Student employment is at record levels, but can it last?

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.

Retrenchment

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.

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What can the government do about student associations and free speech?

The Australian this morning reports that ‘Education Minister Alan Tudge is considering cutting off funding to student organisations that ­attempt to stop the airing of views they oppose on campus.’ The trigger is an issue with the ANU student association, and whether an anti-abortion group and the ADF should be able to set up stalls at the association’s market day.

As is usual in these cases, the facts are not entirely clear. The student newspaper Woroni quotes the student association’s social officer as saying the groups were excluded. But the association told The Australian that the groups did not apply and therefore no application from them has been rejected.

Either way, ‘Mr Tudge told The Australian he was considering ways to block student unions that impede free speech from taking compulsory student fees which fund their services on campus, and tying them to a model code of free speech that now applies only to university administrators and staff.’

How can student unions be regulated?

As the minister’s statement acknowledges, if a student union is a separate legal entity to the university it is not automatically covered by the academic freedom and freedom of speech definitions added to the Higher Education Support Act 2003 earlier this year. The government may try to extend freedom of speech provisions to student unions.

The current freedom of speech law is based on applying conditions to grants rather than direct regulation. As student unions don’t receive grants this mechanism cannot be used for them.

While the government does not directly fund student associations, this year the Commonwealth has lent students about $130 million through the SA-HELP scheme to pay their amenities fees.

There is no current power to attach additional conditions to SA-HELP loans, but this could be considered.

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How much the government paid for Centre Alliance’s Senate vote, and other updates from the funding agreements

This post updates one I wrote in April, including new information from revised university funding agreements posted on DESE’s website.

South Australian university Senate special deals

The updated funding agreements let us see how much the government paid to get Centre Alliance Senator Stirling Griff to vote for Job-ready Graduates, which is $68.6 million for South Australian universities over the 2021-2023 funding agreement period. Unlike much of the other additional money in the funding agreements, these increases are ongoing rather than temporary.

I am not sure what criteria were used in dividing the money between the South Australian universities. In 2021 Adelaide gets 1.9 per cent more than it presumably would have otherwise, Flinders 2.7 per cent, and the University of South Australia 3.1 per cent.

More short course places allocated

In my earlier post the allocated short courses fell short of the announced budget value of $252 million. Now they slightly exceed it at $258.7 million, divided between 256 undergraduate certificates valued at $102.9 million and 491 graduate certificates worth $155.8 million. My updated spreadsheet of short courses is here.

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Would universities have received JobKeeper under more favourable rules?

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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How defensible were the government’s JobKeeper decisions for public universities?

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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The competitive education market for workers updating their skills

In 2019 I wrote a series of posts on declining participation in formal education and training by people already in employment. Falling enrolments ran counter to claims that technology-driven disruptions to work would make further education more necessary than in the past.

The 2019 blog posts identified nine sources of survey and administrative data that should be trending up if the workforce disruption analysis was right. All seven data sources on individuals were instead trending down, while two employer surveys respectively showed a small increase in informal training and a larger increase in online training.

Informal training is not or is poorly measured in the individual person surveys. If it is increasing while structured learning is decreasing then this may signal a change in how people educate themselves after their initial formal education.

Prompted by this week’s release of new data on one of my trend indicators – ATO self-education expense claims – this post updates my 2019 analysis. Most indicators show signs of recovery but on the latest available data three are still trending down.

Postgraduate education

Postgraduate coursework education returned to growth in 2019. Commencing on-campus numbers continued to decline but were offset by online commencements. People moving straight from undergraduate to postgraduate study complicate my analysis, as they are trying to start rather than advance their careers. On the publicly available data I cannot distinguish the two groups.

Postgraduate numbers for 2019 remain below their earlier peak, but I expect 2020 and especially 2021 to be growth years. This is partly because I see postgraduate education as counter-cyclical, with COVID labour market disruptions in 2020 encouraging further study. If this hypothesis is right data noise complicates analysis of longer-term trends, but convenient online postgraduate options are attracting students.

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The ‘model code’ on academic freedom and freedom of speech and higher education law

In his speech to the Universities Australia conference yesterday, Education Minister Alan Tudge expressed frustration that some universities had still not, after 26 months, complied with the model code on academic freedom and freedom of speech devised by Robert French. He told delegates that:

If it becomes apparent that universities remain unable or unwilling to adopt the Model Code, I will examine all options available to the Government to enforce it – which may include legislation.

This post updates an earlier one on the relevant law and legal options around academic freedom and freedom of speech. It argues that, at this point, the government cannot legally require full implementation of the model code. Additional legislation is therefore needed.

A policy on academic freedom and freedom of speech

The most important legal change since my summary last September is that the Higher Education Support Act 2003 has been amended to remove a requirement for universities to have a policy on the undefined concept of ‘free intellectual inquiry’ and instead have one on ‘academic freedom and freedom of speech’. The amended section reads:

19‑115  Provider to have policy upholding freedom of speech and academic freedom

 A higher education provider that is a *Table A provider or a *Table B provider must have a policy that upholds freedom of speech and academic freedom.

Table A means the public universities, Table B is the other universities. The amendment also includes a definition of academic freedom:

academic freedom means the following:

                     (a)  the freedom of academic staff to teach, discuss, and research and to disseminate and publish the results of their research;

                     (b)  the freedom of academic staff and students to engage in intellectual inquiry, to express their opinions and beliefs, and to contribute to public debate, in relation to their subjects of study and research;

                     (c)  the freedom of academic staff and students to express their opinions in relation to the higher education provider in which they work or are enrolled;

                     (d)  the freedom of academic staff to participate in professional or representative academic bodies;

                     (e)  the freedom of students to participate in student societies and associations;

                      (f)  the autonomy of the higher education provider in relation to the choice of academic courses and offerings, the ways in which they are taught and the choices of research activities and the ways in which they are conducted.

This is a revised version of the definition of academic freedom that appears in the French review. It does not, however, include all the issues covered in the model code.

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International students and permanent residence

A Grattan Institute report released last night calls for big changes to the criteria for gaining permanent residence. While recognising that migration and higher education links may have benefits for Australia, the report questions giving permanent migration preference to former international students through points for Australian and regional university degrees, the professional year, and use of skills shortage lists. Instead they recommend permanent residence priority for employer-sponsored people earning more than $80,000 a year.

Major changes to PR rules would make international students nervous. And whatever the general merits of Grattan’s proposal, after Job-ready Graduates and border closures now probably isn’t the time to inflict another big problem on the higher education sector.

But reading the Grattan report (which I saw in draft) highlighted to me that I did not know how many former international students eventually achieve PR. The work for this post was an only partially successful attempt to remedy this situation. I’m not a migration expert and I may have missed or misunderstood things, but FWIW my key findings are below.

Total numbers of former international students with permanent residence

Counting former international students with PR is not a straightforward exercise, since there are many direct and indirect routes to permanent residence. A 2018 Treasury paper based on detailed immigration data identified 5,500 routes from a temporary visa, of which student visas are the largest category, to a permanent visa.

Taking all of these routes into account, of the 1.6 million people who had arrived on a student visa between 2000-01 and 2013-14 the Treasury paper calculated that 16 per cent, or about a quarter of a million, had achieved PR.

This number, however, is not consistent with an earlier Productivity Commission analysis, which on my reading of the relevant chart gets us to 300,000 international student conversions to PR just counting arrivals between 2000-01 and 2005-06.

The ABS Characteristics of Recent Migrants survey estimates how many people who first arrived on a student visa in the last 10 years have achieved PR or citizenship (a further step on from PR). The 2013 and 2016 surveys show growing numbers of former international students with PR or citizenship. By 2019, however, the numbers had fallen back below the 2013 level.

All the ABS numbers in the chart are below what we might expect from the Treasury or Productivity Commission figures. Policy changes a decade ago made it harder to transition from a student visa to PR just by holding a qualification in an area of alleged skills shortage. So an underlying downward trend is quite possible. There are, however, important differences between the ABS numbers and earlier statistics.

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Can performance penalties reduce university maximum basic grant amounts?

The current university funding agreements change the nature of performance funding. Previously performance funding was configured as a reward scheme, providing additional funds in exchange for meeting performance-related criteria. Now it is a penalty scheme, deducting money from teaching grants if universities don’t meet performance criteria. The performance benchmarks are assumed to align with the pre-Job-ready Graduates performance funding policy, but this has not been publicly confirmed.

This post explores whether a performance deduction from teaching grants is legally permissible under the Higher Education Support Act 2003. It is clearly not the kind of performance incentive envisaged by HESA 2003, and there are grounds for thinking that a court might find that it is partially or entirely invalid.

The maximum basic grant amount and the performance penalty

The most important grant provision in HESA 2003 is the maximum basic grant amount (MBGA) for higher education courses. This establishes the maximum amount the government will pay from the Commonwealth Grant Scheme (CGS) for Commonwealth supported student places in coursework courses, other than demand driven enrolments for regional and remote bachelor-degree Indigenous students and medical courses. The total value of this grant for 2021 is about $6.8 billion.

Under HESA 2003 each university is to be paid the lesser of the higher education courses MBGA, as set out in their funding agreement, or the total Commonwealth contribution value (relevant discipline funding rates * full-time equivalent students) of student places delivered. Any enrolments above the cap are funded at the student contribution rate only.

The funding agreements include total MBGA amounts for the next three years. The example below is from Macquarie University’s funding agreement, but all agreements have the same or similar formats.

Another clause in the funding agreements, however, purports to take away an element of the MBGA in the event of poor performance. The example below is again Macquarie but all other other agreements have the same format.
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The Budget and higher education

The Commonwealth Budget has triggered confusion about higher education funding. How much does the government spend? Has there been a cut or not?

The Budget documents understate government higher education expenditure

The only summary statement of higher education expenditure in the Budget documents is in Budget Paper No. 1, which reports spending on the higher education ‘sub-function’ (sub- of education generally).

But what is in the higher education sub-function? I’ve collated as much information as I can from the Budget papers and I think it means grants administered under the Higher Education Support Act 2003. I can’t exactly replicate it but my numbers are very close – slightly less in every year. I lack expenditure on the Indigenous Student Success Program, which HESA 2003 funds but PM&C rather than DESE administers.

The ‘higher education sub-function’ significantly understates Commonwealth assistance for higher education. As the top line in grey in the chart below shows, using numbers from Budget Statement No. 4 on agency resourcing, it doesn’t even cover money flowing under HESA 2003 itself. The difference is money lent through the HELP loan scheme. Although the Budget papers don’t specifically quantify HELP lending this is likely to become the single largest source of funding for higher education, as international student revenues collapse and the Commonwealth Grant Scheme stagnates.

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