Why you should reconsider going to university

By Leith van Onselen

Education Minister, Simon Birmingham, is today expected to announce changes to the Federal Government’s policy on higher education, which are understood to include a tightening of the HELP loan system and an increase in student fees. From The Australian:

The broad outline of the new funding formula, which could see student fees rising by a minimum of 25 per cent, is to be unveiled to vice-chancellors who have been summoned to Canberra on Monday for a briefing…

The new plan will increase the share of university costs to be borne by students from the current 40 per cent, while requiring students to start repaying their higher education loans earlier by lowering the salary threshold for repayments to commence. Students will also be charged a loan fee at the start of their studies…

The government will justify the changes by highlighting that tertiary education delivers graduates a significant private benefit in the form of higher incomes…

Senator Birmingham has been working on a package of reforms for a full year, with the aim of reining in costs while maintaining an uncapped enrolment system that has seen the number of domestic students balloon from 800,000 in 2009 to 1.1 million last year.

Meanwhile, The Australian’s Adam Creighton has lambasted Australia’s higher education system, arguing that Australia’s universities have become bloated bureaucracies displaying low productivity, as well as offering far too many university places of dubious value:

Australia’s universities soak up billions of dollars in public funds — $9.5 billion a year from the federal government alone — but the return to taxpayers is low. Australia, a G20 country, doesn’t have a single university in the top 30 worldwide…

Last year there were 66,500 university administrators out of a total of 120,700 total staff. The number of academics classified as “above senior” — earning more than $150,000 a year — has increased by 5.1 per cent a year since 2007 on average — more than twice as fast as the number of ordinary lecturers, and much faster than the growth in the number of students in the same period (3.7 per cent)…

Students attend university at least as much to signal their ability to future employers as to learn anything. Degrees are too often a mechanism for employers to sort applicants. This has become remarkably inefficient. The flood of additional students has put pressure on academics to lower teaching quality. Universities have long lost their role as bastions of truth-seeking. They are cash cows selling degrees of increasingly dubious value. The huge growth in foreign students reflects more their desire to learn English and receive Australian permanent residence than the superior quality of Australian education.

Last year 1.25 million people were studying at Australia’s universities, a more than 10-fold increase in the overall population share from 50 years ago. It’s hard to believe this is optimal…

Australia’s university system is a microcosm of a deeper more troubling phenomenon in rich countries: the explosion of high-paid relatively unproductive jobs.

I’m with Adam Creighton on this issue. Sadly, a university degree in Australia isn’t what it used to be. The uncapping of university places in 2009 has led to an explosion of students, which has devalued their worth – a form of educational ‘quantitative easing’.

Basically, Australia’s universities have turned into ‘degree factories’, whereby they teach as many students as possible to accumulate Commonwealth government funding through HELP/HECS debts. At the same time, quality of teaching, and students’ ability to secure subsequent employment, remain distant priorities.

This view is evidenced by the escalation of total outstanding HELP loans, much of which will never be repaid, putting increasing pressures on the federal Budget:

As well as the dramatic lowering of university entrance scores, suggesting that every person and their dog can now enroll for a degree.

Indeed, a recent Department of Employment skills shortages report showed there were more than 1 million domestic students enrolled with a higher education provider in 2014, including nearly 730,000 enrolled in a bachelor degree:

However, bachelor degree graduate employment outcomes are falling and are at “historically low levels”:

This view was reinforced by the Productivity Commission’s (PC) final Migrant Intake into Australia report, released in September 2016, which contained some worrying data highlighting the deterioration of university graduate outcomes, whereby achieving stable and well-paid employment has become increasingly illusive:

Education does not guarantee employment, and evidence suggests that it is becoming harder for recent graduates to find a job on completion of their education (Reserve Bank of Australia 2015). For example, the share of higher education graduates in full-time employment four months after graduation fell from 85.2 per cent in 2008 to 68.1 per cent by 2014 (figure D.3).

The 17 percentage point fall in the share of recent graduates in full-time employment from 2008 to 2014 has been matched by an 11 percentage point increase in the share of recent graduates in part-time employment and a 6 percentage point increase in the share of recent graduates not working.

Graduate starting salaries have grown more slowly than average earnings over a long period. In 1977, median starting salaries were equal to male average weekly earnings. By 2014, median starting salaries had fallen to 74 per cent of male average weekly earnings (figure D.4). This has coincided with an increase in the share of the population with bachelor degrees, from 5.8 per cent of the population in 1982 to 24.1 per cent in 2014.

As the supply of people with tertiary qualifications has increased, the market return on a qualification may have decreased…

Clearly, the diminution in monetary value of having a degree corresponds to steep rises in participation in higher education over the same period. An now the government wants to increase the cost of going to university, thus decreasing a university degree’s value even more.

So what is a better option for young people than going to university? My advice, for those that are suited, is to study a trade instead.

The Department of Employment’s most recent skills shortages report showed that “skills shortages” are far more widespread for technicians and tradespeople than professionals:

Because they are experiencing relatively few commencements and completions:

Therefore, if you want to improve your job prospects, as well as avoid sinking tens-of-thousands of dollars into a worthless degree, look at taking on an apprenticeship or going to trade school.

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