculated university attendance rates for 20-24 year olds by SES deciles, with one the lowest and ten the highest.

I think my general point stands: there are low rates of university attendance well above the lowest 25%. Someone in the 4th decile is well above the lowest 25%, but still only has a third of the likelihood of attending university as someone in the top 10%. Even removing early school leavers from the analysis, their chances of attending university are still less than half those of someone in the top 10%.* We need a re-investigation of the role poor school results versus other factors play in this outcome.

uni attend 20-24 take 2

However, the data is less lumpy than I expected. There is the upper middle class at deciles nine and ten with high rates of education and professional employment which is quite different from the rest of the population. But below that attendance rates do slowly but steadily increase as people move up the SES spectrum, without the large and weakly-differentiated lowest 50% I expected from other sources.

* The decile differences are somewhat exaggerated due to students who move from low SES areas, especially in regional areas, to live near universities which are in high SES areas.

What do high-ATAR students study?

The Australian‘s Higher Education Supplement ran a story this week on how high-ATAR Victorian students chase a narrow range of courses and unis. It was based on research by La Trobe’s Andrew Harvey.

The national applications data shows how this produces a counter-intuitive outcome: applicants with ATARs above 90 are persistently less likely to get an offer than students with ATARs of 80-90 or 70 to 80. The 2012 offer rates were, respectively: 91%, 97%, 96%.

It means that a few per cent of the 90+ students take all or nothing gambles. Even though there are hundreds of courses that would accept them, they only apply for one or a small number, and some of them end up missing out. Presumably most of them learn a lesson about hubris and put in a more realistic application the following year.

Andrew H also comments that “the progression of elite students into a narrow range of courses and universities arguably has a distortionary effect on the workforce and society.”

While I partly agree with this, data I received from DIICCSRTE (I hope this name will soon change) on the ATARs of first-year students suggests that the top-performing school leavers are more spread across the disciplines than the applications data might suggest.

The figure below has the 2011 ATAR for a student admitted at the 90th percentile of everyone taking that subject, or in other words with just enough to put them in the top 10%. It just shows those where the 90th percentile is at 98 or above. Surprisingly, radiography is at the top and maths is second (though there are few specific maths courses). From the arts, language and literature is there. If we drop down to 97, politics, history and the performing arts are all there.

90th percentile admissions

Teacher education has a 90th percentile of ATAR 90, with a median of 75. Not spectacular, but far from the very low cut-offs at some unis that attract so much attention.

The complicated university teaching-research relationship

In The Age this morning, Don Aitken argues that university teaching has come off second best. ‘Today research, and only research, is really important,’ he says.

I certainly think that university teaching needs improving. But the story is not one of the decline of teaching and the rise of research, with one improving at the clear expense of the other.

Up until the Dawkins reforms of the late 1980s and early 1990s more than half of higher education students attended colleges of advanced education or institutes of technology. Their mission was teaching rather than research, although some of their academics were doing research. The universities were teaching-research institutions, but with weaker research pressures than today. Most research funding was delivered as a block grant that was (unlike today) not linked to indicators of research performance.

If the teaching-focused colleges of advanced education and institutes of technology were good at teaching, we would expect their positive legacy to show when the first national student survey (the course experience questionnaire) was conducted in the mid-1990s. In reality, the CEQ showed generally dismal results. Across the country, the average positive response to six teaching-related questions was around one-third.

As the government started emphasising research performance in its funding policies, the apparent incentive was to focus on it over teaching. But this is not showing in the trend data (the figure below). The time series was was upset in 2010 in ways that exaggerate satisfaction compared to the past, but the steady upward trend in satisfaction cannot be disputed. (Some theories as to why are here.)

GTS

A consistently calculated time series on research productivity only goes back to 1997. It shows steadily increasing productivity up to 2005, where it stablises at an average 2.1-2.2 publications per full-time researcher per year (counting teaching-research staff as 0.4 full-time equivalent in research, in line with common time use expectations).

Publications per academic

Rather than research rising at the expense of teaching, on these indicators they both rose together until the middle of last decade. In research, the focus has shifted to research quality – it’s still too early to put numbers on it, but simultaneous with on-going increases in satisfaction with teaching universities are culling weaker researchers and focusing their investment in areas of relative research strength.

As well as it being difficult to find evidence for research at the expense of teaching over time, our recent Grattan research project failed to find much evidence that low-research departments are better at teaching than high-research departments, as measured by recent student surveys.

My view is that at the dawn of the Dawkins era universities were under-performing institutions, across both teaching and research. Research was further down the path of professionalisation and favoured in academic culture. But both teaching and research needed to improve a lot, and that is what we have seen.

Just removing research and making some universities ‘teaching only’ would not on its own make things better. Improved teaching needs concerted effort, whether or not it occurs in an institution that also produces research.