The HECS-HELP handout nobody is taking

Back in 2007, I thought that Labor’s election promise to introduce HECS remissions for people entering specified occupations might have something going for it, at least compared to other mechanisms for steering labour market preferences via higher education funding.

It’s not paid unless the graduate actually enters the desired occupation, and provides near-term financial relief, which is more attractive than cuts to student contributions – which effectively mean that someone entering first year will typically gain financially in 8 to 12 years time (when they finish repaying earlier than they would have otherwise). (The ATO site on the scheme is here.)

However a report in The Australian this morning shows that only 405 people applied for the benefit for 2009-10, and only 232 were approved.

This is consistent with some analysis of graduate occupational choices by Graduate Careers Australia, done at my request comparing the first year of the program (2009) with the year before. Statistically, the two years were identical in the proportion of graduates entering the occupations being favoured by the government. I did not publish the data at the time because GCA argued that the scheme was new and that 2009 was a bad year for graduate employment, so more people could have tried to enter those occupations but failed (though if there are no jobs anyway, a policy aimed at increasing demand for non-existent jobs is not necessary).

The 2010 data should be examined, but the very small numbers claiming the benefit suggests that this scheme is so unsuccesful that the government can’t even give money away (far more than 232 would have been able to claim just for pursuing the career they were going to pursue anyway).

Perhaps this policy escaped the last couple of rounds of higher education cuts because its failure meant its costs were much lower than anticipated. But as the government is imposing cuts on the public service, getting rid of a complex and bureaucratic policy that is not obviously achieving anything would make sense.

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.

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A small win for third party political freedom

The federal parliamentary review of campaign finance law reported last Friday (an Age report with a slightly misleading first paragraph is here.) In put in a submission on third parties. A less technical article on the draconinan NSW and Queensland third party laws – my nightmare scenario – is here.

My summary reaction: it could have been a lot worse. Though I disagree with much of what the majority report says, they have held back on most of the extreme NSW and QLD attacks on political freedom. My views were given a fair hearing – I appeared before the committee and my submission is frequently cited in the chapter on third parties.

Most of the material I disagree with on the lowering the donations disclosure threshold, bans on anonymous donations and bans on foreign donations (critiqued here) is just the same old stuff that Labor has repeatedly tried to legislate over the last few years, not a new reform agenda. (Unfortunately it will probably now pass with Green support).

They have actually accepted one of my recommendations, that the political expenditure laws applying to third parties no longer include ‘the public expression of views on an issue in an election by other means’. It would still include materials requiring the ‘written and authorised’ message and other party political material. This would remove the routine activity of think thanks, universities and the media from the law (which is ignored anyway, but the threat of prosecution would be lifted).Read More »

Why does the base funding review panel think lawyers should pay less for their education, and teachers and nurses more?

The most contentious aspect of the base funding review report, released today, is likely to be its proposal to change the basis of public subsidy for higher education.

At the moment, the public subsidy is not explicitly based on public benefits. Effectively, it’s just what’s left after student contributions are deducted from total per student funding by discipline. Total funding is loosely derived from a study of higher education expenditure 20 years ago, while student contributions are loosely based on differential HECS introduced in 1997. Differential HECS was in turn based roughly on average private earnings of graduates in particular disciplines. So law and medical students paid the most because lawyers and doctors earn a lot. Education and nursing students pay lower amounts, because teachers and nurses have modest salaries.

According to the base funding review, public subsidy should be based on the government paying for public benefits. They say the public benefits are equivalent to between 40% and 60% of total annual expenditure per student. These public benefits are defined as miscellaneous non-pecuniary benefits to society, plus the ‘direct fiscal dividend’ from the additional taxes graduates pay due to their increased earnings.

Leaving aside whether these numbers are robust (I doubt it, but assume they are for the sake of argument), what is the justification for using public benefit as the basis for public subsidy? The base funding review offers two possibilities.

One possibility is that without subsidy ‘private benefits might not be enough to motivate a student to pay full fees’. So the logic would be that through subsidies the private benefits are increased to a point where it is financially attractive for students to enrol in higher education, and then go on to the produce the claimed public benefits. Read More »

Any student readers who would like to be a higher education intern at the Grattan Institute?

I’m looking for a an intern to work on the higher education program at the Grattan Institute in Melbourne. It isn’t paid, but you would get experience working in a think-tank and credit for your work in published reports.

It would suit a student on the their summer break. While we are flexible on hours, internships work best if the intern can spend a reasonable amount of time per week over at least a month. Any disciplinary background should be ok, but the work itself will include data collection and using a spreadsheet.

The intern would work closely with me, and with two Grattan research associates.

If you are interested, email me with a CV at

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.