7 APRIL 2016
PROFESSOR STEPHEN PARKER
UNIVERSITY OF CANBERRA
Thank you Chancellor.
Ladies and gentlemen, I’ve said quite enough in this ceremony already, and in the previous seven this week. I’m a bit over the sound of my own voice, as my colleagues must be too.
But this, as you have heard, is the last ever such ceremony I will attend as a Vice-Chancellor, and I was asked if I would accept the honour of giving the graduation address as well.
I would like to focus on the kind of world that our graduates will be moving into. I am going to make some comments about the pace of change in the world that they are entering and finish with some comments about a challenge that we will all face if we feel strongly about social justice.
The pace of change
It’s become a cliché to say that the pace of change in the world is increasing. But it is much harder to grasp the enormity of what I think is coming our way. It’s not just fast, it’s big.
Now, history is littered with thoughtful people getting things completely wrong when it comes to change.
In 1825, one of Britain’s leading engineers said that the idea of a train travelling at over 30 mph was preposterous (but it happened within 5 years).
In 1901, Wilbur Wright said “man will not fly for 50 years”. He and his brother Orville actually accomplished it within two.
In 1927, H.M Warner asked “who the hell wants to hear actors talk?” in fact, almost everyone did, as he and his brother found out with their Warner Brothers’ talkie film The Jazz Singer.
In 1943, Thomas Watson, the chairman of IBM, said “I think there is a world market for maybe five computers”.
And it all seemed perfectly reasonable at the time, from clever and informed people, speaking about their own area.
The common theme here is how we can underestimate the imminence and impact of technological change.
As one 19th century writer put it, in the language of the time: “it is difficult to get a man to understand something, when his salary depends upon his not understanding it”.
The late, great Douglas Adams – author of The Hitchhiker’s Guide to the Galaxy – said that there are three types of technology.
There is the technology invented before you were born, which you don’t think of even as technology – it’s just normal.
There is the technology invented during your life but before, say, you were middle-aged: such as for us the internet or the mobile phone, which you kind of like, and which makes you feel modern and hip.
And then there is the technology invented after you are middle-aged, which you regard as completely pointless and simply makes you angry. I know people who don’t use Twitter but who are just angry that it exists.
Well, I’m now going to take the same risk of getting things completely wrong or showing my age.
I think we are only at the dawning of the digital age. I think it has barely begun. As machine intelligence and automation really develop, there will be massive disruption to the workforce and to society.
Two scholars from Oxford University have examined how susceptible jobs are to computerisation. They concluded that within 20 years near half of all the current jobs in the USA could be automated away.
Last year, The Foundation for Young Australians released a report called “The New Work Order” with some similar and startling conclusions. Seventy per cent of young people currently enter the workforce into jobs that will be radically affected by automation.
3d printing, or additive manufacturing, will collapse many industries. If cosmetics, for example, mainly have the same underlying paste, why won’t we just create our own in the bathroom, adding the colour and scent that we choose.
If pharmaceuticals can be printed, once out of patent why do you need a pharmaceutical company. Just make them yourself.
And 3d printing on the nanoscale is on its way – this is 1/80,000 of the width of a human hair.
Imagine microchips on this scale woven into everything; into pillows in hospitals giving feedback about vital signs; into sports gear, whatever. The internet of things. In fact, almost anything can be made “smart” – except perhaps some of the occupants of this building.
Common to all this is the taking out of the middle, and the creation of direct links between suppliers and consumers, professionals and clients, information and its end-user.
The new economy is relatively weightless. This means that weighty institutions, whether they are political parties, universities, the Encyclopedia Britannica, can all fall, partly because of the democratising power that digital communication can bring.
A challenge to us all
Opinions will differ as to who will be the winners and who the losers from all this massive change, and in particular whether the winners will out-number the losers.
It is very possible that all of today’s graduates will be winners because although you have worked hard and have talent, you have also been able to access a good university, with a rising reputation.
But we can’t stop there. Only 30% to 40% of young people go to university. We can’t embrace a world where 60% to 70% are increasingly left behind. Furthermore, a young Australian who goes to university today is over four times more likely to have a parent who went to university than one who does not. Higher education is at risk of becoming a form of inherited advantage.
So the second part of my address is about the society we are in danger of settling for.
Graduates, you may have thought that your days of lectures were well and truly over. Well not quite, but you don’t need to take notes. I need to introduce you to the Gini coefficient.
Broadly, if all the income in a society were owned by just one person the Gini coefficient would be 1. If it were all shared absolutely equally the coefficient would be zero. Therefore, the closer the coefficient is to zero, the more equal is the society, in terms of income distribution.
Australia’s Gini coefficient has risen in the last twenty years and it is now above the OECD average; in other words we are becoming more unequal in terms of income, over time, and compared with similar economies.
If you look at total wealth rather than income, the picture is even worse, with the wealthiest in Australia owning massively more than the poorest, and with the gap increasing not decreasing.
Opinions will differ about all this, but most people agree that whatever inequality is out there, we want there to be equal opportunity; we want social mobility. We want people to be able move up in the world and not be held back by accident of birth, inherited disadvantage or events beyond their control.
Unfortunately, it seems that social mobility is stalling in Australia. People born poor are likely to stay poor, with limited exceptions. People born into affluence will stay in affluence, with very limited exceptions.
More than anything else we have believed in the recent past that it was education that would break this cycle, and there have been periods in modern times when that has definitely been true.
But the school system is very uneven. Children from schools in poor areas are much less likely to go to university.
Higher education is becoming more expensive with graduate debt levels rising.
Within the last two years the government has tried to pass laws which would cut 20% from university budgets and take the ceiling off student fees, with the likely consequence that fees would rise by possibly 300%. I was the only Vice-Chancellor to oppose this publicly, and the proposals were defeated twice in the Senate.
Something may come back in next month’s budget – we are being softened up for it in the media this week by misleading stories about unpaid student debt (misleading because the problem is really in vocational education not in higher education).
But the full deregulation package will be back after the next election, unless thwarted by the electorate. That is, a 20% cut to government funding, an opening up of places and loans to the private sector, and then a deregulation of the fees that universities can charge.
Just before the last election the previous Prime Minister announced there would be no cuts to education, a promise which he attempted to break within months. The question will now arise how one can believe that a cut would only be 20% if the Government is returned to power. Why wouldn’t it be 40% or more? That’s the problem with breaches of promise. The replacement promises aren’t believed.
I will no longer be in a position to influence things but I hope this university will do all that it can to ensure that education remains available to everyone with talent and commitment. Our job is not to groom extra privilege onto the already privileged. It is to transform people’s lives through the power of education, to kickstart social mobility again and put Australia back on track as a fair society which is not run by elites in the interests of elites.
If tumultuous change is coming our way through technology and global forces, let’s redouble our efforts to create a fair society where it is talent and effort, not privilege, which distributes the rewards.
I have said my bit, but I should finish on a different sense of the word privilege. It has been my privilege to serve as the Vice-Chancellor for over nine years. We have come a long way, but as with any complex institution, we will always be a work in progress.
I would like to thank the Chancellor, Tom Calma AO, the first Indigenous man to be Chancellor of an Australian university, previous Chancellors John Mackay and Ingrid Moses, members of the Governing Council, colleagues (academic and professional), the ever-cheerful graduations staff, and finally all the students, who are the lifeblood of a university.
During my time I am told that 25,000 students have graduated. I have seen a lot pass before me on the stage. I’ve seen the bold and confident. I’ve seen the shy and tentative.
I’ve heard some amazing speeches on this stage. I have seen some amazing students who have achieved against all the odds.
I’ve seen an amazing range of shoes, from sneakers, to “sensible”, to what looked more like scaffolding than footwear at all.
As a University of Canberra graduate I know you will be successful, but I hope you use your success to make your country a fair country.
Thank you for your support. Good luck to you all.
As the late two Ronnies said, it’s goodnight from me.
Below is a paper I’m presenting tonight at the TJ Ryan Foundation, Brisbane
INEQUALITY AND HIGHER EDUCATION: A CLASS ACT
PROFESSOR STEPHEN PARKER AO
VICE-CHANCELLOR, UNIVERSITY OF CANBERRA
PAPER PRESENTED TO THE TJ RYAN FOUNDATION
16 FEBRUARY 2016
Thank you for inviting me. I am proud to present to the TJ Ryan Foundation, and to have been invited to do so by a former Vice-Chancellor of my University, Professor Roger Scott. Whether or not TJ Ryan would have agreed with what I say, I hope he would have agreed we need a debate about it from a socially progressive point of view.
Exactly 50 years ago, in February 1966, The Beach Boys began recording the song which became “Good Vibrations”, the embodiment of modernist optimism.
Two months later, middle England was adjusting to a new style of comedy which poked fun at the world that was passing, and ushered in biting satire; such as the one and a half minute gem on the BBC programme The Frost Report, where John Cleese, Ronnie Barker and Ronnie Corbett performed the now-famous Class Sketch, about who looks down on whom.
Around this time, the UK, the US, and a little later Australia, were welcoming upbeat reports urging the expansion of higher education.
Gary Becker’s human capital theory is catching on. Merit will create the good society; and education, particularly higher education, will develop human capital and provide the equality of opportunity which will drive it all.
In Australia, the pound is replaced by the dollar, the marriage ban is being removed, people are gearing up for a referendum in the following year to recognise Indigenous people, and the federal government is planning to build the first College of Advanced Education in Canberra, of which Roger Scott became principal and which is now the University of Canberra.
The gap between rich and poor is to be smaller and those at the upper end of income and wealth distributions will be there irrespective of who their families were, or where they were born, or whether they were men or women, black or white. If someone has natural ability, combined with a commitment to study or training and working hard, they will join the meritocratic class.
For the first half of those 50 years it looked like it was working, and it really was working for some. But at the end of this period, it is a different picture in those countries, although not all countries in the world.
Here inequality is increasing, and opportunity is becoming skewed towards the already fortunate; social mobility is stalling, if not reversing.
So jump forward half a century from Good Vibrations and imagine the following.
An Australian Government decides to take the cap off domestic student higher education fees and allow universities effectively to charge what the market will bear. It does so in the belief that an up-front loan scheme blunts the price signal to an age cohort largely comprising 17 year-olds, many of whom think they are immortal and for whom even being thirty years old is inconceivable, let alone reaching average weekly earnings and paying off a debt.
Universities publicly or privately resolve to do exactly that – they will set their fees as high as their own market will bear – safe in the knowledge that under the loan scheme all the money is advanced to universities at the outset, so that if its graduates never repay their loans that is no skin off the university’s nose.
As a form of equity measure the government proposes a scholarships scheme which would have as one consequence the third lowest SES quartile subsidising the bottom quartile.
The Government knows it will be borrowing at the long-term Bond rate the extra funds it will have to advance to universities. But in the hope of overcoming opposition it agrees not to charge graduates the same rate of interest it is paying, and settles for CPI. (Presumably it also hopes that repayment default by graduates will not rise in line with higher debt levels.)
And to stretch your credulity even further, imagine that any increase in tertiary fees will in itself contribute to the Consumer Price Index so that all payments linked to CPI will also go up, such as the Age Pension – so senior citizens will receive more money because graduates are incurring more debt. A great result, but odd.
Prior to the election of the Abbott Government, I expect your reaction would be that no government could possibly be so daft. The whole thing would cost far more money than it could save, at least some universities would make hay whilst the sun shone, Treasury would have to step in at some point and stem the outflows, but in the meantime a few annual cohorts of graduates would be saddled with huge debt later in life.
This of course is what was actually proposed in the 2014-2015 period, along with the stinger that the Government’s own contributions to university places would be reduced by 20% so as to nudge universities into the mindset of putting their tuition fees up, if only to stand still.
Universities Australia supported the proposals. All except one Vice-Chancellor – to my surprise, me – supported the proposals. The “reforms” were defeated in the Senate because the ALP, the Greens and some cross-benchers voted them down. I haven’t attended a meeting of UA since.
My assessment is that if they had gone through, the proposals would have greatly benefited a small number of universities. This would have flowed from what those universities have inherited over the generations, where they are located and the elite connections they enjoy. They could have put their fees up by 200% – 300%, perhaps more, before price sensitivity cut in, if it ever did.
The changes would have moderately advantaged some other universities because of their middling advantages in life and because of the hard work they would undoubtedly have put in to turn the reforms to their benefit. They could have put their fees up by variable amounts according to their understanding of their local markets and done quite well if they played their cards right.
The changes would possibly have disadvantaged remaining universities because of their lack of family history, where they are located and their absence of elite connections. They might have put their fees up a little, but with their more established competitors racing ahead in marketing, facilities, research rankings and so on – due to their new-found wealth – lower rung universities would increasingly pale in comparison. In University-land, the gap between the rich and poor would have widened further.
Despite it being shocking public policy, it is easy to see why the changes were strongly backed by the first group; the big winners. They would have become even more elite. They would rationalise it all away due to a sense of inherent worth (or “innate breeding” as it was put in The Class Sketch you saw, coupled with a constant desire for money) and they would conveniently screen from their minds the advantages conferred by their origins, by successive generations of tax-payers’ support and by their current rankings status; paid for with other people’s money.
I can also see why some aspirant universities supported the changes. If it all worked out there was a chance of real extra money for a while, at someone else’s expense. They would rationalise it all away because it fits with a view of the world that even those not born with a silver spoon in their mouth can get on in life if they try hard.
I can’t actually see why most of the remaining universities supported the changes. Perhaps they weren’t seeing things clearly or perhaps they just trusted that their betters knew what was good policy. If their betters told them that markets are now fair and functional, and that regulation is just so “yesterday”, then surely there must be some factual evidence for this somewhere.
Of course, I have deliberately framed this account using language which evokes the standard description of a class system. A few benefit because of their inheritance, location, status and connections. The middle might or might not benefit: some move up and some move down over time. The lower end occasionally benefits, enough to provide some legitimacy to the social order, but by and large they don’t see things clearly (remember good old false consciousness?), or have just enough hope that life will improve to prevent them from rebelling against the social order. And sometimes life does improve, but by and large it doesn’t improve as much for them as for others, so relative disadvantage deepens.
In the words of that great band, World Party, how could it come to this?
In the remainder of this lecture I want to examine what our university system is becoming through the lens of social class. I will ask the uncomfortable question whether we have become agents promoting a divided society rather than reducing the divide between haves and have-nots. I will ask whether a corrosive class system is hardening amongst Australian universities which will further stratify income and wealth distributions in society as their graduates go off into their allotted stations in life, thus reversing intergenerational mobility and stretching the gap between the have-lots, the have-somes and the have-nots.
To put it in a nut-shell, in the last 50 years higher education has expanded, and so too has social inequality. Suppose there is a causal connection and by ignoring it we are becoming complicit?
I will finish with ten proposals – some controversial – which would help. And in case the thought of ten proposals is just too much to bear, I assure you I will finish on time. I have, however, written a full version of this paper where I bring in more evidence and arguments than I can do here.
“I DREAM OF GINI”
Everywhere we look at the moment, if we wish to look, there is material about growing inequality in most developed countries, including Australia. Thomas Piketty’s book Capital In The Twenty-First Century is a best seller. The OECD produces reports about it regularly, the Australian Research Council funds a centre of excellence about it, the super-rich attendees at Davos say it isn’t good even for them, think-tanks and activist charities like Oxfam rail against it.
“I Dream of Jeannie” was a TV sitcom first shown 50 years ago, epitomising how we could luxuriate in dreams of other lives. Under no circumstances should it be confused with the Gini coefficient, named after the Italian statistician and sociologist, Corrado Gini. If all the income of a group were shared equally, there would be perfect equality, and the coefficient would be 0. If it were all owned by one person (“perfect” inequality) the coefficient would be 1. The closer a country is to 0 then the more equal the income distribution. It is a crude summative measure, and disputed from different perspectives, but it has impact and it enables international comparison.
In the last twenty years, Australia seems to have been around the OECD average, although latterly it has been above it: that is, it has been less equal.
If one takes quintiles rather than a single coefficient, Australia does not fare well.
It has not always been like this in Australia. In the post-war era incomes at the bottom were growing faster than incomes at the top, and male income inequality dropped from the early 1940s to the late 1970s.
But for the last thirty or more years, income inequality has been rising, with the income share of the top 1% doubling and that of the top 0.1% tripling.
Around about 1980, there started what Tony Atkinson has called The Inequality Turn. This was the Reagan-Thatcher legacy and it saw the rise of the financier class, now holding positions right at the top of society, including Australia, to whom “disruption” is a hip word rather than a simplistic generalisation. Andrew Leigh claims “inequality is not yet at the levels that prevailed in the 1910s, but it’s close.” Close to 1910 levels!
Wealth inequality has been growing faster than income inequality, once the GFC period is smoothed out, and is considerably worse than income inequality in Australia. The average wealth of a household in the top 20% wealth group is around 70 times the average wealth of a household in the bottom 20% wealth group. The top 10% of households own 45% of all wealth whilst the bottom 40% of households own just 5% of all wealth. Presumably the fuel for this is continuing, because today’s income inequality will be tomorrow’s wealth inequality in the absence of measures to counteract it, such as estate duties.
The arguments that too much inequality is bad are consequentialist and non-consequentialist.
I can’t put the consequentialist ones better than ACOSS has done recently:
Excessive inequality in any society is harmful. It is harmful to the ability of people to participate in social and economic opportunities, and it undermines social cohesion. Excessive inequality is bad for the economy. When resources are concentrated in fewer hands, there is a reduction in economic activity. Fewer people are starting up businesses, buying houses and purchasing goods and services. More people become dependent on government intervention. Excessive inequality is ultimately unhealthy for democracy. Money and power matter in terms of who in society gets heard, who can participate, and whose interests are adequately protected.
Leaving consequences aside, too much inequality is bad in itself because, when explained, it offends most people’s sense of justice. So does the Ultimatum Game, where Player A is given $100 and told they can offer any share of it between $1 and $100 to Player B, who either has to accept whatever is offered or get nothing. Rationally, Player A should offer $1, because they know Player B would still be better off with $1 and so Player B should accept it, but in repeated experiments $25 seems to be the cut-off below which Player B says they would rather get nothing. Intuitively it is an affront to be offered less. We may not want perfect equality but we don’t want too much inequality either.
But it is bad for other reasons because of its effect over time. The greater the inequality in a society then the less social mobility there is across the generations. One’s circumstances at birth have too much influence on one’s life chances: graphically described as The Great Gatsby Curve. This is caught neatly by comparing the AFL with the English Premier League. Resources are spread more evenly amongst AFL teams than EPL teams, and more “surprise” results occur in the AFL. (Even Leicester City’s baffling success this season in the EPL can be explained by a wealthy Thai owner.)
Recently, scholars at the University of Queensland, looking at data from the Household, Income and Labour Dynamics in Australia Survey (HILDA) and the Longitudinal Surveys of Australian Youth (LSAY) found that whilst typically Australia has had moderately high intergenerational mobility, as measured by what is called intergenerational earnings elasticity, there is a declining tendency after 2011. This is consistent with work by the National Council for Vocational Education Research (NCVER) analysing data from the LSAY which suggests that absolute education outcomes are improving but in relative terms there is little evidence of intergenerational mobility. In effect people might be moving up in the world but they do so in line with their circumstances of origin.
As it has been put recently, “Australia’s current social mobility is actually delicately propped up”.
“I’M A BELIEVER”. OR AM I?
In October 1966 The Monkees recorded Neil Diamond’s “I’m A Believer”. Where I’m heading with this is a shift in personal position. I still obviously believe in it, and have given over most of my working life to it, but I’m wondering whether it has run away with us, has burst its banks, and in the course of doing so is swamping those who do not have access to it.
A standard reaction to increasing inequality is to recommend further investment in education. Piketty, for example, argues that “the best way to increase wages and reduce wage inequalities in the long run is to invest in education and skills.” My reaction to this is yes and no.
There is so much evidence of educational attainment being boosted by parental wealth and school location, that investment not well targeted could exacerbate the gap between rich and poor.
Tertiary education sits on top of the school system. Year 12 results are strongly associated with the SES of the school and parental mix. No amount of tertiary reforms will work if a school system is not doing a moderately good job of counteracting the effects of birth and circumstance.
Likelihood of attending university is linked to parental education, which in turn is linked to past advantage. Jenny Chesters’ analysis of HILDA data shows that the “likelihood of graduating from university is positively associated with parents’ education, net of the effects of sex, birth cohort and type of school attended. Males with university-educated parents were three times more likely and females with university-educated parents were four times more likely to graduate from university than their peers with lower-educated parents”.
Australia is around the middle of the pack in this, according to Simon Marginson.
Low SES participation in universities has risen, whichever of the slight variants in definition of low SES one uses, but my interpretation of the data is that the rise has been achingly slow and may have run out of steam. (Parity would be 25%.)
LSES participation by postcode (2006 Census)
LSES participation by postcode (2011 census)
LSES participation by SA1 measure (2011 census)
We now have semester 1 data for 2015 and can compare with semester 1 in 2011. In 2011, 15.32% of all domestic undergraduate students were low SES. By semester 1 2015, this had only risen to 16.08%. Admittedly this is of total students so there may be a pipeline effect to show up from rising low SES commencers (the access rate), but it is a small gain for a massive amount of money and strain to the system.
I suspect a reasonable amount of the increase is in Indigenous students, who will be over-represented in the low SES numbers. They rose by 3,683 students, or 37%. (This is one ray of sunshine in an otherwise depressing picture revealed by last week’s Closing The Gap report for 2015.)
The annual percentage increases for both groups are interesting. For Indigenous students they are 6.4% (2012 over 2011), 9.9% (2013, the peak year of increase), 8.9% and 7.6%. For low SES they are 5.8%, 7.7% (2013), 4.7% and 4.1%.
In both cases 2013 was the peak year of increase and it is coming down now.
I think the growth will peter out because without measures positively to boost academic attainment in schools their subject marks will be too low.
My conclusion is that expensively, and possibly building up trouble for ourselves, we may have increased low SES attainment rates by perhaps 2% at most when all this settles down.
These of course are real people, with proud mums and dads, and their lives may be changed immeasurably for the better, but when we only focus on the exceptions we lose sight of the norm.
So back to my central question, of whether I am still a believer.
Either higher education is:
Well, I don’t think it is irrelevant, at times it is improving, but at other times, including now, it is a mix of restraining and worsening.
It is restraining because there is an increase, albeit slow, in low-SES participation, and this will be transformative of those students’ lives.
But it is worsening in at least two ways.
First, if the economy increasingly rewards graduates, and only 30% to 40% of young people go to university, then over time they will tend to move ahead of the other 60% to 70%. A reasonable benchmark is that the rate of return on education is 10% for each year of study. When tertiary education years are compounded, graduates are likely to earn 35% to 45% more than their non-graduate peers.
Thus, income inequality increases, with the affluent accumulating more property and superannuation, which they pass onto their children, so that wealth inequality increases. The 30% to 40% who do go to university are by and large those already unfairly advantaged in the social system, thus embedding structural inequality and making it positively harder for the disadvantaged to compete in life on merit. Remember I’m measuring the gap, so whilst universities are certainly helping some poor people, they are helping the affluent by more and so they are in this sense a worsening force.
Look at the following graph, which if valid, may be profound, by a leading scholar in social mobility.
What this may show is that the higher returns there are to “schooling”, which includes tertiary education, then the lower the social mobility, with the US the worst in these comparators. Possibly this is because unequal access to education repeats itself across a generation and the more the education premium the more that graduate parents can invest in their children’s education.
So one way in which we are unwittingly part of the problem is because we belong to a system where educational qualifications increasingly divide the population. But we didn’t create the system. We don’t control the tax-transfer system, set the minimum wage or create the deep gravitational waves that drive global capitalism.
The second way in which we are a worsening force is, however, under our control to some extent.
This relates to the internal stratification of the university sector.
Parental education has typically had an influence not only on whether a child attends university but also on the type of university attended. If one parent went to university then it is more likely that the child will graduate from a Group of Eight research-intensive university. When type of school attended and pathway into university are included, parents’ education no longer of itself predicts type of university but parents’ education predicts type of school and likelihood of completing secondary school, so it comes together.
Low SES students are distributed unevenly amongst different types of institutions, which goes to my point about a class system within the university sector. Below are commencing student numbers, not total participation, related to the group to which universities belong. Group of Eight universities have the lowest percentage of low-SES students. The distributions do not change much between 2007 and 2014. Much of the change is attributable to regional universities, who do most of the heavy-lifting in improving access to higher education, followed by the outer urban universities. The inner urban universities (Group of Eight and Australian Technology Network) are in this sense the most elitist, although the postcode method distorts things.
Domestic Undergraduate Commencing Students from LSES Backgrounds
|Network||% LSES (postcode measure) (2001 SEIFA) 2007a||Low SES (postcode measure) (2011 SEIFA) 2014||Low SES (SA1 measure) 2014||All Commencing Domestic Undergraduate Students 2014||% LSES according to 2011 SEIFA Postcode Measure 2014||% LSES according to SA1 Measure 2014|
|1960s & 1970s||21.1%||12201||10633||61029||20.0%||17.4%|
So what is going on and why the somewhat melodramatic tone?
I take a cyclical or dynamic view of the continuing race between technology and the economy on the one hand, and education on the other. When technological and economic change accelerates, governments expand higher education to upskill the workforce. It seems that only when demand from the upper and middle classes has been satisfied does access by lower class people expand (the so-called “maximally maintained inequality theory”). As Jenny Chesters puts it, only when the privileged class have reached the saturation point in education will it then reach down to the less privileged, if the places exist. However, if the rich dominate the elite institutions this will accentuate and entrench hierarchy amongst places, moving the rich relatively further up the distribution.
And then when the next phase of the cycle occurs and higher education expansion runs ahead of technology (which is arguably the case at present, with declining graduate employment rates and starting salaries) the premium on a degree declines and competition for prestigious places intensifies as privileged elites seek to consolidate their position in a toughening market. They pay for the most expensive schooling, secure access to the most prestigious universities and if necessary invest in graduate study.
Then, when technology takes off again, those elites are best placed to take advantage of it, and divergence increases. And if the very form of economic change is in itself driving inequality, that stratification is further entrenched.
Like a blood pressure balloon, with each squeeze of the hand the pressure increases but when the hand pulls back at the end of each squeeze the pressure doesn’t come down again. It is a pump inflating inequality. I think we are in real danger of returning to a situation when the son or daughter of poor parents who lack tertiary qualifications has no realistic prospect of entering a prestigious profession or a secure, well-remunerated career. They might as well hope that they have a long-lost distant relative who leaves them all their money, or “marry up” if they can, (in that order) as in Jane Austen’s day.
In April 1966 The Beatles recorded “Taxman” as the opening track of the Revolver album. It picks up the realisation at the time that the Welfare State costs real money. None of the proposals below necessarily requires an increase in the higher education budget, although personally I think income taxes are too low and real political leadership would persuade people to vote for a more progressive taxation system if it were to bring about a better society.
If we are serious about negating the effects of birth and class to someone’s life chances through higher education, then we need to do more than tinker at the edges. Every proposal below will be confronting to someone in the sector; as will be my starting point.
The unholy trinity of tertiary entrance rank (ATAR or OP in Queensland) as the dominant selection method, research evaluation exercises (the ERA) and the quest for world rankings, in the context of global markets in education and plutocratic capture of policy agendas by elites, is a recipe for social disaster.
The ATAR is a gift to the media, enabling it to portray nuanced admission methods as hypocritical discounting, and persistently confusing a rank with a mark. So, if a newspaper wants to compare a generation of young Australians against each other, let them try to get hold of the results and come up with a valid method of ranking people around a vast country, with different backgrounds and taking different Year 12 subjects.
The ATAR could also become a real barrier to social mobility. If school attainment improves because the school system does, we would still have rank ordering and the pernicious optics of ATAR will make it hard for a university to admit a student with, say, an ATAR of 50 even though that student is much better educated than one with an ATAR of 50 a decade earlier.
I think universities should simply advertise the minimum subject marks they require for entry to a particular course, whilst requiring passes in a range of other subjects to ensure a general level of education (we could even call it matriculation!). These marks are already moderated. I don’t think we should be adding bonus marks at source, but there should be ways of students improving marks where they fall short: it should be the student that adds the bonus marks, however, by further study, not the university. I will come back to this.
The focus should be on those subjects relevant to the course of entry. Whilst I would like scientists to be imaginative, I don’t see why a student’s Creative Writing marks should help them get into Chemistry, which the ATAR system enables: it should be their Chemistry marks. We also need to do more work on admission tests, which occasionally flower and then seem to die in Australia, on portfolio assessment and old-fashioned interviews.
Basically, society is putting too many eggs in the basket of higher education. We need to offer alternative pathways to well-paid satisfying careers other than through universities. A beneficial consequence of this would be to bring the university sector back to people who not only want a good career – that is legitimate – but also feel that their formal education isn’t done yet and they have more learning to do, more literature to read, more ideas to explore.
Returning to the 1960s, where our story began, the last song that all four Beatles recorded together was “The End”, which contained McCartney’s couplet:
“And in the end, the love you take is equal to the love you make.”
If what goes around comes around, then aiding and abetting an increase in inequality will rebound on us. We will get the society we deserve: permanently divided. In an age of extremist ideologies, no one knows where things end up. If we keep playing the Ultimatum Game in social policy, some will say they would rather reject the $1 offer and find a living outside the law.
Universities are good at many things and make a huge contribution, as a recent Deloitte Access Economics study for Universities Australia has demonstrated. At times we have also made great contributions to social justice, but the times are changing around us. The forces that are creating greater inequality are making us accomplices, and unless we do more where we can, we start to aid and abet.
Simon Marginson in a reflective essay in 2015 wrote:
The lesson of the last fifty years is that higher education does not trigger egalitarian societies on its own, though it can facilitate them. We should set aside the old hubris that higher education is the principal maker of society, whether we live in innovation societies, or knowledge economies, or somewhere else. In aggregate, what happens with incomes, wealth, labour markets, taxation, government spending, social programmes, and urban development, are overwhelmingly more important. This suggests that as researchers into higher education we take a closer interest in the larger intellectual and policy conversation on inequality, especially by focusing on the junctions between higher education and other social sectors.
Universities Australia has called its 2016 Policy Statement, “Keep It Clever”. In 2017, I’d like to see “Keep it Fair” and a closer interest in precisely these questions.
Nor is there a moment to lose. With automation and more digital disruption heading our way, there will be some winners and many losers. If the members of each group are determined by their social origins rather than talent and effort, then truly the good vibrations of 50 years ago will cease.
 I would like to thank the following for their help with my thinking, for which I take full responsibility: Dr Jenny Chesters, Professor Anne Daly, Professor Bruce Chapman, Associate Professor Michele Fleming, Professor Diane Gibson, Adjunct Professor John Goss, Professor Michelle Grattan, Ms Alexis Johnson, Professor Peter Radoll, Professor Louise Watson.
 But see also Anthony B Atkinson, Inequality: What Can Be Done?, Harvard UP, 2015
 See J Greenville, C Pobke, N Rogers, Trends in the Distribution of Income in Australia, Australian Government, Productivity Commission, 2013 at 29 et seq.
 See “In It Together: Why Less Inequality Benefits All … in Australia”, OECD, 2015.
 R Wilkinson, K Pickett, The Spirit Level: Why More Equal Societies Almost Always Do Better, Allen Lane, 2009, p17.
 See Andrew Leigh, Battlers and Billionaires: The Story of Inequality in Australia, Redback1, 2014, 41.
 Above, 80-21.
 Inequality in Australia: A Nation Divided, ACOSS, 2015, 31.
 Back in discussion again, see The Australia Institute’s paper on Estate Duties, February 2015.
 Above, 8.
 See, for example, Miles Corak, Income Inequality, Equality of Opportunity and Intergenerational Mobility”, 7 Journal of Economic Perspectives, 2013, 79 at 82.
 Y Huang, F Perales, M Western, “Intergenerational Earnings Elasticity Revisited: How Does Australia Fare in Income Mobility?”, ARC Centre of Excellence for Children and Families over the Life Course.
 S Crosby, A happy country is a socially mobile one, The Conversation, 14 May 2014.
 Above, 313.
 I am grateful to my colleague Dr Michele Fleming, Dean of Students at UC, for collating these figures.
 Closing The Gap, Prime Minister’s Report 2016, Australian Government, 25.
 O’Malley calculates it as 3.8%, see B O’Malley, Leap in Indigenous access, general enrolment hits high, The Conversation, 27 January 2016.
 See, for example, R Cassells, Smart Australians, AMP.NATSEM, 2012.
 See Corak above, p87.
 In the UK this is now comprehensively documented from its Great British Class Survey and discussed in M Savage, Social Class in the 21st Century, Pelican, 2015, chapter 7.
 Because statistical methods change and university groupings evolve, there is a slight apples and oranges issue with this table, but it is broadly right.
 J Chesters, “Maintaining Inequality Despite Expansion: Evidence of the Link Between Parents” Education and Qualitative Differences in Educational Attainment”, Higher Education Quarterly, Vol 69, 2015, 138 at 141.
 Chesters, above, 142: “In order to maintain their advantage during this era of mass higher education, students from higher social classes need to enrol in higher-quality (sic) programmes in higher quality institutions and consider undertaking postgraduate study.”
 I include in this the Overall Position (OP) ranking in Queensland, despite some differences.
 A Norton, The cash nexus: how teaching funds research in Australian universities, Grattan Institute, 2015.
 The Times Higher Education, 24/31 December 2015, 37.
 J Chesters, “Within-generation social mobility in Australia: The effect of returning to education on occupational status and earnings”, Journal of Sociology, Vol 5, 2015, 385.
 L Ashley, J Duberley, H Sommerlad, D Scholarios, A qualitative evaluation of non-educational barriers to the elite professions, Social Mobility and Child Poverty Commission, 2015, at 6.
 John Lennon agreed that McCartney wrote this.
 Deloitte Access Economics, The Importance of Universities to Australia’s Prosperity, Universities Australia, 2015.
 S Marginson, The Landscape of Higher Education Research 1965-2015
Equality of Opportunity: The first fifty years, SRHE 50th Anniversary Colloquium, 26 June 2015.
 See in particular Committee for Economic Development of Australia, Australia’s Future Workforce?, CEDA 2015
There is much to be welcomed about “Investing In Our Economic Future”, the Australian Labor Party statement released today, 21 September.
Starting with a point that appears in the second half of the statement, Labor will initiate a targeted Green Paper-White Paper process to finalise the implementation of its reforms. Australia needs to be able to debate the detail of higher education policy, not be ambushed by sweeping reforms, or be told there is a crisis and that there is no choice. I welcome this return to order and orthodoxy.
I also support the proposal for a Higher Education Productivity and Performance Commission. I would not have welcomed a “buffer” body a few years ago, but if this is a way of taking the politics out of higher education and allowing decisions to be made based on reason and evidence then I support it.
I commend the intention to invest more public funding into higher education rather than keep looking to students and increasing their debt levels. Australian students already pay a higher proportion of the cost of their higher education than in other developed nations, and the taxpayer pays well below the average of OECD countries as a proportion of GDP.
We will need some time to work through the actual net impact of the funding commitments, and how they compare with today’s actual funding rather than the Liberals’ blocked 20% cuts, but at least the debate is now in the right place: how much extra can Australia invest in its future through its universities.
I welcome the proposal to increase the funding of the Tertiary Education Quality and Standards Agency. There will be a question about how this relates to the proposed Commission, but if Australian students are to be protected in a much-expanded sector, and Australia’s reputation as a higher education destination is to be advanced, we have to have a properly funded watchdog.
I can understand why Labor will want to make its extra investment deliver on policy objectives, and at the level of detail we have I do not have a problem with focusing on completions, provided it is through better support of students who do have the potential rather than funding pressure to pass students who do not.
Indexing funding by CPI will provide a level of certainty. In most years this is not as high as the Higher Education Grants Index but provided the indexation is not eroded by supposedly only-off efficiency dividends it seems a reasonable step: and universities do need to keep focusing on cost-controls.
Perhaps the most welcome aspect of this statement is that it offers a positive, egalitarian and optimistic approach to higher education rather than a divisive, scare-mongering one.
Below is an opinion piece I wrote for ABC’s The Drum, published today (16 March, 2015) You can also read it here.
The Government’s decision today to split the higher education reforms into separate bills, so that a 20% cut in teaching grants is to be debated separately from the deregulation of domestic student fees, helps us see more clearly what the agenda has been. Saving money for the federal budget was always secondary to the central goal of strengthening competition and private markets in higher education. I said last year that this was ideology in search of a problem and thus it has been shown today.
Let’s step back for a moment. Australia has one of the best university systems in the world. This status is not under any particular threat except perhaps from a direction which would be pointless to resist: massive investment by China in their system, including into a small number of potentially elite universities.
Australia also has some world-leading universities within its system. More Australian universities appear in world rankings than a decade ago, courtesy of the current funding system. It is true that some are overtaking others within the Australian group, which is no doubt causing great angst to some vice-chancellors. There is however nothing in the world-rankings of Australian universities to suggest a problem, let alone a crisis.
Australian tax-payers contribute one of the lowest proportions in the developed world to their universities, with the balance being picked up almost entirely by students who borrow their contribution from the tax-payer. Universities Australia in a submission to the Senate earlier this month estimated that in 2011 Australia ranked 30 out of 31 OECD countries for public investment as a percentage of GDP. There is no sense in which the tax-payer is being milked.
Universities Australia also argues that Australian universities face a long-term sustainability problem but since 1947 vice-chancellors have been arguing that they need more money (even whilst our system became one of the best in the world) and if public investment rose even to the OECD average our strength would be assured for a generation.
The main beneficiaries of fee deregulation will be Australia’s sandstone universities, The Group of Eight. It won’t be the tax-payer because amendments today and in December ensure that the system will cost more not less. Fees will go up, the Government will advance the full amount to universities by borrowing at long-term bond rate and but recouping the debts from students at the lower CPI rate. Tertiary fees are also part of CPI, so all government outlays linked in some way to CPI will go up as well. And as graduate debt goes up, non-repayment rates will also go up.
Younger universities, which have not yet had many decades of tax-payer dollars to build a strong brand, might benefit to some extent depending on their local market conditions.
Regional universities are thought to be the most vulnerable, but I’m not so sure. No sane private provider is going to move into these areas, except to pick any cherries that have not yet been picked. Regional universities have a de facto monopoly in many courses and could price them in the knowledge that local students would otherwise have to pay accommodation and other living costs in the nearest large city. If the regional universities also manage to extract an adjustment fund out of government it will be a masterful piece of manoeuvring.
As is to be expected from the introduction of more market forces in any sector, there will be winners and losers, or at least winners which benefit less than other winners, and the university sector will be further stratified from the traditional elites (to which the children of affluent families go) at one end to the open access, less-resourced campuses (to which other children go) at the other end.
The interests and views of the world will become so diverse amongst universities that their peak body Universities Australia will break up, unless perhaps Group of Eight vice-chancellors come to some meetings for a while as a form of noblesse oblige.
Tragi-comedy seems to have been averted today by the delinking of funding for the National Collaborative Research Infrastructure Scheme from the passage of the reforms. The fact that it was even contemplated shows how much the government wants deregulation of fees.
I can’t say how much, if any, of the reforms will now pass but when going to the polls next time the electorate might reflect on how a situation has come about that in March 2015, Parliament was debating measures under which universities would cost the budget more, students would pay more, policy was made on the run and none of it was foreshadowed when they went to the polls last time.
Below is a joint submission to the Senate Inquiry into the principles of the Higher Education and Research Reform Bill 2014, and related matters written by Ben Phillips from NATSEM and myself. You can also view it by clicking here.
SENATE EMPLOYMENT AND EDUCATION REFERENCES COMMITTEE
HIGHER EDUCATION AND RESEARCH REFORM BILL 2014
PROFESSOR STEPHEN PARKER, VICE-CHANCELLOR, UNIVERSITY OF CANBERRA
BEN PHILLIPS, PRINCIPAL RESEARCH FELLOW, NATIONAL CENTRE FOR SOCIAL AND ECONOMIC
MODELLING, UNIVERSITY OF CANBERRA
In this submission the authors address only one of the specific matters listed by the Committee: namely “alternatives to deregulation in order to maintain a sustainable higher education system”.
In our recent submission to the Senate Education and Employment Legislation Committee, on the revised provisions in the Bill, we make the point that the Bill as revised is worse for the taxpayer and the student than the status quo. Accordingly, in this submission the status quo features as the main “alternative”, along with some variants.
In summary, we come to the view that “the problem” for which fee deregulation is said to be the answer has been, at the least, exaggerated; that arguably it will diminish as a problem because higher education on current settings will consume a decreasing proportion of GDP; that there may be a case for some adjustments to the current settings – including being honest with the voter and expecting the tax-payer contribution to increase – but that policy like this cannot be made on the run and within the timeframes that have been imposed on this process.
The Status Quo
Most advocates of the reforms have sought to argue that the status quo is a “problem”, and many go on to argue for the specific virtues of deregulation and an increase in market forces in higher education.
Insofar as international benchmarks are concerned, one can argue that the glass is half full or half empty.
Up until the uncapping of student places in Australia, higher education revenue as a proportion of GDP has tended to be at the OECD average, and higher than the EU average, although the contribution expected from students to this revenue has been considerably higher than the OECD average.
Australia has tended to be in a cluster with other social democracies such as Finland, Switzerland, Belgium and France. The uncapping of places since 2012 will have increased Australia’s relative proportion, and the comparative data have not yet caught up, but we doubt that the increase will take us towards the top, for example where Canada sits.
The modern level of investment in higher education in Australia has produced a sector which has been ranked highly. If one takes the Academic World Ranking of Universities (AWRU) as a measure, Australia had 14 universities in the top 500 in 2004 but by 2014 it had 19. If one scales for the size of population or for GDP, Australia’s performance looks even better. In 2014 we would have been 4th in the world per 10 million of population and 5th per million US dollars of GDP.
If one takes as a measure the attractiveness of Australian universities to international students then Australia is similarly successful. In fact, if one discounts Switzerland because of its very small local population, scaled for size Australia would be first in the world.
There is no particular prospect of comparator OECD countries investing in their universities at markedly higher rates so as to leave Australia behind: so there does not seem to be a competitive threat looming from that direction. There is, however, a prospect of some large developing nations doing this. But if, say, China, with a huge population, wishes to focus on a small number of universities and help them move to the top, we would question whether it is sensible for Australian student debtors and the taxpayer to fund the defence of our relative position in rankings, when the absolute quality of Australia’s institutions is not going down.
In addition, as we will argue below, higher education revenue as a proportion of GDP will be falling not rising over the coming decades because of the ageing of Australia’s population, so we do not subscribe to the idea that there is a problem of cost pressures building up; or at least not a problem for which higher education should be made to suffer.
We conclude that the sense of there being an urgent “problem” may have been confected, but there is no doubt that uncapping places has been expensive, and more so than had been anticipated. Perhaps the consequences of uncapping are where one should start for other alternatives.
The Status Quo Adjusted
This heading is short-hand only for the idea that the current system is basically workable but needs some updating to reflect the fiscal situation and expansion of the sector.
If expansion of the sector has been more costly than expected, it is open to Parliament to increase student contribution amounts and reduce Commonwealth grants correspondingly or partially. It is broadly accepted that higher education produces public good as well as private gain, but no one can say with confidence where around the middle, the split really should be. At present students pay on average about 45% of the cost of their education (with wide disparities within the average) but the dividing line could be moved.
It is likely, however, that this would push us towards the bottom of the OECD in terms of the proportion of cost borne by the public. In other words, Australian graduates would be paying proportionately even more than their OECD counterparts. And it would come at a time when relative graduate starting salaries and employment rates have dropped considerably. In 2001, the median starting salary for a new graduate under 25 was 85.8% of average male earnings. In 2014 it was 74%. In the same period, graduates in full-time employment four months after completing had dropped from 83.6% to 68.1%.
The Status Quo Improved
One could however be more assertive about the benefits of higher education to society and the individual and make the case for the taxpayer providing more: in other words, being honest with the voter. Important background to this comes from Intergenerational Report data. A new report is imminent but on the 2010 data higher education will shrink as a share of GDP by 2050, from 0.6% to 0.5%. An important driver of this is demography. The population is growing, GDP will grow, but the cohort of typical university age people is not growing as fast. Put differently, the outlays are levelling off in relative terms and the headroom for increased resourcing is being created.
Another perspective is to look at past and future growth rates of undergraduate students. Between 1991-2001 places grew by 19%. Between 2002-2013 they grew by 29%. But the estimate for the decade 2013-2023 is growth of 11%. Due to demographic factors, and possibly saturation of the population likely to benefit from higher education, the big growth periods are behind us.
Alternatively, or in addition, some revisiting of uncapped places might be warranted, bearing in mind emerging data about attrition rates amongst lower ATAR entrants.
In 2009, 12% of offers were to students with ATARs below 50. In 2014, 40.6% of offers were to students in this range. According to Department of Education completion rate data, 49% of students admitted with ATARs of below 50 in 2005 had not completed by the end of 2012, whereas only 6.2% of those with ATARs between 95 and 100 had failed to complete. An attrition rate of nearly 50% for those in the lower half of the ATAR range is arguably unacceptable, from various viewpoints, including the fiscal one.
One could have a system of uncapped places, and therefore “place competition” between providers, down to a certain ATAR or equivalent, but a different approach below that level. If there were penalties for high attrition rates this could also make providers wary of expanding further below the threshold. If there were quotas of places for low ATAR students, perhaps linked to courses in areas of expected workforce shortage, this could provide the basis of rationing places to the group at highest risk of not completing. This kind of policy cannot be developed on the run, but has more potential merit, in our submission, than the provisions in the Bill. Whilst it is fashionable to say that governments do not get it right when they try to predict workforce needs, we do not accept that it is a wholly flawed goal. Who could doubt, for example, that with an ageing population we will need more health workers in the future?
More Radical Alternatives
A range of more radical alternatives could be explored systematically, including allowing some public providers to opt out of the Commonwealth Grants Scheme for coursework offerings, and moving to unregulated fees on what is currently FEE-HELP. The taxpayer contributions could then go further amongst other universities which wish to stay in the public system.
Restructuring through mergers and clustering in mini-systems could be explored: there are numerous examples overseas, including merging research universities into power-houses.
Shared services and common administrative platforms between universities could be considered, so that competition is based on academic performance rather than systems and processes.
Whether the status quo would look too bad at the end of all this examination would be an interesting question.
Below is a joint submission to the Senate Inquiry into the Higher Education and Research Reform Bill 2014 written by Ben Phillips from NATSEM and myself. You can also view it by clicking here.
SENATE EDUCATION AND EMPLOYMENT LEGISLATION COMMITTEE
HIGHER EDUCATION AND RESEARCH REFORM BILL 2014
PROFESSOR STEPHEN PARKER, VICE-CHANCELLOR, UNIVERSITY OF CANBERRA
BEN PHILLIPS, PRINCIPAL RESEARCH FELLOW, NATIONAL CENTRE FOR SOCIAL AND ECONOMIC
MODELLING, UNIVERSITY OF CANBERRA
The authors of this joint submission previously put in separate submissions to the Committee inquiry in relation to the original Higher Education and Research Reform Bill. We will not repeat that material here, but instead focus on some of the key differences in the current draft of the Bill: namely the restoration of CPI as the interest rate payable on HELP debts, a cap on domestic tuition fees linked, in effect, to the comparable international student fee, and the plausible impact of higher fee levels on typical student debts under the revised arrangements.
The Consumer Price Index
The abandonment of the proposal to charge HELP debtors the long-term Treasury bond rate is welcome in its own terms; particularly in relation to existing graduates. In its context, however, it may have major implications and subvert a central rationale for the reforms in the first place. A fundamental feature of Australia’s income-contingent loan scheme is that the Government advances the total tuition fee to the higher education provider and then recoups the student contribution over time. If fee flexibility is introduced, we believe the likely effect will be considerable increases in tuition fees. This is the international experience, and was in fact clearly in the mind of the National Commission of Audit in 2014 when it said that “a full review of the pros and cons around full or partial deregulation of university fees would greatly assist to inform future policy directions”.
If tuition fees rise substantially, so do Government outlays. If the Government is borrowing at the long-term Bond rate (which, in the foreseeable future it will be) but it is only charging back debtors at CPI there will ordinarily be a short-fall. When coupled with a likely increase in “default” by graduate debtors, it seems to us quite possible that the proposed funding scheme will become more expensive to the taxpayer than the current one.
We put “default” in inverted commas because by virtue of the simple operation of the HELP charging rates the higher the amount of debt the less likely it is that as many debtors, with repayments of between 2% and 8% of income, will clear the amount owing across their working lives. In addition, one would expect some increase in the number of graduates who are motivated to work overseas so as to avoid repayments, in the knowledge the amount owing is not rising in real terms but merely indexed to CPI.
On NATSEM modelling, a doubling of HELP debt over 2014 figures, and an increase of bad debt from 17% to 30% – both of which we think are plausible – would lead to an annual HELP budget of around $5 billion compared to $2 billion today, thus erasing future savings from lower Commonwealth grants to universities1.
More profound consequences are possible. Because tertiary education fees are part of the basket that makes up the CPI, increases in fees will increase inflation as defined by this index. And because many Government payments are linked in some way to CPI, the indirect effect on the budget could be substantial. We estimate that if tertiary education fees double in real terms this would drive the CPI up by 1.4 per cent and the consequential implications for fiscal outlays are significant and sustained: $2.1 billion a year on the above example. Aged pensioners will receive more pension because student fees are going up.
The Ceiling on Domestic Tuition Fees
The revised proposals do not allow a provider to charge a domestic student more than the amount charged to an international student (or Australian full-fee student) for the same or comparable unit, after deducting the Commonwealth contribution. Put the other way round, the provider cannot receive more in relation to a domestic student than it does for an international student. We think the basis for this proposal is perverse, and there may be perverse consequences in practice.
International student fees are affected by various factors not applicable to domestic fees, such as the exchange rate, trends in student mobility and shifting global competition between universities. The current evidence suggests that in postgraduate courses, where Australian students can be charged full fees, many institutions continue to charge higher rates to international students because the two markets are not particularly connected to each other and have different dynamics.
If now the Australian Government is willing to advance larger sums to universities for domestic undergraduate students, and those students are not price-sensitive due to the blunting effect of HECS, we think that domestic fees will tend to rise to the international fee level. And if a university senses that it could command still higher domestic fees, it can raise the international fee to provide the headroom. It then becomes a calculation of how many international students are lost as prices rise compared with how much more domestic student revenue can be brought in.
The Likely Effect on Graduates
NATSEM has revised earlier modelling in line with the adjusted parameters of the Higher Education Reform Bill. NATSEM has considered the typical repayment profiles for low, middle and high income graduates from 23 popular university courses. These repayment profiles were categorised by gender and provide analysis of expected prices under the existing policy and prices under the proposed legislation at ‘cost recovery’2 and ‘international fees’3 after the reduced government subsidy is accounted for.
With the return to concessional interest rates NATSEM does find that graduate repayments are reduced in real terms, as one would expect. The extent of the reduction varies depending on course, gender and income level. As an example, for a female teacher on a typical income her repayments are reduced from around $34,500 to $25,800 under a ‘cost recovery’ scenario, compared with $22,700 under the existing policy. Her repayment period is reduced from 13.2 years to 10.9 years, by virtue of the reversion to CPI, compared with 9.4 years under the existing policy. Under the ‘international fee’ scenario her repayments are significantly reduced from $60,700 to $43,000 and her repayment time is reduced from 21.5 years to 16.8 years
NATSEM has undertaken additional modelling on lower income (bottom 25th percentile) graduates. For lower paid occupations such as nursing or education the reduction in interest rates makes little difference to females as they rarely earn enough to reach the HELP thresholds. The lower interest rate does impact on lower income males where moderate savings are made.
Where graduates pay back only a small proportion of their HELP debt the impost falls on the government, and thus the taxpayer. The extent of that impost relative to the current fee scenario depends on the extent of price increases. NATSEM does not take a view on exactly where prices will fall but suggests somewhere between a cost recovery fee and international fee is at least initially likely. QUT and UWA prices are set for 2016 and these are suggestive of significant price increases that fall within that band. In the case of UWA they are towards the upper limit.
With regard to worst case scenarios the example of Veterinary Studies is worth noting. Concessional interest rates (CPI) reduce the expected repayments for female graduates (in 2014 terms) from $102,400 to $65,100 under a cost recovery scenario. Under the international fee scenario repayments are reduced from $152,000 to $120,900. Under the existing legislation repayments are around $49,400. The male results are not greatly different. For low income graduates, females do not make any repayments whereas males make similar repayments to median income male graduates.
A continued concern with or without concessional interest rates is the extended period of repayment for women. Under the current capped system most women would be expected to repay their HELP debt prior to having children (if that were to happen in their early 30s). Under higher fee scenarios this period of time extends well into their 30s and 40s and pushes up their already very high effective marginal tax rates where the impacts of personal income taxation, child care costs, and reduced family payments interact with increased working hours to severely diminish the incentive to return to work.
The conclusion we reach in this submission is that the revised proposals are better than the original ones for students, but they remain worse than the status quo for students. However, the revised proposals are worse for the taxpayer, not only than the original proposals but also than the status quo. Doing nothing would be better than plunging into the unknowable.
1 The current HELP debt costs for 2014-15 are estimated in the 2014-15 Federal Budget to be $1.38 billion. Our calculations are based on the assumption of the long-run bond rate of 5 per cent and CPI of 2.5 per cent which we estimate pushes this estimate up to around $2 billion.
2 That is, where the University increases tuition fees to make up for the lost Commonwealth revenue.
3 That is, where the University goes as high as it can legally go, but on the assumption that international
student fees are not deliberately raised so as to create further legal headroom.
Below is an opinion piece I wrote with Ben Phillips from NATSEM, published in The Australian on 18 February, 2015. You can also view it by clicking here.
WHAT, or whose, problem is the government trying to solve in its revised higher education reform proposals?
Last Friday at the University of Canberra a fascinating round-table forum brought some of the country’s most experienced higher education thinkers together to examine the evidence of “the problem”, and some possible solutions, under Chatham House conventions of non-attribution.
We heard that Australia has been spending about the same per student as social democracies such as Germany, Finland and The Netherlands, and that we are on about the OECD average. Where we differ is the proportion that students are expected to pay (through HECS): they already carry a far greater financial burden than most OECD nations.
When scaled for size as a country, Australian universities do remarkably well in world rankings. If we take those in the Academic World Ranking of Universities top 500, Australia comes fourth when scaled for population and fifth when scaled for gross domestic product. In 2004, we had 14 universities in that set. Last year we had 19.
Is something about to change dramatically, within Australia or globally, that should make us alarmed? In Australia, the answer seems to be no. In fact, higher education will consume a smaller proportion of GDP in the future.
The government’s Intergenerational Report showed in 2010 that higher education spending will take a declining share of GDP, falling from 0.6 per cent to 0.5 per cent by 2050. The ageing society is a key driver behind this trend, as the share of the Australian population aged 18 to 24 — the main demographic for higher education — falls from 9.8 per cent in 2011-12 to 8.3 per cent by 2050.
Australia will indeed face significant fiscal pressures in coming decades. However, these are largely related to health, aged care and the aged pension, which in combination increase as a share of GDP from 7.5 per cent to 12.8 per cent. The next Intergenerational Report, expected this month, is likely to show a small uptick in higher education spending due to the uncapping of student numbers, but the overall long-term projected trend is unlikely to be greatly altered.
Globally, there is indeed a sense that some other countries are investing heavily in universities and will somehow blast us out of rankings. But if a country with a huge population decides to invest in a relatively small number of universities to ensure they move to the top, is it seriously supposed that a small cohort of young Australians paying fees, borrowed from the taxpayer, should be called on to resist it?
If we deregulate tuition fees, the evidence elsewhere is that they go up considerably. The government was warned about this explicitly before the budget last year by its own National Commission of Audit, which added gratuitously that there was no clear evidence that higher fees would lead to improved student outcomes either.
But it isn’t only students who would be losers under the proposals. It is the taxpayer too. The abandonment of the long-term bond rate on HELP debts means the commonwealth will be advancing much more money to universities than in the past, and using borrowed funds that attract a higher interest rate than it is going to charge graduates.
HELP works well within a system where sensibly capped fees are shared between students and the government. Uncapping fees introduces a moral hazard where universities are guaranteed payment. HELP is not like a normal loan. Graduates repay only when earning above a threshold and there are no consequences for the university if the debt is not paid back. While graduates will take longer to repay their debts than at present, even under the revised bill it will be the government that faces much of the risk of higher student debt levels.
It gets worse. University fees are part of the consumer price index. We estimate that if tertiary education fees double in real terms this would drive the CPI up by 1.4 per cent. Many benefits and other government payments are linked in some way to CPI, so the consequential implications for fiscal outlays are significant and sustained: $2.1 billion a year on the above example. Aged pensioners will receive more pension (which is good) because student fees are going up (which is odd).
The strict meaning of a laydown misere is where the bidder in a card game plans to lose every trick. Is it possible that every player will lose from these reforms? No. We think the Group of Eight will benefit substantially. The effective cap on deregulated domestic fees is to be the international student fee less the commonwealth contribution for a domestic student. (This takes some effort to understand.) The Go8 can command much higher international fees, courtesy of decades of taxpayer investment, which a rising Asian middle class is willing to pay. These elite universities will therefore have the headroom now to model where they need to set their international fees to optimise their revenue from whatever student source. Which presumably is why they are advocating the changes so tenaciously.
As former vice-chancellor Don Aitkin said in a blog recently: “Universities would like more money. They have talked about ‘crises’ since 1947, and the crises are always about insufficient funds to do what they want to do.” So it may be wise for the Australian voter not to take at face value everything that vice-chancellors say, individually or collectively (except for one, of course).
Dianne, Kelly, Kirra, Peter and other members of the Choquenot family, Chancellor, Deputy Chancellor, colleagues.
David Choquenot was a great leader, an excellent scholar, a terrific colleague – and in my case a personal friend. He was decent, generous, balanced, clever, strategic, no-nonsense.
David was a head-banger, but it was never other people’s heads: only his own, to loud and progressive rhythms.
David was brought back to the University three years ago, essentially by my colleague Professor Frances Shannon, the Deputy Vice-Chancellor (Research). Frances says that David pulled the Institute of Applied Ecology together as a cohesive group. He did this through his ability to engage with, and listen to, all the diverse voices in the IAE; from the early members to the recently appointed ones. David was always willing to acknowledge a problem, Frances says, and have a sensible conversation about how to solve the issue. I quote from her: When he acted in my role in 2014, my office was full of praise for how he operated and I think they would have been happy for me to be away for longer.
From my own perspective, having David act in Frances’s role helped me see the amazing sides to his character and his capacity. He treated everyone with respect – academic and administrative staff alike – and was admired by them all. David also helped UC engage effectively with external organisations; such as CSIRO and the Invasive Animals CRC, represented here today, and many other universities such as Griffith, Charles Darwin and the University of Melbourne: all of whom I have heard from in the last week or so: all devastated, as are we. I know there are also people here from the University of Sydney and the ANU; perhaps other universities as well. Forgive me if I don’t acknowledge you.
In the last three years, we have attracted extraordinary people to the IAE, including Ross Thompson, whom I thank for what he has steeled himself to do over the last 12 days. I know that David Choquenot’s personal and academic reputation was a key draw-card for this influx of scholarly talent. Ross and his colleagues will realise David’s dream of a truly world class research institute dedicated to the environment.
David cared a lot about the early career academics in the IAE and spent considerable time mentoring them and ensuring they were well-advised about their career and attracting funding. They are here today: and my advice would be to model your behavior on David Choquenot whilst also being true to yourself; as he would have wanted.
David had some spiritual homes on campus. One of them was Zierholz, the pub, where, in addition to numerous informal drinks, he hosted three IAE Conviviums, at which our band, The Hip Replacements, played on each occasion.
Those last times when we played together at the end of 2014 – the IAE Convivium at Zierholz, the Christmas Staff Party at my Residence, and Bruce Lines’ farewell at Zierholz on 14 December – are now indelibly printed in my memory. (Bruce, incidentally, is watching the livestream of this event, from his new role at the University of Adelaide.)
I know I speak for fellow Hip Replacement band members, John Campbell, Stephen Sarre and Michael de Percy: we will always hear David’s backbeat behind us, getting louder as the evening wears on.
Dianne, my heart goes out to you, Kelly and Kirra. I am not sure there is anyone else for whom I would take off my shoes to walk behind over hot tarmac.
Historians say there was some dispute among The Beatles about the order they should walk in; and Abbey Road in London could not have been as hot as the slightly less famous Kirinari Street on campus in December. I was proud, however, to walk behind David Choquenot barefoot.
This image has been my start-up screen for the last year; and now it will stay that way.
Vale David Choquenot, and thank you.
Professor Stephen Parker
14 January 2015
It is my sad duty to inform you that David Choquenot passed away suddenly on Friday. His colleagues in the Institute of Applied Ecology have been informed and, with the agreement of David’s wife, Associate Professor Dianne Gleeson, I am now letting all colleagues know as soon as possible.
David was an expert in wild animal management with a high international profile in biodiversity and pest management. He joined us in March 2012 as the Director of the IAE, having come from Landcare Research, New Zealand’s leading environmental science institution, where he was General Manager of Science and Policy. He was also Professor of Ecology in the Centre for Biodiversity and Biosecurity at the University of Auckland. David’s connections with UC went back many years, however, as he had completed a Master of Applied Science degree with us before moving to the University of Sydney for his doctoral studies.
A commemorative event will be held in the Ann Harding Conference Centre on the afternoon of 14 January followed by an informal function at Bimbimbie. More details will be provided by Professor Nick Klomp as acting Vice-Chancellor in the coming days.
I know that all our thoughts will go out to Dianne and their two young children at this incredibly difficult time. I also extend my condolences to David’s colleagues and many close friends within the University. There will be opportunities on 14 January and subsequently for us to express our feelings about this loss and to pay tribute to David for the contribution he made to our world class environmental science.
Below is an opinion piece I wrote for The Australian, that was published online yesterday.
You can also view the piece online here.
The Senate voted down the higher education reforms yesterday, but the Minister introduced a revised bill into the Lower House this morning, to have it ready for the Senate early next year when Parliament resumes.
It is difficult to know whether we are at half time or in injury time. Maybe we have the same again to look forward to, or maybe this is a ruse and it is nearly over. Having a current bill before Parliament apparently allows the Government to continue counting the assumed savings in its budget calculations, but the public opinion against the reforms is running so strongly that perhaps pragmatic heads will prevail over the summer and it will not return.
Assuming we have to do it all again, here are some reflections on the first half.
As a democracy we are in trouble. One of the more scathing comments about my own performance recently was that I was hopelessly naive in the first place to believe what the now Government had said before the election. It does seem to be the case that one can say absolutely anything before an election and then just tough it out later if one wins. More fool us.
As a peak body, I didn’t understand the initial turn that Universities Australia took. When Labor introduced a small percentage efficient dividend in 2013, the sector plastered the media with its opposition. When the Coalition introduced a 20% cut in 2014, but with the promise that one could charge it back from the students and then go further, the response was to ask politely if the Government wouldn’t mind making the cut perhaps a bit smaller (please). Being ravaged by a dead sheep, to use the classic phrase from British politics, would have been more frightening.
Had there been national advertisements immediately after the Budget opposing these cuts, and a firm statement that we aren’t going to put up with this, some bargaining from strength would have been possible.
Universities Australia, and individual institutions, may have stored up some real trouble for themselves now, because my sense is that academic and professional staff have woken up to a seeming sell-out of the values of public education and the students in our care.
For the Government there may be lessons to be learned in policy design. The package had too many moving parts (extending HECS to sub-bachelor courses, extending HECS to private providers at a lower rate, imposing a real interest rate, cutting recurrent funding, allowing fee de-regulation but then requiring there to be a scholarship pool from 20% of new moneys, and so on). The public, and the non-specialist media, were never going to get their heads around this. The impression was simply that the prospects for our children were being unfairly worsened.
Two glaring design weaknesses were never properly addressed. Where is the guarantee that a student who takes on more debt now will see any benefit in their course or university experience? And how is it a budget savings measure if fees go up? HECS works through the Government advancing all the fees up front to the university, so if more students default, because debts are higher, the taxpayer could end up having paid out more cash.
Finally, for our national governance there could be a lesson in statesmanship and honour. So much was at stake here, for the next generation and the future of the country, that ambushes, horse-trading, tacky offers of $400m and being content to win by one vote, no matter whose, just demeaned the process and made one wonder whether education is in safe hands.
When asked whether he was planning to buy more players, an English football manager once replied that he had a number of irons in the fire but was keeping them close to his chest. I await more painful surprises.
But first, some physio, before the second half.