Labor to restore failed demand-driven university system

By Leith van Onselen

Late last year, the Turnbull Government implemented university funding reforms to make it harder for students to access the Higher Education Loan Program (HELP) for courses that have poor employment prospects, thereby effectively ending the demand-driven university system established by the Gillard Labor Government.

Over the weekend, the federal Labor opposition promised to restore the demand-driven system by funding another 200,000 university places at a cost of $9 billion over the next decade. From The Australian:

Federal Labor will spend nearly $9 billion in the next 10 years to cover an extra 200,000 univer­sity graduates over the decade to fulfil its promise to abolish the cap on bachelor degree numbers that the Turnbull government imposed in December.

Labor has also promised a boost to TAFE colleges, saying it will remove upfront fees for 25,000 students a year in key trade and vocational courses.

It has budgeted $473 million over the next 10 years for TAFE, including removing upfront fees for four years for a total of 100,000 students…

The $9bn promise on university funding draws a clear distinction between Labor and the Turnbull government, which in December froze university course subsidies for each institution during this year and next at their nominal 2017 level, without inflation adjustment.

The government says from 2020 onwards when the freeze ends, funding increases to universities will be based on graduate outcomes and population increases.

Education Minister Simon Birmingham yesterday said Labor was “throwing money around like confetti” and making big promises without substance.

An objective assessment of Australia’s higher education system and Labor’s demand-driven policy shows clearly that it has massively oversupplied the economy with university graduates:

Leading to poor employment outcomes, despite the massive cost to the Budget as well as university students:

As well as a massive increase in outstanding HELP debt, much of which will never be repaid:

Meanwhile, this heavy oversupply of university graduates has unambiguously pushed down wages:

These points were acknowledged in a recent Productivity Commission report:

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.

Moreover, 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). And while Labor’s pledge to increase TAFE funding by $473 million over the next 10 years is welcome, it pales into insignificance against the $9 billion pledged to the already heavily oversupplied university sector.

Labor should, therefore, divert funding away from Australia’s bloated universities towards our heavily neglected publicly-run TAFEs.

Such a policy would help the working class far more than shunting them into expensive dead-end degrees.

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