What happens if the Job-ready Graduates bill is rejected?

The Innovative Research Universities lobby group says that rejecting the Job-ready Graduates bill is ‘not an option’, while proposing several amendments to it. But its rejection by the Senate is still an option. What happens if it is rejected?

In this post, I argue that status quo policies can deliver similar outcomes in meeting student demand over the next few years, while causing much less disruption to the higher education sector.

Student places

The government says that it will ‘fund more bachelor‑level Commonwealth supported places (CSPs) at universities from 2021.’ Some universities will receive notional allocations, and regional Indigenous students will get demand driven places. But at a system level I don’t believe that direct Commonwealth funding will increase student places in the coming years, beyond what could be delivered under status quo policies.

As the minister said when Job-ready Graduates was announced, the package is budget neutral over the forward estimates. The recent budget update shows increases in spending this financial year and 2021-22, and then decreases in 2022-23 and 2023-24. The government is mentioning longer-term increases, and I believe that the minister sincerely wants to deliver extra places, but nothing in the legislation guarantees that this will happen. Under the status quo, 2020 funding levels for bachelor-degree places are legally protected.

The short-term increases under the Tehan package are transitional funding, to keep universities in the same total financial position until 2023. Transitional funding is mainly needed because cuts to students contributions for some fields, such as teaching and nursing, are for current and future students, while the increases to student contributions, for business, law and most arts students, are only paid by future students.

Not grandfathering all current students is one of the many strange policy decisions in the Job-ready Graduates package. To maintain budget neutrality over the forward estimates, the package reduces Commonwealth Grant Scheme funding in the critical years leading up to the arrival of the ‘Costello baby boom’ cohort, to hand windfall gains to current students. This cannot be explained as an incentive to take ‘job-ready’ courses; the students who benefit have already chosen these courses.

Any growth in Commonwealth-funded student places would not be driven by increased Commonwealth Grant scheme funding, but instead by lower average funding rates. Universities would, on average, need to deliver more student places to receive each $1 million of CGS funding.

But, as I have noted previously, how this average turns out very much depends on enrolment trends. One contradiction of the Job-ready Graduates package is that its growth objectives will succeed to the extent that its discipline-specific incentives fail.

As the chart below shows, in the disfavoured business, law and arts fields each $1 million of CGS funding will require many more student places than now. But in several favoured fields, such as nursing, teaching and IT, universities would need to deliver fewer places per $1 million. Big cuts to student contributions are the main cause of this problem, because the compensating higher Commonwealth contributions drive up the CGS cost of these fields.

Assuming enrolment shares between disciplines remain roughly as now, universities will be required under the Job-ready Graduates package to take additional students to get their (reduced) Commonwealth Grant Scheme allocation. But there is good reason to think that under current policies universities will voluntarily provide additional places on top of their status quo CGS allocation.

Student contribution only places

At a sector level I previously estimated that, due to over-enrolments – places for which universities receive student contributions only – universities were already delivering sufficient places in 2018 to achieve their maximum 2021 funding. Some universities had demand-side issues earlier this year, so they might have to increase enrolments. However, reports of strong intakes for the online short courses, along with additional mid-year bachelor-degree starts, suggest that sector over-enrolments will exceed earlier forecasts.

The main growth potential created by the Job-ready graduates package is the prospect of a de facto demand driven system in the $14,500 student contribution fields of arts, business and law. Universities could ignore the $1,100 Commonwealth contribution and increase enrolments on the student contribution alone.

I think this is a plausible scenario, although offer rates were already high in these fields except for law (chart below), and the new student contributions may put some potential students off. But an overall increase in demand due to the COVID-19 recession, and some cancelled gap years, should mean there is scope for additional ‘demand driven’ enrolments in these fields in 2021.

A complicating factor in this scenario is that although over-enrolments become more attractive in the $14,500 fields, they become less financially viable in other fields, as the chart below shows. Yet again the decision to create wider imbalances in student contributions is causing problems.

Overall I think there will be significant over-enrolments whether the Tehan package succeeds or fails, but the disciplinary mix may differ depending on the Senate vote.

Complexity and uncertainty

The Tehan package brings with it huge additional complexity and uncertainty. Grandfathered versus non-grandfathered students Disciplines with multiple different funding rates. Cutting overall funding for some disciplines, adding to the research crisis and pushing more regional universities into teaching deficits. Much more compliance work around student admission and retention. New equity and industry engagement funds that will require universities to change their expenditure patterns (less for low SES students, more for regional students; more prescriptive industry engagement). Enabling places possibly on their way out of Commonwealth support. Equity and industry funds based on annual ministerial whim, with no guarantee that universities that meet the criteria will ever get their money.

Conclusion

Overall, I think the Job-ready Graduates package will cause many more problems than it will solve over the next few years. Muddling through with the current system, while encouraging the government to try again with a simpler, fairer and more coherent policy proposal, is the better option.

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