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.
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.
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.
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.
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 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.
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 the major 2020 and 2021 lockdowns tertiary student employment in the 24 years and under age group fell by over 100,000, or 20 per cent of the pre-lockdown total. Yet these losses proved to be temporary. As I discuss in a new paper, student employment rates and earnings recovered to record levels. While the strong Australian labour market is obviously a major factor, the sometimes significantly overlapping employment markets for students and temporary migrants made closed borders beneficial for students as workers.
Tertiary student employment rates
The strength of tertiary student employment is most obvious in employment rates, the percentage of the total student population with a job. Tertiary student employment levels and rates vary during the year, driven by movements in and out of both employment and enrolment. Comparisons of the same month in different years can help distinguish a trend from a normal seasonal change. December is not necessarily the peak month for total student employment, since course completions reduce student numbers. But student employment rates typically reach annual highs in December, as seasonal spikes in retail employment coincide with a summer holiday increase in student capacity to work.
As the chart below shows, employment rates fell sharply in April and May 2020 as lockdowns hit, but by August 2020 student employment rates were back at 2019 levels. In 2021 employment rates were consistently higher than in 2019, despite lockdowns in NSW, Victoria and the ACT causing a significant dip. In early 2022 student employment rates remain 10 percentage points or more above their 2019 levels.
Long overdue data on university staff in 2021 was released yesterday, giving us the most detailed information yet about job losses since COVID-19 hit the higher education sector.
The Department of Education’s staff statistics are mostly based on a 31 March census date. For staff with permanent or fixed term contracts I assume few job losses before 31 March 2020. The full travel ban on incoming international students was less than two weeks old, although some countries – including, importantly, China – had earlier travel restrictions. But retrenchments take time to process so I doubt the impact at 31 March exceeded some new hires abandoned at the last minute. These weren’t enough to prevent a 3.7 per cent headcount increase between 2019 and 2020.
In the next twelve months to 31 March 2021 total permanent or fixed term contract staff fell by 9,050, or 6.9 per cent of the 31 March 2020 total. This is only the third decline in staff numbers since 1989, and by far the largest. Difficult as 2020 was for everyone involved, total staff numbers at 31 March 2021 (121,364) were roughly what they had been on 31 March 2018 (121,718). The higher education sector is still a big employer by its own recent historical standards.
The full-time equivalent fall for permanent or fixed term contract staff was 7,985, or 6.8 per cent. This number, however, needs a caveat. For these staff the FTE is an extrapolation based on work arrangements as at 31 March. Normally this would understate actual FTE, as hours worked by additional staff hired after 31 March will not be counted until the following year. But in 2020 the 31 March estimate would have overstated FTE, by not taking into account net staff reductions during the rest of the year.
For casuals DESE reports actual FTE (ie not an extrapolation) with a lag, so that 2021 actuals will be reported in the next staff data release. Before then DESE publishes university estimates of casual FTEs. With no notice periods or retrenchment payouts required, universities could start reducing casual numbers before 31 March 2020. As the chart below shows, casual estimates were trending down at 31 March 2020 compared to 2019 – a contrast to the increase in permanent and fixed term staff.
The actuals show an even bigger decline, with losses of 4,258 FTE or 17.5 per cent in 2020 compared to 2019 .
In March 2020, as Australians realised that COVID was a major problem, I wrote a pessimistic post about student employment. For a while during 2020 that pessimism was justified. But not in 2021. Tertiary student employment is at an all-time high, driven by more jobs and less labour market competition.
For the ABS Participation, Job Search and Mobility survey the sample is full-time students who have completed Year 12 but have no post-school qualifications. For this group retrenchments were high in 2020. Of the people who were students in February 2021, and had been employed in February 2020, 6.5 per cent had been retrenched over the previous 12 months. This compares to retrenchment rates of about 2 per cent a year in the 2016-2020 period.
The ABS monthly and quarterly labour market reports do not include retrenchments by student status, but do provide a time series for 15-24 year old workers. About 24 per cent of those workers were full-time tertiary students in 2020. As the chart below shows, retrenchments for 15-24 year olds spiked in the May and August quarters. In the May 2020 quarter they were 31 per cent of all retrenchments. JobKeeper slowed overall job losses from the end of March, but this demographic is relatively high on people not meeting its personal eligibility criteria. Temporary migrants such as an international students were not included in JobKeeper and casuals needed to have been in their job for 12 months.
Employment to population ratio
The main analysis supported by the labour force statistics is full-time tertiary students aged 15-24 years. The chart below shows that just between March and April 2020 the proportion of tertiary students in employment fell significantly, down nearly 9 percentage points. Student employment levels were already coming off their summer peak, with employment rates declining from 65 per cent in December 2019 to 46 per cent in May 2020.
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.