Sitting out the recession at university: postgraduate courses

In previous posts, I looked at whether demand for undergraduate education would increase during the COVID-19 recession. In this post, I examine potential demand for postgraduate education.

As with initial undergraduate qualifications, theory suggests that a recession is a good time for postgraduate study. The opportunity cost of time spent out of the workforce is lower or non-existent. Studying is a relatively productive and interesting way of sitting out a recession.

In examining what happened in previous recessions I have been helped by a project that has put all the old graduate destination surveys online (scroll down to the bottom of the page here). Recessions aside, the trends are interesting.Read More »

The popularity of online self-education

A couple of weeks ago I posted on the surprising apparent decline of reskilling and retraining. Mature-age undergraduate, postgraduate, vocational qualification, ABS work-related training, and ATO self-education expenses have all trended down in recent years. These trends did not seem consistent with the oft-repeated claims of workplace change and the need to reskill and retrain.

Especially on LinkedIn, much of the reaction to the post suggested that this was due to online self-education as a substitute for credentialed and uncredentialed courses and training. While I haven’t found any time series data on how online self-education  has grown, I am persuaded that this must be a significant part of the explanation.

In a recent Pearson global survey of learners, employed respondents who required further training were asked how they did it. In Australia, organised courses or training are still more widely used than online self-education. But a third of the sample had used this method (chart below).

use Pearson

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Current higher education policies are the unsatisfactory result of political misjudgements in 2017. There are better ways of balancing the interests of students, universities and taxpayers.

Higher education is one of the sectors most affected by Saturday’s surprise election result. Labor’s biggest promise, restoring demand driven funding from 2020, would have delivered universities funding for all bachelor-degree students, with Commonwealth  contribution rates 5.3% higher than they were were in 2017. This did not require legislation; the current funding freeze was imposed through university funding agreements and could have been ended the same way.

By contrast, if the Coalition’s current policies stay in place there will be no demand driven funding and most universities face limited nominal increases in total Commonwealth Grant Scheme funding for bachelor-degree students (a few unis have special deals that will deliver larger increases). The best-case scenario for most universities is an annual total CGS funding increase linked to growth in the 18-64 year old population, if they meet yet-to-be-announced performance criteria.

The mention of population gives the impression that the policy will respond to demographics, but this is not correct. As the chart below shows, the projected increase in the 18-64 year old population is below even recent low CPI increases. In real terms total funding for bachelor-degree students will continue to decline.

population funding

If universities decide to maintain per student funding they would provide fewer student places each year (the logic is explained in this submission). It’s not clear to what extent this will happen. Commencements were down in 2018, but quite possibly due to weak demand for student places rather than a reluctance to supply them.  Existing enrolment projections, based on numbers universities give to the Department, suggest modest growth to 2022. But whether this would be sustained long-term with annual real funding cuts is unclear.Read More »

The VETification of higher education is a precedent that should not be set

In The Australian this morning an article points out that publicly-funded language diplomas may be not be available to new students from next year. In my view, that is a correct implication of both general policy statements on funding diplomas and associate degrees made by the government, and the specific consultation paper on sub-bachelor courses.

Unfortunately, this is a case in which the government, in attempting to fix one problem, would create several new problems.

The original problem here is that diplomas and associate degrees were, at the last minute in 2011, excluded from the demand driven system. That means that the total number of government-funded sub-bachelor places remains set by the government, the allocation of places between universities reflects largely historical decisions, and new places (when available) are distributed according to regularly changing criteria. The distribution of places does not strongly align with the preferences of students, the strategies of universities, or the needs of employers. In the review of the demand driven system I did with David Kemp, we recommended putting sub-bachelor places into the demand driven system.

On the surface, the government’s proposal looks like it is responding positively to this recommendation. Constraints on the number of funded sub-bachelor places will be lifted in two ways. First, sub-bachelor courses approved by the minister will enter the demand driven system. Second, sub-bachelor courses not approved by the minister will be given an exception on the general ban on undergraduate full-fee places at public universities.

Language courses are in trouble because they typically fail to meet both the announced criteria for sub-bachelor demand driven funding – that they articulate into a related bachelor degree program, and that they have been developed with a focus on industry needs. Read More »

Has the demand driven system largely achieved its objectives?

At the AFR higher education conference this week the demand driven system was criticised from the speaker’s platform and elsewhere.

Some Group of Eight universities are arguing for something they call ‘cap and trade’. The core idea is that, in exchange for accepting capped funding or student places, universities could trade in bachelor degree places and replace them with sub-bachelor or postgraduate places. Under the current system, sub-bachelor places are capped in public universities. Universities can enrol unlimited numbers of postgraduates on a full-fee basis, but in some courses they want to offer cheaper Commonwealth supported places, which are currently capped.

From the government’s perspective, cap and trade implemented across the entire system would give them more certainty about future higher education expenditure.

University of Melbourne VC Glyn Davis gave the argument a new feature at the AFR conference. He put as central to the demand driven system the goal of 40 per cent higher education attainment in the 25-34 age group. Noting that this had been achieved in some metropolitan areas, he suggested capping inner city universities while allowing outer metropolitan universities to continue growing.

The 40 per cent attainment goal was certainly part of the original Bradley report recommendations for the demand driven system and the subsequent government policy announcement. But how important is it to the overall logic of demand driven funding?Read More »

Rival fairness arguments in the university fees debate

This week I am on a panel discussing a fair price for students to pay for their university education. Both those who want students to pay more and those who want students to pay the same or less draw on fairness arguments.

Fairness arguments for higher student charges

Fairness to other taxpayers: Critics of free or cheap higher education have long thought subsidising students was unfair to other taxpayers. Way back in 1972 Malcolm Fraser criticised Labor’s free tertiary education policy on the grounds that it would lead to a ‘wharf labourer paying taxes to subsidise a lawyer’s education’. The 1988 Wran report, which recommended the introduction of HECS, justified it partly on the basis that ‘taxpayers carry most of the burden of higher education [but]…most taxpayers are not privileged members of society and neither use nor directly benefit from higher education.’

Fairness to other taxpayers is perhaps the lead trigger idea in reducing public spending and increasing student charges. Two of the three proposed nominal cuts in per student public spending of the last 30 years (1989 was the exception) occurred when there was a Budget deficit, creating an active choice between increasing taxes or charging students more.

A fair price: Underlying the fairness to other taxpayers notion is also an argument that it is fair to ask people to pay for what they receive. This has led to a recurring idea that there should be a ‘balance’ between private and public contributions to the cost of higher education. It appears in the Wran report, the arguments for the 1996 funding cuts and HECS increases, the Lomax-Smith review of funding (never acted on), and again in the Pyne and Birmingham policy documents. Students should pay for the benefits they receive, and the public should pay for the benefits it receives.

The public-private balance idea has had little influence on policy detail. Public benefit calculations have never been used to set public funding rates, and private benefits have been used to set private funding rates only once, in a back of the envelope way, in introducing differential HECS for 1997. This created the idea that student contributions should be linked to likely future earnings. Differential HECS connects to a market idea of a ‘fair’ price – pay more, get more. But it also links to progressive notions that the relatively rich should pay more, or get less in taxpayer-funded benefits. This is a common idea in the Australian welfare system. Despite the weak association with policy detail, repeated use of the balance metaphor suggests it reflects intuitions about how higher education should be funded.
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Should teacher education places be capped?

NSW education minister Adrian Piccoli has long been a critic of universities over-supplying the teacher education market. In this morning’s Australian, he is calling for caps on student places. If accepted, this would be the second course after medicine to be capped.

It would also be a major precedent, as it would set a low benchmark for justifying capping. According to employment surveys education graduates do slightly better than average in finding full-time work. Among those finding FT work, education graduates do significantly better than graduates in other fields in getting jobs that use their qualifications. That said, full-time employment for education graduates is down 11 percentage points on 2008, the recent peak of graduate employment rates.

The strength of the demand driven system is not that student and universities will always make the right call about where the job market is going, but that it can adapt as new information becomes available. Over the last few years, the message that the teacher market is saturated has been well publicised. Commencing student numbers were already past their peak by 2015, as the chart below shows. The trend would have been further down except for a major move by Swinburne Online, which went from no students in 2014 to 8.5 per cent of the national commencing market for initial teacher education in 2015.

commecning ed students
Source: uCube

There are bigger falls in education more generally – down 10% percent in commencing students between 2014 and 2015 and 13 per cent in full-time equivalents (presumably part-time enrolments at Swinburne Online are affecting that). Under the legislation, capping occurs in full-time equivalent places, not on a head count of students.

The initial 2016 applications and offers data suggests a fall of 2.4 per cent in applications and 4.7 per cent in offers for education, so a further drop in student numbers seems likely.

Cutting student numbers under the pre-demand driven system was a slow, politically painful process. With demand driven funding, it is happening quickly with few people even noticing.