Former Greens higher education adviser Osman Faruqi thinks that it is time to reconsider the demand driven system, in light of the annual ATAR controversy and mediocre employment outcomes. It is the usual story of good intentions turning to not-so-good outcomes:

There was an opportunity for universities to work with policymakers and industry, identify economic trends and skills gaps and use their new-found flexibility to provide students with a rigorous learning environment.

While university managers might have convinced themselves this is what has occurred, the numbers tell a different story. Enrolments shot up across the board — but particularly in relatively profitable courses such as business, commerce and media. As more students with lower ATARs gained entry into university, attrition rates increased alongside them. One in seven students currently drop out by the end of their first year, the highest level in a decade. Graduate unemployment is at its highest level since records began in 1982.

The demand driven review I did with David Kemp is the main analysis of how the system is going, but it is now two years old. It’s worth looking at a few statistics to update trends.

The actual enrolment increases for domestic bachelor degree students are a little different to Osman’s take, and can be used for and against in the debate about different systems. The chart below shows the disciplines with at least 2,000 EFTSL enrolment increases between 2008 and 2014. Law and business are on the list, but not at the top, and below the average in percentage terms.

Consistent with what Kemp and I generally found two years ago, disciplines related to occupations with skills shortages generally responded with increased places under the demand driven system. Two of the top three growth areas were disciplines in skills shortages at the time (although not now except for some specialised areas). This we saw as one of the system’s strengths compared to the previous system, which had no established process for identifying or responding to skills shortages. Before the demand driven system, it was very ad hoc: if employers screamed loudly enough and there was money in the Budget for extra places then the system responded; otherwise not.

Of course, in theory it would be possible for the government to more actively steer the system. But should we trust them to make good judgments? The several science-related disciplines in the top half of the fast-growing discipline list suggests not. That was a response to cutting science and maths student contributions in 2009 and campaigning for STEM, with the former Chief Scientist being a major advocate for study in these fields. It was bad analysis all along, and has predictably led to very poor employment outcomes.

Have our political leaders learned their lesson from this? Labor’s plan to pour even more money down the STEM drain suggests not, and the STEM evangelism of the current government (fortunately without any extra student spending), also suggests not.

While student course choices are structured by their interests and aptitudes, precisely which courses they choose is influenced by what they hear and observe. We can see publicised ups and downs of the labour market flowing through into applications and enrolments ups and downs. But government campaigns also make a difference, and not always for the better.

Yes, demand driven funding is leading to more growth in some disciplines than the labour market warrants. But on the historical evidence, I am not convinced that it is worse than the realistic alternatives. Our much-maligned 18 year olds spot and respond quickly to real skills shortages; the old system did neither in a reliable way. Some young people’s course choices look to be misjudgments, as least if they are looking for work. But on that they have been misled by the actions and words of politicians and officials, the very people who would have to run a non-market system of distributing student places.