Has Job-ready Graduates increased the number of commencing students?

This morning the government released the first enrolment data since the Job-ready Graduates policy began. It covers only 25 of the 40 full universities (including private universities). No information is available on which universities are in the 25, but based on previously published first-half-of-the-year enrolments I estimate that they enrol just over two-thirds of domestic students.

The government had previously published tertiary admission centre applications data, which based on previous years would represent just under two-thirds of all applications.

As each source has significant missing data any conclusions must be tentative. The chart below lines the two sources up by field of education. Each of demand and supply is up about 7 per cent, but there are significant differences between the two at the broad field of education level.

Apparent trends to date

Demand for IT, science and engineering is up, but supply is up by much more. It is possible that the idiosyncrasies of what is in each of the demand and supply datasets explains some of this discrepancy, but also that the national priority places and short courses allocations, which have a policy bias to these fields, are driving up supply more quickly than demand.

Health commencing numbers also show a strong increase. Because the health enrolment increase is off a higher base than the others, the chart does not show that it has the largest increase in absolute commencing numbers (2,810), making up 26 per cent of the total increase. The extra places could not meet the skyrocketing demand (10,840), but I doubt any funding system could meet large increases in demand at short notice for courses with a clinical component.

Agriculture has strong percentage increases for both demand and supply, but due to low base numbers this is 405 additional applicants and 248 extra commencing students.

‘Society and culture’ is so broad as to be not an overly useful category. It includes humanities, languages, social science, social work, psychology and law. Demand and supply increased at roughly the same rate.

There was a similar story in education. It is more reliant on direct applications than other fields, but after a number of years of soft demand before a weak recovery in 2020 this looks positive for education faculties.

The big loser is management and commerce, both demand and supply down. Creative arts had a drop in demand but an increase in commencing students.

Job-ready Graduates and demand

The minister is noting that the changes are in the direction Job-ready Graduates was intended to encourage. But this does not necessarily mean that we are looking at cause and effect.

Applications tend to move with the labour market whether there are fee changes or not. This makes it hard to attribute much of the demand-side change to Job-ready Graduates price cuts, although I do think JRG may have had a publicity effect, ie the government has told potential students which courses it thinks will lead to jobs (wrongly in the case of science, of course). This will only last for one application cycle, so next year’s applications will be a better test of price effects.

COVID-19 would have given health courses a powerful publicity effect. This effect may persist after 2021, although let’s hope the underlying cause of health’s increased profile will diminish in the next couple of years.

In two broad fields with student contribution price hikes, management and commerce and creative arts, the fall in demand continues a trend, leaning me to the conclusion that we are looking at more of the same rather than a JRG effect.

We need a more detailed break down of society and culture numbers, but the worst case scenarios for dramatically falling arts enrolments due to a doubling of student contributions don’t seem to be playing out.

Job-ready Graduates and supply

Student demand is very hard to steer. There are fundamental social and economic factors driving it up over the long term. Students go with their interests and the labour market. The main policy lever is supply rather than demand, because universities are much more sensitive to government policy and financial incentives than their students.

One of the levers of increased supply in JRG is a de facto demand driven system in the $14,500 student contribution fields – business, law, arts. At least on a marginal cost basis, that is probably enough to cover costs in those courses.

With management and commerce, the fall in demand was such that although it looks like offer rates were up commencing enrolments appear to have dropped. In society and culture, which is mostly but not entirely a $14,500 category, supply is up. It’s possible that the financial attractiveness of the student contribution was a factor.

But what explains the overall growth, most of it in fields that are less attractive on a student contribution only basis than under the old funding system?

There is a scenario in which none of this is due to Job-ready Graduates. Instead, it could be entirely driven by the short courses and national priority places, which are temporary COVID-19 responses that will only affect commencing numbers in 2021.

Last week I put in a Freedom of Information request for the detailed allocation of these places, but I have not yet received a response. But as noted above the criteria for allocating them would have seen a bias to the fields with increases in places. Universities respond to supply signals, and then fill places from increased demand or by taking applicants they would otherwise reject.

I did some back-of-the envelope calculations on how many commencing students the national priority and short course funding could produce. This involved some significant assumptions: that the 25 universities in the commencing student statistics received funding according to their existing enrolment share; that most of the short courses are in graduate rather than undergraduate certificate courses (my impression based on the funding agreements I looked at; I won’t know for sure until I get the FoI results); that two-thirds of short courses would start in first semester; and that an EFTSL would convert to a headcount of 1.29, based on commencing numbers in previous years.

To the extent that any one of these assumptions is wrong my estimate could go up or down. But they get me to a 15,000-16,000 once-off increase in commencing headcount, which is more than than the 11,360 increase observed in the government’s figures.

The underlying numbers

This implies that without the temporary national priority and short course funding we might have seen a fall in commencing numbers this year.

Last year I predicted that this was a possible consequence of Job-ready Graduates. This is due to the transition arrangements, in which continuing students taking subjects with lower student contributions immediately transition to the reduced fees (the students taking subjects with higher student contributions are grandfathered at the old rates). Because lower student contribution are partially offset with higher Commonwealth contributions, universities consume more of their limited Commonwealth Grant Scheme allocation on continuing students. This leaves less money for commencing students.

This problem will reduce each year, as the pre-2021 grandfathered students on high Commonwealth contributions are replaced with 2021-and-after commencing students on lower Commonwealth contributions. But in the early JRG years it exerts downward pressure on supply capacity.

It looks like the national priority and short course places have avoided supply falling while demand rose. But better policy design could have avoided this expensive solution to a problem that should never have been created.

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