Today’s proposal by the Grattan Institute for higher education students to pay more will be viewed by many as unfair and unreasonable, says Australian National University Professor Bruce Chapman.

“No one in the world believes that you can put an accurate figure on the externalities from higher education,” Professor Chapman, who was the architect of the Higher Education Contribution Scheme, said today.

The Grattan Institute report, entitled “Graduate Winners”, argues it’s not clear what benefit the public gets from what will by the middle of this decade amount to $7 billion in higher education subsidies.

It also argues that higher education subsidies should only be paid when they lead to new additional public benefits.

Andrew Norton, director of higher education with the Grattan Institute, and author of the report, said the finding that some of the non-financial benefits of higher education aren’t big will be controversial for some people.

“Based on research in other countries, it’s generally assumed they are large,” Mr Norton said.

But Professor Chapman, who is director of Policy Impact with ANU’s Crawford School of Economics and Government, said trying to quantify the benefits of higher education was one of the most difficult areas of empirical education economics.

“There are many many things we just don’t measure,” Professor Chapman said.

“I think actually the most important things we don’t measure, and no one has even attempted to put a figure on it, are the consequences for technical change, the consequences for productivity growth, all of which can’t be captured by the graduate, and the consequences for economic growth, the consequences for the productivity of other people they work with because they’re graduates.

“We kind of know those things exist but we can’t measure them.”

Professor Chapman, together with PhD student Kiatanantha Lounkaew, completed a report on the value of externalities for Australian higher education as part of the Federal Government’s Higher Education Base Funding Review that was kicked off in 2010. The report can be viewed here.

Belinda Robinson, chief executive of Universities Australia, said in a statement that while there is logic in attempting to identify both the public and private benefits of higher education, the fundamental flaw in the Grattan Institute’s proposal is the application of a very narrow and theoretical definition of public benefit.

“What this report fails to acknowledge is the magnitude of the national return on public investment in universities, including increased productivity, a highly-skilled and educated workforce, the creation of industries and technology needed for long-term economic diversification and the human capacity for making much needed medical and scientific discoveries.

“All of these things are critical to Australia maintaining a strong economy and the maintenance of our future well-being,” Ms Robinson said.

Professor Chapman said he agreed with the argument that there would be little impact on decisions to undertake higher education as a result of an increase in fees, but that the politics of increasing fees would be “huge”, as was evidenced in the UK when the government removed fee capping for domestic students.

Mr Norton said there were far more pressing social needs in disability than in higher education.

“No one will really suffer if they have to keep paying their HECS-HELP debt for a few more years,” he said.

He added that universities in Australia had never had to sell the idea of higher education, but that the market was changing.

Mr Norton said graduates do well out of higher education – attaining jobs with above-average pay and status.

“Given these large benefits, and with the HELP student loan scheme in place, most students would take their courses regardless of the size of the subsidy.”

“Tuition subsidies therefore merely redistribute income to students and graduates. The general public – particularly those who do not go to university – are worse off.”