Pearls and Irritations

The Government’s proposed changes to the fee structures for university degrees are not fair, and contrary to the Government’s assertion, nor do these changes respond to the needs of the labour market.

The thrust of the Government’s proposed radical restructuring of university fees is that study of the sciences and technologies will cost less, and the humanities and social sciences will cost more, with the exception that English and other languages will also cost less.

According to the Minister, Dan Tehan, the justification for these fee changes is to “increase the number of graduates in areas of expected employment growth”. The aim is to “incentivise students to make more job-relevant choices, that lead to more job-ready graduates”.

Many critics have understandably objected to this characterisation of universities as job factories. For many of us, the fundamental purpose of universities since their foundation hundreds of years ago has been to promote scholarship by teaching people to question and think critically.

In particular, human progress has depended upon fostering an understanding of the nature of our societies, human relationships and the requirements for good governance. Furthermore, although scientific discoveries are principally responsible for the technological progress that has driven the improvement in human living standards over time, that technological progress most often represents a response to human demands. And it is the contribution of the humanities and social sciences to our understanding of these demands, that is frequently a necessary pre-condition for that technological progress and its implementation.

In this article, I discuss why it is dangerous to try and tie university course fees to an inadequate understanding of the job prospects for different university courses, and then how university fees should instead be set.

Job prospects for different university courses

The Government says that its fee changes are intended to “encourage people to study in areas of expected employment growth”. However, the Government has not so far provided any information to justify its expectations for job growth, either by industry, occupation or qualification level. All we can infer is that the Minister expects a relative increase in demand for graduates in the courses where fees will drop, but frankly in too many cases, that expectation is likely to prove wrong.

For example, employment in agriculture has been falling for a long time, and it seems unlikely that the demand for degrees in agriculture will rise faster than average, but the cost of this degree is scheduled to drop by 62%. Similarly, the past track record of employment of graduates with degrees in science, architecture, and environmental science does not suggest that the future demand for these graduates is likely to increase faster than the average.

This conclusion is further supported by recent research by Peter Hurley published in The Conversation. Hurley found that four of the five degrees with the lowest median full-time salaries about three years after finishing the course were science and mathematics, architecture and built environment, agriculture and environmental studies, and veterinary science, in descending order. Contrary to the Minister’s postulates, this finding strongly suggests that there is less demand pressure for these graduates, favoured by the new fee structure, than for graduates with an arts, business and economics or a law degree.

What the Minister has failed to recognise is that the employment of graduates in the humanities and social sciences is not closely tied to the fortunes of specific industries. By contrast, relatively few jobs require a specialist degree, such as medicine or engineering.

Indeed, the most recent ABS data for 2015 show that, whatever their discipline, a professional has roughly the same chance of working in the same field as their qualification (see Table 1). Although the proportion of professionals with degrees in the humanities and the social sciences who are working in their field of study is a bit lower than the average, the lowest proportion is for professionals who studied natural and physical sciences, and engineering and related technologies is also a bit below the average.

Table 1. Employment of Professionals*

* Professional is assumed to approximate graduates.
** This discipline is included for completeness. There are no professionals in this discipline.

Furthermore, for those professionals who are not currently working in their main field of study, that does not mean that their degree is not useful as they have been taught to think and communicate. Thus, in addition to the 82% of professionals who reported that they are working in the same field as their highest qualification, another 11% reported that their qualifications were relevant, and I suspect this latter proportion would be higher for graduates in the humanities and social sciences.

In addition, older graduates are less likely to have a close alignment between their degree and their occupation. One reason is that older graduates are more likely to have been promoted into management and are no longer classified by the ABS as professionals. Thus analysis by the Academy of Social Sciences shows that two in three CEOs of the top Australian companies have a degree in the social sciences, as do 62% of government executives.

In sum, and contrary to the Government’s thinking, the reality is that for most jobs that employ graduates, the skills that are being sought are not highly job-specific technical skills. Instead, the principle skills being sought are to reason and communicate. Graduates are being hired to think critically and creatively, ask the right questions, identify and explain the best possible solutions, and determine how to implement them.

The Government’s attempt to justify these radical fee changes on the basis of unrealistic allegations about future job openings and their requirements should be abandoned. Instead, we should return to the previous basis for setting university fees, as discussed below.

How should university fees be set

The reason for charging fees for university courses is that some of the benefit from a university degree accrues to the individual. However, some of the benefit also accrues to society at large. Society is better off with a more educated population that enriches our culture and can question authority and contribute to better human relations and the development of better policies and governance. Equally not all the gains from new innovations that improve well-being over time accrue to the innovators nor to the people who have the education and training that enables them to adopt and use those innovations.

In response to the uncertainty about relative gains, we have generally operated under the principle that the proportion of the cost recovered from the individual graduate should be much the same for all disciplines. That has meant that the more expensive degrees, such as medicine, engineering and science have tended to have higher fees.

But the Government’s new fee structure has nothing to do with the cost of providing the different types of degree. Instead, the ratio of cost-recovery from the individual graduate will be much higher for the humanities and social sciences than for the various sciences and technology degrees. Indeed, student contributions of $14,500 per year for law, business and arts is getting pretty close to full cost recovery, with almost no contribution from the government.

In short, there is therefore no obvious reason why this fee structure is fair or an appropriate apportionment of the responsibility for cost recovery across university courses.

Conclusion

In sum, the Government’s proposed fee structure is neither fair nor based on economic logic. While the Government claims that it will allow the universities to enrol more students, this is only possible because the Government is proposing to reduce its average contribution per student.

Many critics have contrasted this Government’s attitude to universities with the Menzies era, when one of Menzies’ biggest legacies was the expansion of university funding. But in those days, the majority of graduates voted for the Liberal Party, whereas today’s graduates, and perhaps especially those from the humanities and social sciences, are more likely to vote Labor. One wonders therefore how far this change in political allegiance helps explain the Government’s changes to university fees.

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