Science degrees to cost $11,000 more

One of the policy decisions in today’s Mid-Year Economic and Fiscal Outlook is to rescind Labor’s cut in the student contribution amounts for science, maths and statistics subjects.

While students starting before 2013 will be grandfathered, those starting in 2013 will according to the government’s estimates pay $3,662 a year more, or about $11,000 over a three year degree.

I opposed the cut to student contributions at the time, among other reasons because I doubted that it would increase demand. The MYEFO repeats this argument, citing the Bradley review of higher education policy.

The Bradley review, however, reported shortly before the cut to student contributions came into effect. The student applications data since suggests that my prediction, along with Bradley’s prediction, was wrong.

In the two years after the cut took place, demand for science courses increased 32% in a market that was up 12% overall. Though the slow-moving DEEWR bureaucracy hasn’t yet published the 2011 applications data, media reports earlier in the year from the tertiary admissions centres suggests that science demand was up again.

Given that science graduates were having above-average difficulty finding work on course completion even before the demand surge converted to more graduates, cooling demand is not a problem if that is what occurs.

Though we can never tell for sure simply based on applications, a drop in demand following a price increase would help increase our confidence that relative prices were a science demand driver.

Why run an expensive ad for one PhD place?

Why would a business school buy expensive media space to promote its PhD scholarships? The advertisement below appears on page 3 of today’s Weekend Australian, offering a $50,000 PhD scholarship at the UQ Business School. The ad on its own would be worth a good percentage of the scholarship’s value. There are surely much cheaper ways of communicating with the smallish pool of potential business research students.

Is it some kind of branding exercise for the UQ Business School (‘Australia’s most recognised’, ‘international reputation for research’, ‘close links to industry’ according to the ad)? But if so I would have thought that there were better ways of doing it, and good outcomes for graduates would be more important. Keeping up the flow of fee-paying coursework students is the key to a successful business school (some of which have a history of losing money, which isn’t exactly a great endorsement of the business acumen contained within their walls).

I’d welcome any theories explaining this ad.

Demand-driven system to become less demand-driven

The demand-driven higher education funding system is to become a little less demand-driven than we thought. The Minister has announced that sub-bachelor undergraduate degrees will be excluded from the system.

It’s a move designed to protect the TAFEs, already being hit by the federal and some state governments in other policy areas, from further competition from universities.

In The Australian this morning, I gave this move qualified support.

The problem is that the TAFEs and other non-public university higher education providers have been excluded from the demand-driven system. This puts them at a competitive disadvantage. The danger in my mind is that universities could seek to use this period to wipe out some of their non-university competitors, leaving us with an even less diverse system than we have today.

The danger remains for TAFE bachelor degree programs, though they have always known that they were taking on the universities and so have niche products. But not many unis have large associate degree or diploma programs, so the TAFEs had a wider market for these.

It would be better if the same rules applied to all, and there was no need for anti-competitive rules. And this should have been announced earlier – sudden rule changes undermine the confidence needed for future planning. But in our world of second and third-best policy, this policy seems better than its most likely alternative.

Are Australian students reluctant to choose?

The visiting boss of Universities UK, their Universities Australia equivalent, says that Australian students are used to studying near their home. It means student choice here will take longer to evolve than in the UK, where leaving home to study is common (they are getting a very partial demand-driven system).

That Australian students are stay-at-homes is a commonly held view, but there is not much research on how often Australians move to study. The DEEWR student statistics show that about 11% of students are enrolled outside their home state. But the 2006 census showed that about 40% of 18-19 year old university students were not living with their parents.

Of course many of these are likely to still be fairly close to the family home; living in a share house in Fitzroy is more fun than living with your parents in Camberwell. But it shows a capacity and willingness to move.

There are signs of national marketing. Both Bond and James Cook universities have been advertising on Melbourne TV in the last few weeks (admittedly SBS). This suggests that at least some universities think that students can be persuaded to travel long distances.

All the other mobility statistics – jobs, houses, travel – suggest that Australians are happy to go somewhere new or do something new. If student mobility to study is lower than in other countries I doubt it is anything deep in the culture. It is a pragmatic decision that Australian universities are quite similar, and that therefore there is not much point in moving to study. If universities differentiate themselves more, I would expect more mobility.

Overseas student reforms bad for higher ed market design

Declining international student numbers prompted the government to commission a report from former NSW politician Michael Knight, and his report was released today. The government has accepted his recommendations.

Most of Knight’s recommendations are sensible. But his report would also lead to a visa system that is biased in favour of universities at both ends of the course of study: in a easier process for getting a student visa, and for a new two-year work right after completing the course. This would put non-university providers at a significant disadvantage.

Coming on top of the government’s decision to uncap Commonwealth-supported places for public universities, letting them compete more strongly against private providers and TAFEs offering degrees, and to lift the FEE-HELP debt surcharge from 20% to 25% for undergraduate courses, I could see why the non-university higher education sector could come to the conclusion that the government is trying to put them out of business.

I don’t think the government is trying to wipe out the non-university higher education sector; rather this situation is the result of an ad hoc approach to policymaking, with decisions made without adequate consideration of their systemic consequences.

Though Knight correctly observes that there have been more migration-related problems in the vocational sector than in the universities, I could not find any evidence that the non-university higher education institutions were particularly prone to taking students who broke visa conditions (especially compared to the universities at the cheap end of the market, attracting students from poor countries with the strongest reasons to want to stay in Australia). There was a discussion of the difficulties in setting rules institution by institution, but not for different classes of institution.

An effectively functioning higher education market in Australia requires – to use the now cliched metaphor – a more level playing field. International students are important to building economies of scale in the non-university sector, and making those institutions more able to take on the universities in the domestic market. So Knight’s recommendations, and the government’s apparent acceptance of them, are a setback to good market design in both domestic and international markets.