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 »

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 »

Young people were less likely to enter higher education in the years after Whitlam than before. Demography and deficits were against them.

The three politicians with the greatest impact on higher education participation were Robert Menzies, John Dawkins and Julia Gillard. Yet I never hear anyone say, depending on their age, that “I only went to university because of Menzies/Dawkins/Gillard”.

Yet for Gough Whitlam the story is different. Last week USQ VC Geraldine Mackenzie was reported in the Australian saying “I was very fortunate to go to university after the Whitlam years when it was all free. Otherwise I may not have had that same opportunity.” And in February shadow education minister Tanya Plibersek told the Universities Australia conference that “it feels like every week, I meet someone in their 60s or 70s who reminds me about how Gough Whitlam was responsible for them going to university.”

I have argued before that Whitlam, Prime Minister 1972-1975, was very significant in the history of Australian higher education and has some lasting legacies. But I think the lesson from Whitlam’s time for now is that the biggest drivers of participation are supply-side policies on student places, and in particular how they interact with demography and fiscal policy. Because both these factors were significant in the free education era, the long-term trend towards increased higher education participation was interrupted.

Free education lasted from 1974 to 1986 (there were small charges in 1987 and 1988, before HECS started in 1989). The chart below shows that 19-year-old participation rates went up in 1976 but then fell and did not return to the previous peak until 1986. At the low point in 1982, the 19-year old higher education participation rate was 2 percentage points lower than it had been in 1975 (unfortunately, my data source starts in 1975).

19 year old participation

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The proposed law against commercial cheating and the Constitution

Successive Commonwealth governments have been creative in finding ways to by-pass the Constitution. That has been very necessary in education, which was originally intended to remain a State responsibility.  The Commonwealth has no direct power to legislate on an education topic other than in the territories. This creates legal issues for the Commonwealth’s attempts to ban commercial cheating. Draft legislation was released at the weekend.

The Commonwealth’s main vehicles for education policy have been section 96 tied grants to the States (no longer used for higher education, but still used for school and vocational education), the section 51(xx) power to legislate on foreign, trading and financial corporations (which relies on universities being trading corporations; this power could collapse if they went back to full public funding) and section 51 (xxiiiA), the ‘benefits to students’ power, which is the main legal basis of Youth Allowance, the Commonwealth Grant Scheme, and HELP.

Because the Commonwealth can fully legislate for the territories, the draft bill would be effective in the ACT and the Northern Territory. But in the states the legal situation is more difficult.

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Higher education inequality: how much does performance at university differ by socioeconomic status?

In an earlier post, I argued that the Australian higher education system probably deserved about a 7/10 for equity of access. In line with some theory, the middle-class meritocracy continues to reproduce itself successfully, but the universities are open to talent: for a given ATAR, university participation rates are very similar across SES groups. But what happens when students arrive at university?

Intriguingly, many studies have found that low SES students or students from non-selective government schools do not do worse and indeed tend to get slightly higher marks, for a given ATAR starting point (eg here, here, and here and the literature cited within).

Various theories for this finding have been offered, but I suspect it is because the schools higher-SES students attend maximise ATARs through intense coaching and social pressure, but their less motivated and organised students don’t do as well in the much less structured university environment. By contrast, a lower-SES student who has done well in Year 12, quite possibly with much less school and social support than higher-SES students, is a motivated and resourceful person, and that pays off at university as well.

Student satisfaction is not reported directly by SES, but recent surveys differentiate between people who are first in family and those who are not. This gives much less nuance than I would like, but low SES students are much more likely to be first in family than high SES students. The Student Experience Survey finds first in family students are often slightly more satisfied with their educational experience than students who are not first in family. Maybe first in family student expectations are different, but generally they seem to be experiencing university in much the same ways as other students.

However, on actually completing a degree we do find some negative differences. Using a geographic measure, 69 per cent of commencing low SES undergraduates complete a degree within the nine years to 2015, compared to 78 per cent of high SES students. Read More »

How bad is student mental health?

The media this morning is reporting some dramatic figures on student mental health. According to Headspace, a youth mental health organisation, two-thirds of students responding to an NUS survey reported high or very high psychological distress over the last twelve months, and a third experienced thoughts of self-harm or suicide.

I’ve recently been doing some reading on this subject, as part of a project on student attrition. I’m convinced there is a problem, but I am not so sure that it is this bad.

The latest ABS National Health Survey from 2014-15 shows that the main student demographic, those aged 18-24, has worse mental health than any other age group. This is only moderately so for men, with 11 per cent reporting high or very high psychological distress on the Kessler scale, compared to 10 per cent for all adult men. But it is dramatically so for women, with 20 per cent reporting high or very high psychological distress, compared to 13.5 per for all adult women.

According to other ABS sources, about half of 18-24 year olds are students. An analysis of an earlier NHS (along with HILDA) found small overall differences between students and non-students, especially after adjusting for demographics, with students being on average younger and more likely to be female than the general population. The NHS survey found 10 per cent of its student sample were experiencing high psychological stress, while it was 21 per cent in HILDA.

One important reason for different results is that the ABS surveys and HILDA ask about mental health issues over the last month, while the Headspace/NUS survey asks about the last twelve months. Mental health issues tend to be episodic, so we should expect more people to experience one over a year than a month. There seem to be widely varying results even from surveys with similar methodologies, so mental health is clearly something that is difficult to measure at a population level. But Headspace/NUS getting triple the rate of the ABS or HILDA seems high. They have not published their detailed results, so perhaps we will have a better idea of why when they do.

Some first thoughts on Labor’s higher education policy

Labor has released its higher education policy today. Some first thoughts:

The sensible

* They want to build on the new QILT website (itself a big improvement on MyUniversity) to provide better information to students and parents in making informed choices. It’s not in Labor’s policy, but I would suggest that there are two big information gaps for prospective students at the moment. For QILT, the units of analysis are the course and the university. However, as the attrition rates reported elsewhere in Labor’s policy imply the more important unit of analysis may be the prospective student – ie, student attributes matter more than university or course attributes in predicting completion. The other issue is that while prospective students are getting improved information about choices within higher education and vocational education (see the MySkills website), there is not much on the choice between higher education and vocational education. But that’s the choice people with weaker academic backgrounds need to be considering.

* They would keep the demand driven system. Previous talk of using compacts as a backdoor way of steering the supply side of the demand driven system is absent from this document, and if it has been dropped I think that is a good thing.

* There would be better processes: a green and white paper to sort out the detail of their policy once in government. They are also proposing a Higher Education Productivity and Performance Commission. The main discussion about the Commission is on labour market forecasting, but there is much else it could do to meet the goals implied by its title.

The neutral

* They are promising a ‘Student Funding Guarantee’, which they say will boost per student funding by $2,500 ‘compared with the Liberals’ plan’. Perhaps compared to the 2014 Budget policy, but not so far as I can see compared to the status quo, which is the most likely outcome under the Liberals as well, even if they would rather spend less. Just indexing the current average per student funding rate by 2.5% a year I get quite similar projections to Labor. Incidentally, 2.5% is less than universities would like, but in recent times weak wage growth means that the indexation system Labor introduced last time they were in office is not producing the increases in grants that universities thought it would.

Incidentally, the wording in the document is not always as careful as it could be, blurring the distinctions between per student funding and per student government funding. Universities won’t be 40 per cent better off per student each year under Labor; without spending cuts or fee deregulation it is just that more of their money will come from government. The accountability pressures may differ slightly depending on whether the government or students pay, but a dollar is a dollar regardless of where it comes from. Apart from ideological considerations around public-private funding shares, so far as I can see universities will be financially indifferent between Labor in 2018 and the status quo (which is just Labor policy as of 2012).

The not so good

* Labor’s plan to write off the HELP debt of 100,000 STEM graduates was controversial when it was announced in May. As I said at the time, it is at best wasteful and at worst will encourage prospective students to take high employment risk courses. The Higher Education Productivity and Performance Commission will be able to identify the problems.

* They will not implement the Kemp-Norton report recommendation to extend the demand driven system to non-university providers or sub-bachelor degrees. However, they will announce further policies regarding the TAFE system and pathway programs prior to the election.