Greg Craven, vice-chancellor of the Australian Catholic University, has penned a driveling article in The Australian today moaning about the Coalition effectively ending the demand-driven university system:
Australia thinks of itself as a land of opportunity. Some politicians less so. Through its cuts to university places, the Turnbull government poses a major threat to national equality.
Forget the drivel these are financial cuts to fat universities, or the fantasy they constitute “reform”. This is a policy to keep qualified Australian kids out of university so Scott Morrison can drool momentarily over a larger surplus.
Because let’s be clear: some people reading this have kids they hoped would be nurses or physios who are now going to be cleaners or bit-workers. Congratulations.
The essence of this educational poison is it stops the so-called demand-driven system. This outrageous idea from 2012 said universities could enrol any qualified person in the degree of their choice.
This meant university education was opened up to thousands of socially disadvantaged, first-in-family and regional students. Simultaneously, the education level of Australia’s population soared, approaching that of our leading international competitors…
Of course, an objective assessment of the demand-driven policy would have found that it has massively oversupplied the economy with university graduates:
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Leading to poor employment outcomes, despite the massive cost to the Budget as well as university students:
For those who do complete their degrees, post graduation outcomes have been getting worse. Full-time employment rates for recent graduates have been declining, even as the Australian economy has continued to grow (figure 3.3). Many of those who do not work full-time are not in that position by choice, with the underemployment ratio among graduates at 20.5 per cent in 2016, compared with about 9 per cent in 2008. Graduate starting salaries have also been growing slower than wages across the broader economy (declining from nearly 90 per cent of average weekly earnings in 1989 to about 75 per cent in 2015)…
Further, over a quarter of recent graduates believed they were employed full-time in roles unrelated to their studies, to which their degree added no value. To the extent that someone without a costly university education could have undertaken these roles, this can then have cascading employment and income effects down the skills ladder.
Many employers are also not satisfied with the quality of recent graduates, with about one in six supervisors saying that they were unlikely to consider or would be indifferent to graduates from the same university…
University students are also not satisfied with the teaching in their courses…
As this site has argued ad nauseum, the uncapping of university places has delivered a form of ‘quantitative easing’ to the university sector, whereby universities have recruited as many students as possible in order to accumulate HELP/HECS funding. The entry bar has been lowered so far that actual tertiary entrance scores have plummeted, devaluing a degrees’ worth in the process.
The Australian’s Judith Sloan last week did an excellent job explaining the inherent flaws with the demand-driven system:
Let’s face it, the universities were never going to miss an opportunity to maximise their incomes.
The result is that anyone with a pulse can gain entry into a university course, notwithstanding that it is a known fact those with low school marks are much likelier to drop out than those with high marks. (Gosh, who would have thought?)
We are really selling our young ones a pup by pushing the notion that pretty much everyone should go to university.
Not surprisingly, the employment prospects and wage premium previously enjoyed by graduates have slipped alarmingly.
The proportion of graduates in full-time employment after course completion has slipped from mid-80 per cent to close to 70 per cent. A recent Treasury paper notes “workers with a university education had higher wage growth than those with no post-school education over the period 2005-10 but have since experienced lower wage growth than individuals with no post-school education”. The latter gap is more than 1.5 percentage points a year for the period 2010-15.
And if this is not bad enough — and recall that university students end up being saddled with debt whether or not they complete — the system of vocational education basically has fallen into a complete heap as more young people opt for university rather than a trade or other VET qualification.
The idea behind demand-driven enrolment was that students are better able to gauge what is in their interests rather than bureaucrats determining course numbers. But here’s the thing: the taxpayer also should have a say in this equation.
In most countries, an assessment is made of how much taxpayers should stump up for university tuition and that provides the basis for a cap. It can be a generous cap or a miserly cap. But it is completely legitimate to limit the amount of funding for university tuition, given the high opportunity costs involved (spending on alternatives such as health, defence and the like or returning the funds to taxpayers).
Sloan’s point about vocational education is important. While funding for universities has exploded, vocational education has suffered:
And yet that is where Australia’s biggest skills shortages lie:
Precisely because apprenticeship and trainee commencements and completions have collapsed:
As such, employment outcomes are much stronger in the trades, reflecting the relative undersupply:
In short, Australia is spending way too much on university and not enough on vocational education and training (VET).
Accordingly, the Government should divert funding away from universities towards publicly-run TAFEs, which according to the 2016 VET FEE-HELP Statistical Report, offer lower course fees and have much higher completion rates than private (rorted) VET providers.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
