Why did universities become reliant on international students? Part 5: The rise of research rankings

In my series of posts on why universities became financially reliant on international students I have, to date, focused on domestic factors. Research funding policy changes are the most important. Universities needed new discretionary revenue to finance government-supported research projects, and to pay the salaries of staff with teaching and research roles.

But universities did not need a nearly 500 per cent real increase in international student fee revenue since 2000 to fill these budgetary gaps.

Suppose annual Commonwealth research spending was 50 per higher across the last few decades, all of it paid through block grants rather than generating additional costs via competitive grants. Up until the year 2000, as the chart below shows, a 50 per cent increase in public funding would have covered all research spending. But in 2018 Commonwealth funding 50 per cent higher than it was would still have left over 40 per cent of research spending unfunded (although there is about $1.9 billion in non-Commonwealth research income).

Profits on international students have been used to help finance a massive increase in university research expenditure this century.* Growth on this scale was something universities chose to do, not a change forced on them by government policy.

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Australia’s university research boom

Last weekend I posted some concerns about whether ABS research expenditure figures were over-estimates. They may attribute a higher proportion of academic working hours to research than a proper time-use study would show, and therefore put a too-high share of academic salaries into the ‘research expenditure’ column.

On the other hand, research output evidence is consistent with the 21st century research boom suggested by the ABS figures. The number of academic journal articles with at least one Australian author increased dramatically, as seen in the chart below.

Although missing the 1990s comparison, journal article volume data collected as part of the Excellence in Research for Australia exercise shows the same very large upward trend.

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Reality testing teaching and research cost results

My recent blog post on the cost of the teaching-research academic employment model prompted various Twitter comments on its analytical assumptions.

Friday’s post and the comments made on them also link back to other recent posts that try to understand how universities finance themselves. The posts have consistently acknowledged data issues, and that precise dollar figures cannot be attached to most of the conclusions. At best, we can get to a credible range.

The most important criticism is that my analysis assumes that the two main sources of university expenditure data, the Deloitte Access Economics study for teaching, and the ABS for research, can adequately distinguish between and separately cost scholarship and research.

According to the ABS, which uses international definitions, research is ‘creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge’. Scholarship, by contrast, I take as activity leading to or maintaining in-depth understanding of existing knowledge.

It is hard to have research without scholarship. How can academics claim to have increased knowledge if they are unaware of the current state of their topic or field? The literature reviews that appear in many ‘research’ articles in academic journals are scholarship.

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Why did universities become reliant on international students? Part 4: Trying to maintain a teaching-research academic workforce

In my previous post in this series, I argued that international student fees help pay for under-funded government-sponsored research grants. But these research projects are not the only partially-funded research universities are trying to finance. They also have many teaching staff on contracts that include research time, but who do not attract equivalent research income.

For academics, the expected and preferred academic career is generally to have a teaching and research or research only role. For most academics, however, teaching is not their top priority. A survey about a decade ago found that, among teaching-research academics, nearly two-thirds leaned towards or were primarily interested in research.

This bias is reinforced by the academic recruitment process, which favours people with PhDs. In 1987 less than a quarter of academics in the Colleges of Advanced Education, which by then taught the majority of higher education students, had PhDs, and 69 per cent of university academics. In 2018, across the now unified system, nearly 74 per cent of academics have a PhD.

Not surprisingly, most people who do PhDs are interested in research. In a 2010 survey, only six per cent of research students planning an academic career nominated a ‘mainly teaching’ role as their ideal job.

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Why did universities become reliant on international students? Part 3: The rise of research project grants

In a previous post, I doubted that inadequate public funding for Commonwealth supported students could, with a few exceptions, explain why universities have enrolled so many fee-paying international students. For publicly-funded research, however, structural changes in how funding is delivered have changed its economics.

Government policy has moved away from block grant funding – lump sums of money that universities can spend as they choose – towards project funding awarded on a competitive basis, mainly through the Australian Research Council and the National Health and Medical Research Council.

In the 1990s, as the chart below shows, competitive grants made up less than a quarter of Commonwealth research spending on universities (counting Department of Education plus NHMRC). By the middle of the 2010s nearly half of Commonwealth funding was delivered through competitive grants, though with an easing off recently as ARC funding was cut.

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How reliant is Australian university research on international student profits?

The decline in international student numbers has many people worried about the future of university research in Australia. A recent report from the Chief Scientist predicted that 7,000 research jobs could go due to reduced teaching profits, philanthropy and corporate funding.

In this post, I estimate how reliant research is on international student profits. It combines data from multiple sources. None of them were designed to calculate this profit, so my result should be taken as being in a plausible range rather than as a precise total. But it can give us a sense of the scale of reliance on international students.

According to the 2018 ABS higher education research report that was released yesterday, in 2018 universities spent $12.158 billion on research. The ABS also gives sources of research funding, but these only explain 44 per cent of the total, with the rest coming from ‘general university funds’.Read More »

University JobKeeper hopes dashed again

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 »

Ministers should not choose research projects

Senator Kim Carr has been around forever, and knows what questions to ask in Senate Estimates. And yesterday he got the Australian Research Council to reveal that, last year, then education minister Simon Birmingham rejected 11 humanities grant recommendations. So far as we know, this hasn’t happened since Brendan Nelson was minister in the middle of the last decade (Gideon Haigh tells that story well).

As with the Nelson intervention, Birmingham’s decision has prompted outrage. The Australian Academy of the Humanities says that “this interference is entirely at odds with a nation that prides itself on free and open critical enquiry.”

Birmingham’s response is, in effect, that the rejected projects are not worth funding. On Twitter, he says “I‘m pretty sure most Australian taxpayers preferred their funding to be used for research other than spending $223,000 on projects like ‘Post orientalist arts of the Strait of Gibraltar.'”

He could have picked several other examples: “beauty and ugliness as persuasive tools in changing China’s gender norms”, “music, heritage and cultural justice in the post-industrial legacy city” or “Soviet cinema in Hollywood before the blacklist, 1917-1950”.

But that Australian taxpayers were probably not going to get value for money from these very niche projects is not the same as an argument for rejecting an ARC recommendation. Read More »

Is university research activity increasing again?

Last year I reported, using ABS statistics, that the long boom in university research spending had stalled between 2012 and 2014. A combination of reduced Commonwealth research spending and couple of weak years for international student revenue in 2012 and 2013 were likely major contributing factors.

The research commercialisation survey results released yesterday also contain a question on total research spending for 2015. While universities are asked to use the ABS methodology, there is provision for estimates in non-ABS survey years (which 2015 was). There are also some universities that did not submit data.

With these caveats, on a same-university basis reported research spending increased by about 5 per cent in real terms between 2014 and 2015. However, other indicators suggest research activity was still flat in 2015. Research only staff on a full-time equivalent basis dropped by 5.6 per cent between 2014 and 2015, with a small increase in teaching and research staff.

In the same period, teaching-only staff (including casuals) increased by 8.5 per cent. It would need a detailed analysis to work out exactly what was going on, but possibly a more competitive student market after demand-driven growth slowed in 2015 was putting more focus on teaching.

The 2016 head count staff data (which excludes casuals) shows a 4.7 per cent increase in teaching only, a 1.8 per cent increase in research only, and 0.3% decrease in teaching and research staff.

With international student enrolments and revenue again booming in 2016 and 2017, these numbers suggest that teaching staff are increasing to meet the needs of additional students. International students are highly profitable in some universities, and the modest increase in research only staff is consistent with those universities feeling confident enough in future financial surpluses to expand their research activity.

University research expenditure growth finally moderates

In a Grattan report released last year, I argued that research spending was increasing rapidly, with profits on teaching supporting that growth.

The latest ABS statistics on research spending, released every two years, suggest that this trend might be moderating. Although I have not had time to update the complicated analysis we did to estimate the contributing of teaching revenues to research, the long boom in research spending has stalled. After double-digit real growth rates between 2002 and 2012, from 2012 to 2014 there was only 1% real growth, to $10.1 billion (see chart below).

research spending

As overall university expenditure has not stopped growing in this time period, research expenditure as a share of all university expenditure dropped from the record 41% in 2012 to 39% in 2014 (see chart below).

research as a share of university expenditure

Closer examination of the ABS figures by expenditure type shows that one of the reasons for the moderation in research growth is that capital expenditure dropped by $200 million between 2012 and 2014, but 2012 was an unusually high year for capital expenditure. The ABS records capital expenditure in the year in which it occurs, which means that big projects can skew the results for particular years. That $200 million drop accounts for about 0.7% of the drop in the research share of university expenditure.

Still, it does appear that there may be at least a pause in the trend towards research consuming an ever-larger share of university resources. A small decline in research only staff and a small increase in teaching only staff would also support this conclusion. Whether this moderation is just a pause through a period of Commonwealth Budget constraint and a less lucrative international market, or a more lasting slight re-ordering of university priorities, remains to be seen.