Update 6/4/20: Since this post was written, the minister has indicated that performance funding is being reconsidered due to COVID-19.

The government’s university performance funding scheme was always based on  questionable assumptions. Among them is the belief that we can reliably distinguish a university’s contribution to various outcome indicators from the other influences on those same numbers.

I’m sceptical enough of this in normal times. But COVID-19 means that, despite the extraordinary efforts of academics and other university staff to provide continuity of education and student support, three of the four performance indicators – graduate employment, student satisfaction, and equity group enrolment share – will or are likely to worsen compared to recent years. The fourth – attrition – will probably show a positive trend that also has little to do with university performance.

Due to the total amount of performance funding being linked to population growth, COVID-19 driven changes to migration levels will also reduce how much performance money is on offer.

Graduate employment

Let’s start with graduate employment, which has a 40 per cent weighting in the performance funding formula. As I argued in a blog post on Monday, previous record-bad employment results in 2014 will be significantly exceeded.

In the end of the mining boom downturn, the most directly-affected mining and construction industries were not big graduate employers. This time around major graduate employers in retail, hospitality and the arts have had to sack or stand down all or most of their workforce. Employment levels will not fully recover for a long time.

A Twitter comment on that blog post noted that these industries primarily offer ‘placeholder’ jobs, not career destinations. That’s true, but the performance funding indicator is all employment, not just career employment (making the switch from full-time employment to give universities credit for student jobs doesn’t look like clever gaming now).

The huge macroeconomic shock caused by closing down whole industries will also hit industries permitted to operate during the COVID-19 lockdown. The bad results will flow quickly into the Graduate Outcomes Survey via the May data collection. Even as the economy recovers in 2021 I doubt many firms will run large graduate programs.

The performance funding formula has ‘contextualisation’ to take account of local unemployment. But that won’t stop the graduate results looking bad, because it is based on overall unemployment, not on the unemployment experienced by the young people who are always hit especially hard in recessions, as the chart below shows. New recruitment is the first thing to go when economic times are tough, and young people are more likely to be looking for work than older people. In competing for jobs, young people are also disadvantaged by having less experience.

Student satisfaction with teaching

Student satisfaction with teaching is weighted at 20 per cent of performance funding. In recent weeks universities have rapidly shifted to online education. While historically online and on-campus students report similar levels of satisfaction with teaching quality, I doubt this is a reliable guide to 2020 results.

Online students in the student satisfaction survey chose to study off-campus and typically attend universities with well-developed online delivery. It’s hard to imagine that students who wanted to study on-campus would rate highly quickly-transitioned courses from universities with little experience in fully-online education.

The student satisfaction with teaching survey does not go into the field until August, and optimistically students who enrolled for an education on campus will be back there by then. But the relevant questions start with ‘Thinking of this year…’.

Equity enrolment shares

Equity student enrolment shares of low SES, regional and Indigenous students make up another 20 per cent of  performance funding (although incorrectly described as participation rates in government documents).

I’m not sure whether COVID-19 will cause any significant 2020 deterioration in this indicator.  Lack of access to adequate IT and bandwidth may mean that students in these groups are more likely to take a study break than non-equity students, but that won’t necessarily mean abandoning their course. Most of them, I think, would still be counted as enrolled for at least part of 2020.

Mature-age students are more likely to be equity students than school leavers, and it is possible that fewer jobs will lead to more mature-age applicants for university study in second-semester 2020 and in 2021.

However on current policies all equity applicants will face intensified academic competition for student places as demand exceeds supply by a larger margin. I plan on writing a separate blog post on this issue, but equity enrolment shares will trend down if this happens.

Universities could perhaps create more differential entry criteria for members of equity groups to reduce the equity impact of an enrolment squeeze.

Attrition

While COVID-19 is likely to cause negative trends in three of the four performance indicators, the basis of the final 20 per cent of equity funding, attrition rates, could improve.

During 2020 some students who would have continued in a COVID-19-free 2020 may withdraw because purely online delivery is impractical or unsatisfactory. However,  withdrawing from one or two teaching periods is not defined as attrition. Students who come back in 2021 after a break will be counted as continuing students.

Some students may take a different direction in life after taking a study break, but I doubt they will do so in large numbers. The most obvious alternative to study, work, will be hard to find. Students who depart longer-term due to COVID-19 are likely to be offset or more by students who would have dropped out in a COVID-19-free 2020 staying in a COVID-19-infected 2020. History suggests that attrition decreases when there are fewer jobs.

Quirks in how we calculate attrition may also improve official attrition statistics. A member of the public might assume that anyone who starts a course and then leaves has dropped out. But that is not the definition used in Australian higher education statistics. Only commencing students who are enrolled on a 2020 census date and then reach no census date in 2021 are counted.

As a result, student behaviour around the census date is important to reported attrition levels. A Grattan Institute report on dropping out provided survey results, supported by circumstantial enrolment evidence, that many students are ignorant of or confused by the census date. As a result, some students disengage from their studies but fail to formally end their enrolment before the census date. They appear in their university’s statistics as attrition after they do not re-enrol for the next year.

In 2020 many universities have delayed their census dates, giving students more time to do the paperwork needed to officially end their enrolment. Publicity around extensions may also have increased student awareness of the census date’s significance. As a result, I expect fewer students who would have dropped out anyway in a COVID-19-free 2020 to reach a census date.

Personally I would give universities some ‘performance’ credit for promoting knowledge of census dates, as I think it improves overall system equity and efficiency. But from the perspective of the performance policy, which encourages retaining students who are considering leaving, apparent improvements driven by census-date factors will be statistical rather than real. The lift in retention from students who might otherwise drop out staying will be mainly due to the COVID-19 recession, not anything universities have done.

Population growth

Another complicating factor is that COVID-19 will affect the amount of performance funding. It is linked to percentage growth in the 18-64 year-old population.

The largest driver of Australia’s population growth is net overseas migration (NOM). A person is counted as adding to the population if they are in the country for at least 12 months in a 16-month period. This means that international students, along with other temporary migrants, have been driving up NOM. Travel restrictions and a weak labour market will reduce the flow of international students and other NOM migrants.

Although in a global recession we will probably see fewer Australians leaving for overseas and more expatriates returning – this is what happened during the global financial crisis – the net effect of COVID-19 will be lower population growth over the next couple of years (at least) than previously estimated. On current policy, that means reduced overall performance funding.

Conclusion

At minimum I think the COVID-19 crisis means that the plan to put performance funding  into the Commonwealth Grant Scheme guidelines should be postponed. The reason for this is that the scheme is currently run administratively via university funding agreements. This gives the Department the flexibility to pay universities even if the original performance criteria have not been met, which is now an impossible goal.

Better still, abandon performance funding in favour of policies that can meet the higher education system’s long-term needs.