Has the university funding freeze caused commencing enrolments to fall?

The 2018 higher education enrolment data, published yesterday (yes, it should be released much earlier than late October), showed a rare fall in public university domestic commencing bachelor degree students. Both a headcount and full-time equivalent count show a decline of about 0.8 per cent compared to 2017.

2018 was also the first year post the demand driven system, the practical implication of which was that universities would not be paid Commonwealth contributions for enrolling additional students. Indeed, there is a financial incentive to let the number of student places fall.

So is this cause and effect, with changed funding rules causing enrolments to decline? I have no special insight into the strategic decisions of universities, but overall this trend looks to be driven by weak demand more than an unwillingness to supply student places.

As the chart below shows, applications trended down in 2018 and 2019 and offers (willingness to supply) followed this trend. Offer rates were stable: 83.2 per cent in 2017, 83.8 per cent in 2018, and 83.6 per cent in 2019. If universities were actively trying to reduce numbers we might expect offer rates to go down, but this isn’t happening.

applications down 2019

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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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Contrary to expectations, reskilling and retraining seem to be in decline

We are regularly being told that in an era of technology-driven labour market change we will need to reskill and retrain much more than we did in the past. Perhaps we will. But it is hard to find evidence for this in the available data.

Let’s start in higher education. As I have noted before, mature-age undergraduate education is trending down. But domestic postgraduate coursework commencing student numbers are also down on their 2014 peak, as seen in the chart below. Education and business courses are driving the decline. Only health and IT courses have enjoyed enrolment increases since 2014.

Total student numbers are still high by historical standards. But with record numbers of eligible students (people who already have degrees), and undergraduate initial professional entry courses being converted into postgraduate qualifications, we would expect strong growth in this type of qualification. It is not happening.

postgraduate commencers

In vocational education too enrolments are trending down, including for people who already have a Certificate III or above qualification (taking the Certificate III as more clearly a career qualification than Certificates I or II). Read More »

How bad is the international student English language problem?

The English language abilities of international students keep coming up as an issue. Despite reassurances from the regulator and universities, there is little publicly-available evidence to support a conclusion that the language issues are too infrequent or not serious enough to be a major concern.

Although we should always be careful with statistics on self-assessed abilities, they can provide a rough guide. If someone says that they do not speak English very well chances are that they will struggle in an English-speaking university.

One source of data on self-assessed English is the 2016 Census. The Census does not directly identify people on student visas, but I have used a number of filters – enrolled full-time in university, non-citizen, and arrived in Australia 2014-2016 – to identify likely international students. I also removed people who are monolingual English speakers. It’s likely that the data still includes some visitors to Australia and domestic students, such as those on humanitarian visas, but it should be dominated by international students.

As the chart below shows, the vast majority of likely international students say that they speak English well or very well. However, 9 per cent say that they do not speak English well.

English language overall

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The case for redefining low socioeconomic status in higher education

(This post also appears on the Grattan Institute blog.)

Since the early 1990s, higher education statistics have defined someone as of low socio-economic status if they are from a region classified in the lowest 25 per cent in Australia according to the ABS Index of Education and Occupation.

Universities are rewarded for enrolling students from these areas. A participation fund of about $135 million is distributed between universities according to their share of low SES students. A university’s success in the new performance-funding scheme will depend in part on it enrolling low-SES students.

The low-SES definition has been criticised over the years, usually because it often misclassifies individuals. High-SES people live in low-SES areas, and vice versa. But we need a balance between precision and practicalities. To recruit additional low-SES students, universities need to first identify them. Geographic areas are easier to find than individuals with particular family characteristics.

Although geographic SES measures should be retained, the lowest 25 per cent definition needs reconsidering. As the chart below shows, in 2016 higher education participation rates in the lowest quartile were not clearly distinct from the second quartile. Generally, the weighted average participation/attainment rates at the ABS SA2 geographic level cluster at around 25 per cent for people aged 18-23 across the lowest 50 per cent of areas by the Index of Education and Occupation. An SA2 is roughly the size of a postcode.*

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Is HELP doubtful debt likely to increase?

In February last year, when introducing legislation to change HELP repayment thresholds and rates, along with other HELP reforms, the government said that:

The fiscal challenge for the government is that HELP repayments have not kept pace with HELP lending growth. From 2010-11 to 2016-17, the level of new debt not expected to be repaid increased from 16 per cent to 25 per cent.

But unfortunately there is a disconnect between the stated purpose of the legislation and its likely effects. The thresholds and rate changes are unlikely to reduce doubtful debt , and indeed may increase it. Using  ATO tax data,  at the Grattan blog Will Mackey estimates that the new HELP repayment thresholds will produce slightly lower total annual student debt repayment than the previous thresholds.

The reason is that although some low and high income earners will repay more each year, most of the more numerous middle-income earners will repay less, producing a total repayment estimate of about $50 million a year less than if the previous thresholds and rates had been retained.

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Will the number of Commonwealth supported student places fall?

A couple of opinion pieces about university performance funding last week suggested that the government’s policy is aimed at increasing student places with population growth. That may be the impression the government is trying to give, but their policy provides a financial incentive to decrease the number of student places.

The government’s promise is to increase nominal funding for bachelor-degree places in line with increases in the population aged 18-64, for those universities that meet performance targets. But because percentage population increases are likely to be below inflation,  total Commonwealth Grant Scheme funding will decrease in real terms each year, even if universities get 100 per cent of their performance funding.

Although maximum CGS payments will probably increase at less than the rate of inflation the underlying Commonwealth contributions are still being indexed to the CPI. As noted last week, the demand driven funding calculation is still going on as well, so that universities receive the lesser of their demand driven or maximum grant amount. The practical effect of this is that universities can decrease the number of Commonwealth supported places each year and still get their maximum CGS funding amount.

The chart below illustrates the logic, using nursing as an example. Under the Wellings review recommendations, universities are pretty-much guaranteed 60 per cent of their maximum performance funding. So on the left-hand side of the chart below I have indexed the maximum funding amount to that and divided it by the indexed Commonwealth contribution. Next year a university could offer 4 per cent fewer nursing places than in 2017 and still get its maximum funding amount. 100 per cent performance funding does not make much difference. Read More »