In 2020 the Australian government JobKeeper policy provided eligible employers and employees with a wage subsidy, which was designed to sustain employment during a COVID-related shock to the Australian economy.
Public universities were eligible for JobKeeper, but its regulations were changed several times to reduce the chance that they would qualify. I assessed the merits of the government’s university JobKeeper decisions in a previous post. No university received JobKeeper directly, although some benefited from it via their subsidiaries.
With most university annual reports now published I can partially investigate the effects of the government’s university JobKeeper decisions. As at 6 July 2021 I have 2020 financial results for 32 public universities. I am missing the South Australian universities, the University of Canberra, the University of Tasmania, and Charles Sturt University.
Time period of revenue loss
For all organisations JobKeeper eligibility involved comparing revenue in 2020 with the same period in 2019. Most organisations could choose a month or quarter, but for universities it was changed to the six month period from 1 January 2020. In my previous post, I rated this as the least defensible government university JobKeeper decision.
Early on, before the six month period was introduced, some universities thought that they could qualify (eg Sydney and La Trobe in April).
The original one month comparison option, starting with a calendar month that ends after 30 March 2020, seemed to create opportunities for some universities. Government payments arrive in fortnightly instalments, while fees are paid around due dates. In particular months international student fees received for the next semester may be a large percentage of all university income. A big drop in fee revenue in one of those months might have triggered the revenue decline threshold that made an employer eligible for JobKeeper assistance (the relevant level is discussed below).
At least at Sydney, most first semester 2020 student fee due dates were prior to 30 March (I could not find La Trobe’s dates). And Sydney is one of the ‘China universities’ affected by a border closure to China from 1 February 2020. The ‘India universities’ are unlikely to have had a March trigger month, as Indian students mostly arrived before the international borders closed completely to routine travel on 20 March 2020.
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The Australian Government’s JobKeeper program was intended as a temporary scheme to keep people in jobs during COVID lockdowns and business restrictions. It was originally scheduled to run until late September 2020. With some more limited extensions it finished at the end of March 2021. The government made several decisions that reduced the chance that a public university would qualify for JobKeeper support. This post evaluates those decisions from a public policy perspective. A subsequent post assesses how the various decisions affected public university JobKeeper eligibility.
In the rush to implement JobKeeper, the public university aspects were not well implemented or explained. University hopes were raised only to be dashed, feeding a sense of persecution as well as cutting off potential funding. I will argue, however, that the final policy position reached by the government, except for the time period for comparing 2019 and 2020 cash flows, was not wrong in principle.
More importantly, JobKeeper was never the right response to the higher education sector’s COVID-related problems. It was a short-term program aimed at helping employers maintain staff through domestic lockdowns and restrictions on activity. Regulations affecting the day-to-day activities of people in Australia were, and remain, very disruptive to universities but are not leading to a major loss of income. The financial problem is an international border closure that will last for more than two years. This will cause significant continuing revenue losses from international students into the mid-2020s.
The eventually announced extra government money for research and temporary new student places were more like what is needed. My critique of the government’s higher education response to COVID is that these policies were only announced late in 2020, and largely terminate before borders are predicted to re-open. Additional assistance for 2022 should be arranged.
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And so we have another turn in the twists and turns of universities and JobKeeper.
The universities listed on Table B of the Higher Education Support Act 2003 – Bond, Notre Dame, Divinity and Torrens – will be exempted from one of the three rule changes designed to prevent universities getting JobKeeper.
They are still not counted as charities to get the lower 15 per cent decline in turnover threshold (not that Torrens is one anyway). They still have to count government grants in their revenue base. However, their revenue loss can be calculated over the month or quarter that applies to most enterprises, rather than the six months that applies to Table A universities.
In practice, I think this change is irrelevant to Notre Dame. In 2018, only 2 per cent of their revenue came from international students. Another 10 per cent came from up-front payments from domestic students. With their Commonwealth Grant Scheme and HELP funding guaranteed, there is a very low likelihood that Notre Dame will have the required 30 per cent decline in revenue.
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A week ago, when I last reported on the saga that is university eligibility for JobKeeper, the government had just announced that its grants would be counted in university revenue, making it harder for universities to get the required 30 or 50 per cent (depending on their size) drop in their income.
Despite this, I thought that some universities might still be eligible. The University of Sydney believed that it was. This was because while no university is likely to be down 30 or 50 per cent on its annual revenue, the timing of when international students pay their fees could mean that, in certain months, the cash flow reductions were that large.
The amended JobKeeper rules dash that hope. While other organisations can calculate their revenue losses over a monthly or quarterly period, for universities the relevant period will be the six months starting 1 January 2020. Over a six-month time period, the fortnightly payments of Commonwealth grants are likely to push university revenue losses back below 30 or 50 per cent. Read More »
Update 2/5/20: The government has further changed the rules so that university income must be assessed over the six months from 1 January 2020.
When I first wrote about universities and JobKeeper, at the end of March, I concluded that although they were included they were unlikely to meet the required revenue falls. Especially for the universities with $1 billion plus annual revenue, the required 50 per cent fall in revenue seemed like a financial disaster beyond what COVID-19 issues could trigger.
Since then, the universities and JobKeeper story has had many twists and turns. In early April, universities briefly hoped that they would only have to meet the 15 per cent decline in revenue required of charities (they are educational charities). But the JobKeeper legislative instrument specifically excludes institutions listed in Tables A and B of the Higher Education Support Act 2003, which cover all public and private universities.
This flips the normal funding biases of higher education. Generally, educational organisations that were publicly-funded before 1989 have privileged access to government subsidies. Now, for a brief time, the educational charities that are not in the pre-1989 group have easier access to public funding. They only have to show a 15 per cent decline in revenue, instead of 30 or 50 per cent for Table A and B institutions, depending on their revenue. In 2018, 41 non-university higher education providers were registered educational charities.*Read More »
Update 9/4/20: Since this post was written there was, briefly, some expectation that the revenue loss required for universities would be lower for 15 per cent. That is not happening.
Update 24/4/20: This story keeps evolving. Due to a loophole in the legislative instrument, which sets the revenue base at GST turnover rather than total income, some universities look like they have a basis for receiving JobKeeper.
Update 25/4/20: Cancel yesterday’s update, the government is moving to block that one. But there may still be other ways that universities can get JobKeeper. A new post updates the story.
Last night there was some Twitter discussion about whether university casuals would receive the new JobKeeper payment of $1,500 a fortnight. It is to be paid via employers, but casual staff are not eligible unless they have been employed on a regular basis for the last 12 months. Given the on-gain, off-again nature of casual teaching many probably would not be eligible.
But the first issue is whether universities are eligible employers. To qualify, they need to have suffered a significant loss of revenue:
Employers (including not-for-profits) will be eligible for the subsidy if:
• their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
• their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month). (emphasis added)
In 2018 eleven universities had annual revenues exceeding $1 billion. They therefore have the higher 50 per cent drop in revenue requirement, rather than the 30 per cent drop for smaller universities. Read More »
Although I don’t support the Tehan plan to steer student demand to ‘national priority’ fields, from day one I have supported increasing the number of student places.
According to the Department’s discussion paper on the reforms, they will ‘support an additional 39,000 university places by 2023 and almost 100,000 places by 2030’. These additional places are needed to meet previously unexpected demand due to the COVID-19 recession and, from the mid-2020s, the ‘Costello baby boom’ cohort (although the former Treasurer perhaps should not get too much credit for them).
This post examines how student places for undergraduates might increase under the Tehan reforms. For general readers, the first section on major sources of additional places includes the key policy changes. Read on after that part if you need to know the detail of higher education policy.
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In my previous post in this series, I argued that international student fees help pay for under-funded government-sponsored research grants. But these research projects are not the only partially-funded research universities are trying to finance. They also have many teaching staff on contracts that include research time, but who do not attract equivalent research income.
For academics, the expected and preferred academic career is generally to have a teaching and research or research only role. For most academics, however, teaching is not their top priority. A survey about a decade ago found that, among teaching-research academics, nearly two-thirds leaned towards or were primarily interested in research.
This bias is reinforced by the academic recruitment process, which favours people with PhDs. In 1987 less than a quarter of academics in the Colleges of Advanced Education, which by then taught the majority of higher education students, had PhDs, and 69 per cent of university academics. In 2018, across the now unified system, nearly 74 per cent of academics have a PhD.
Not surprisingly, most people who do PhDs are interested in research. In a 2010 survey, only six per cent of research students planning an academic career nominated a ‘mainly teaching’ role as their ideal job.
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A decline in international student numbers has triggered Australian higher education’s biggest-ever financial crisis. But why did universities became so financially reliant on international students?
In university constituencies, a common belief is that the government cuts going back to the 1990s are a factor.
Assessing trends in government funding is not straightforward. No official time series data exists. Different historical data sources do not always match.* There are notes about these issues in the text below, the footnote and the slides. I am confident of the overall pattern, although some year-to-year comparisons are not precise.
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At least temporarily, some domestic students are financially better off due to the government’s COVID-19 measures. This is due to increased income support payments and JobKeeper exceeding their likely pay if they had been working.
Eligibility for JobKeeper is a two-stage process. First the employer has to be eligible, with a 30 per cent reduction in revenue for businesses with revenues below $1 billion, and a 50 per cent reduction for business with revenue above $50 billion. Most charities have a lower threshold of a 15 per cent reduction in revenue.
I have no direct data on how many students are employed in eligible firms, but student employment is concentrated in industries that we know have been hit hard by COVID-19 shutdowns.
Second, the student has to be an eligible employee. In the ABS Characteristics of Employment Survey for August 2019, about two-thirds of employed students aged 17-30 years who are studying full-time meet the criteria. They have either on-going employment (using the entitlement to paid sick leave proxy) or are casuals who have been with their current employer for 12 months or more. This analysis includes all students, not just higher education students.
[Update 25/4/20: The Treasurer has announced that full-time students aged 16 and 17 years will not be eligible for JobKeeper, adding an age condition that slightly affects my analysis.]
If these tests are satisfied, there is a flat payment from the government, but paid by their employer, of $1,500 a fortnight. This is likely to be much more than full-time students usually earn. According to the Characteristics of Employment Survey, their median earnings are $320 a week, or $640 a fortnight. JobKeeper is likely to more than double earnings for eligible students until it expires on 27 September 2020. Read More »