Changes to Australian Higher Education Funding: An Attack on Expertise
The Federal Government yesterday announced a raft of changes to their financial support of undergraduate university places under the title âJob-ready graduatesâ. Undergraduate places in Australia are mostly government-subsidised, supported in part by a contribution from the student themselves (the student contribution) and in part by the government (the commonwealth contribution). The total funding a university receives to support teaching and associated activities for a student is determined by the total of these contributions. The levels of total funding for places is regulated, and varies by the topic (âfield of educationâ) of the courses the student is taking. The breakdown between the student and commonwealth contributions is also regulated and also varies by course topic. Moreover, the student contribution is not paid up-front, but deferred though a government-run income-contingent loan scheme, HECS. The system is complex and various parts of it are the legacy of now-forgotten historical policy events.
The governmentâs proposed changes rearrange the complex existing systems of bands of commonwealth support. The proposed model has four levels of commonwealth support, and four levels of student contribution. The government has announced various rationales for their changes, such as producing more âjob-readyâ graduates in fields of projected future employment growth. There has been a lot of discussion around the impacts on the humanities and social sciences (âHASSâ), as they have greatly increased student contributions.
Real aims
But we can see the real aims of the policy if we look at the effects of the new banding structure on each field of education:
What are the governmentâs priorities? If we think that the Commonwealth contribution is what best indicates those fields the government thinks worthy of support then then the biggest cuts are in (i) communications (including media), (ii) social studies, political and behavioural science; (iii) environmental studies; (iv) history and philosophy. (All lose more than $5K per FTE student per annum). The only winner is English, but it is not clear whether that is just vocationally oriented (e.g., English as an additional language, business English).
If we look at the overall funding institutions will receive per student â what they are supposed to fund their teaching from â then the big losers are (i) environmental studies (ii) engineering and science (iii) communications (iv) maths (v) agriculture â all lose more than $3.5K per FTE student from their teaching resource. (Each place in environmental studies will now receive $10K per FTE student less from 2021.) The fields of education which benefit are English, again, and â perhaps surprisingly â history and philosophy: the increased student contribution more than makes up for the loss of commonwealth funds.
The only fields which have both a reduced student contribution and increased total funding are English, IT, architecture, âotherâ health, and medicine, dentistry, and veterinary science.
An attack on teaching
The government claims that the changes are designed to incentivise prospective students
to make more job-relevant choices, that lead to more job-ready graduates, by reducing the student contribution in areas of expected employment growth and demand. (Dan Tehan, address to National Press Club, 19 June 2020)
Consider first the absurdity of incentivising students to study courses which lead to greater prospect of future employment. Surely the job is a bigger lure than a marginal change in your future HECS debt. However, we should probably discount this supposed incentive, because in fact the QILT graduate outcomes data shows that HASS graduates do comparably with graduates of other fields in post-graduation employment, and that almost all university graduates do pretty well regardless of field of study.
But what will this actually lead to in practice? The Minister specifically cites âteaching, nursing, clinical psychology, English and languagesâ, âagriculture and mathsâ, and âscience, health, architecture, environmental science, IT, and engineeringâ as those which will see cuts to the student contribution.
However, the measures cut total support for educating students in almost all of these fields. Students may be incentivised to go into them, but what they will find once they enrol is a less resourced teaching environment. In this case, students really will get what they pay for: the cut in student contributions is not fully compensated for by the commonwealth. A lower cost degree will be a lower quality degree. The price signal here is reliable; universities will be strongly incentivised to increase class sizes, increase the move to non-individualised teaching strategies, and cut costs for labs and practicals in science courses.
In fact, the price signal is reliable for the humanities and social sciences too â and law, economics, commerce, and management â because there the increased student contribution is associated with increased total funding. This will allow universities to run courses in these areas with lower student-staff ratios, more individual attention, and better educational outcomes.
âJob-relevanceâ
The whole announcement presupposes that HASS fields are not âjob-relevantâ. Again the QILT graduate outcomes tell a different story, one where (i) HASS graduates are comparably employed with STEM graduates, both in employment rates and remuneration, and (ii) where HASS graduates are among the most satisfied with their course of study and the quality of teaching and transferable skills:
In fact, looking more closely at this table, it looks like the government is trying to use price to lure students into areas which report low overall satisfaction. Rather than pour resources into improving satisfaction in IT, nursing, teaching, engineering, to positively attract students to high quality educational experiences, the government is trying to lure students to a cut-price offering. If anything student satisfaction will only get worse as marginal and unprepared students respond to these incentives, and then face difficulty in study.
The minister said âUniversities must teach Australians the skills needed to succeed in the jobs of the futureâ. The jobs of the future, as we know, will be unlike the jobs of the present or even the next five years. They will require flexibility, adaptability, and critical thought. They will not be susceptible to automation or replacement by machine learning algorithms. They are exactly the âsoft skillsâ taught by pure disciplines in HASS and STEM. But the incentivised courses arenât generally teaching fundamental thinking skills, apart from pure math and theoretical science.
The governmentâs changes to HASS course funding really mean this: they are making it unaffordable for small business, charities and NGOs to employ skilled HASS graduates. The graduates will be fine â they are flexible and adaptable, by training, and they will find careers that enable them to service a large HECS debt. Society loses, as the expertise and skills of the most desirable graduates are lost to those most public-serving sectors.
Moreover, the idea that universities should be producing âjob-readyâ graduates is just baffling. I would never want to be treated by a recent medical graduate whoâd never undertaken a residency. It takes on the job training to learn to apply a substantial body of theoretical knowledge. The same is true for any of the other substantial bodies of disciplinary knowledge taught across the university. For example, the transferable skills of philosophy (logical, ethical, and critical thinking) are directly job-relevant, even if workplace-specific further training is needed.
Added 2020â06â22: Let me be clear: I actually regard an investment of nearly A$15,000 per annum for a good degree in HASS as a pretty attractive deal, certainly by international standards (UK domestic students pay ÂŁ9,000 [~$A16,000] per annum, and even in-state tuition at a good US public university like Rutgers or Michigan will set you back well over A$17,000). If a student has the resources to study in the first place â and we have to emphasise that many potential students, particularly first-in-family and those from low-SES backgrounds, will notâthere is still available across most institutions a very high-quality educational offering. The lifetime premium on income, and the lifetime intellectual rewards, would make studying the liberal arts and sciences almost certainly worth the cost for almost all students.
Price insensitivity
The decreased costs for teaching, nursing, science and maths may, as the government intends, lead to some students enrolling in those degrees. There are unlikely to be many, given the preparation needed for science and maths and the unattractive employment prospects for teaching and nursing (there may be jobs, but they are underpaid, undervalued, and often unpleasant). Likewise, the increased costs for humanities and social sciences courses may, as the government intends, deter some students from enrolling in HASS degrees. Some who are otherwise able and eligible may not take up a university place at all, deterred by the costs.
But in fact these outcomes are comparatively unlikely, because the HECS system has been explicitly designed to insulate student choice from cost. Economically, the most attractive feature of the system is that demand is decoupled from price, allowing places to be subsidised without distorting student preference. The heated discussion at the present about the increases in cost for Arts degrees will distort some student choice, but once things settle down we will likely still see a cohort of dedicated students who will continue to enrol in HASS degrees at perhaps slightly lower rates than today. As Andew Norton puts it:
Research shows that course choices are strongly linked to student interests. This is not surprising. In their course choices, students commit to years of education, and possibly decades of work, in that field. It makes little sense to forgo a preferred life to save what are, in the context of total career earnings, modest amounts of money.âŚHumanities and commerce students are often committed to their choice, with more than 60 per cent of their later preferences for other courses in the same field.âŚStudent interest theory also creates doubt that heavily discounting some courses will significantly change student choices. Education and nursing students would save over $3,000 a year under the new rates, and science, engineering, architecture, IT and allied health courses about $2,000. For these modest sums, only prospective students who were almost neutral between their options would change their minds about what course to take.
Previous changes in course bandings bear this out. Reviewing previous research on the Australian HECS system, David Robinson and Daniel Carr concluded (in a report produced as part of the UK review of its higher education sector) that
setting subject fees with the intention of shifting student demand towards subjects with labour market shortages or high public benefits has limited evidence in its favour. âŚ
⢠When fees for a select range of subjects more than doubled in 1997, there was no material change in student demand for these subjects relative to others.
⢠When nursing and education fees were shifted into a newly created ultra-low fee band in 2005 there was âlimited effectâ on student demand for both subjects. Counter intuitively, when fees for both subjects were then restored back to their original, higher, fee band, nursing applications surged and the long decline in education applications steadied.
⢠When in 2013 the government reversed the 2009 decision on lowering maths and science fees, moving them from the lowest to the middle fee band, no change in application growth rates was observed. (pp. 26â7)
Notice that if this is right, all that the changes to student contributions in HASS will do is create a significant number of very large HECS debts in fields the government believes will never be repaid as the job/earnings prospects are low. The idea seems to be: extend bigger loans to those least likely to pay them off! Typical of the economic âunderstandingâ of the government, but letâs hope some economists at Treasury have an eye on this proposal. Alternatively, a policy which leads to a significant increase in HECS debts never repaid might be best understood as making economic sense only if the longer term government objective is to get rid of HECS.
Unintended consequences
It is clear that this is an attack on universities as a whole, which has been presented by the minister as an attempt to shift student choice away from the humanities. It cuts total income for science across the board, from pure to applied. It cuts engineering, maths, psychology, and agriculture. It will probably impact the humanities, but science and engineering faculties had better hope their universities are still able to recruit strongly into HASS degrees. This is because the costs of teaching science and engineering cover very little of the costs of having a science and engineering faculty. To attract high quality teachers in those fields, you need to offer them high quality research opportunities, provide them with laboratory space, project funding when they are between ARC grants, and so on. These costs are covered in most institutions by a subsidy from high demand/lower overall cost areas â humanities, social sciences, law, and commerce.
These incentives to continue to enrol large numbers of students into HASS and professions degrees are bolstered by the sheer magnitude of the shift away from commonwealth support for these degrees. For many institutions, the student contribution will probably cover the whole cost, and so institutions will be incentivised to enrol above the commonwealth cap (the number of total places the commonwealth will provide the commonwealth contribution for). Every additional unsubsidised student is still worth more to the universities than currently, since the commonwealth contribution is less than the total funding increase. Talk about setting an incentive structure!
An attack on expertise
The net effect of all of this is to cut the overall funding available for universities on a per-student basis, whether that funding comes from students or the commonwealth. This gives universities an incentive to grow student places to retain current quantum of total funding. So we should see total places growâwhich is convenient for a government facing the increased demand from the Costello mini baby-boom, and the counter-cyclical effects of a recession on demand for education. And we see those places grow without more government funding:
Added 2020â06â22: On further reflection, the incentives for universities to enrol, and over-enrol, in HASS and law/economics/commerce are so great that it must be part of the plan that enrolments in those disciplines grow substantially. The outcome will be that universities will attempt to enrol many students as effectively full-fee-paying domestic students (an attempt which will likely succeed), with a nominal commonwealth contribution for some of them. This looks like a cynical attempt to fund increased demand by replacing now absent full-fee-paying international students with their domestic counterparts.
But the result will be lower quality degrees, less resourcing for research in STEM, and lower levels of university funding across the board. As a way of attacking a sector the government has never had much sympathy withâtoo many expertsâit is going to be pretty effective. And if it puts the boot into the HASS sector while theyâre at it, so much the better, it seems, from their culture warrior perspective.
