Higher education: the age of Pyne the destroyer begins

Has Education Minister Christopher Pyne destroyed the equity of Australia’s higher education system? AAP

In Hinduism Lord Brahma is the creator, Lord Vishnu is the preserver, and Lord Shiva is the destroyer and transformer. Here are rich models for contemporary leaders, whether they were raised in the Hindu tradition or not.

Federal education minister Christopher Pyne plans to leave his mark on higher education and research in Australia. We can be sure it will not be as Vishnu the preserver, Pyne enjoys a good stoush and is not seeking a quiet life. It will not be as Brahma the creator, that requires too much imagination, and it is difficult to be kind to everybody. Mr Pyne has chosen for himself the role of Shiva the destroyer and transformer.

If the Senate passes the package in the budget, the Abbott government will destroy the predominantly public settings of the present unified Australia higher education system, created by Labor Minister John Dawkins in 1987-1992 on the basis of 39 universities with similar missions. Mr Pyne will transform the Dawkins system into one with a different shape and different patterns of social participation.

To understand what is happening we need to distinguish short-term and long-term effects. If the package goes through, universities will be able to set their own fees at up to three times the current levels, knowing that the burden on students will be softened by the income contingent repayment mechanism for tuition loans. Through this mechanism, the government effectively subsidises students while they are studying, and also subsidises graduates whose earnings are not high enough to trigger repayments through the tax system. But under the new system the interest rate on tuition debt will be higher than before, and the total graduate debt will be much higher.

In the short-term universities will sharply increase student contributions, to make up the gap in the funding of places resulting from cuts in the government subsidy rate, and to provide much needed extra resources. Also more private providers will emerge, cherry picking cheap profitable areas like business finance and health sciences. Because of the higher level of interest charged to tuition loans repaid through the tax system, plus the higher tuition rates, students will be hit hard. There will be much protest.

In the long term, over a decade or more, a different system of higher education will evolve. The research mission will become concentrated on fewer providers, the word ‘university’ will break loose from the present requirement for research and become associated with many smaller teaching-only institutions offering no frills degrees, and some of the existing institutions will be struggling to survive.

Not one market but two

The Pyne-Shiva system will be sharply divided between two distinct markets. The first market will be populated by an elite sector of highly selective universities, enriched by high student fees, inhabited as now largely by the middle class, and dominated by students from independent schools. Institutions in this sector will lift their global performance. The fact that universities of Melbourne, Queensland, Sydney et al will become stronger in world terms is the one good piece of news in this package. However, their strength will take the form of the great American private universities, the Stanfords and Yales, rather than University of California Berkeley, or the University of Toronto. Unfortunately they will lack the stellar research funding of their American counterparts. Research has been cut back in this package, a sign of the anti-modernist populism that infects the conservative parties in Australia. So expect world top 30-50 university performance rather than top 10-25 performance.

The second market will be a mass sector populated by a miscellany of for-profit private colleges, which will now be supported by tuition loans on the same basis as the public sector (though with lesser transparency and narrower responsibilities and no obligation to provide research depth underneath the teaching), online providers, and large impoverished public universities struggling with their cost base.

In between will be a shrinking number of universities playing in both the elite market and the mass market, constantly paring back costs and changing offerings, floating vocational credentials, and feeling the strain. Nimble entrepreneurs will make gains. But in university markets, which are markets in social and economic position, status is everything. Status is the sole source of educational value and the strongest source of revenue, and there is only so much status to go around. There is a limited number of places at the top of the social pyramid. Not everyone can do well in the Pyne-Shiva system.

Flaws in the reasoning

The flaws in the minister’s reasoning are that competition in a price-based system will drive prices down (true only in the bargain basement commercial market), and lift quality and focus on the customer (ditto). As everybody knows, and most commentators have been saying, prices in the top two thirds of the sector will go rocketing up.

In the elite market, universities in that category have to compete with each other for prestige, resources and high quality students and staff. But they are out of reach of non-elite competitors. With limited places and a product with guaranteed high social and economic value, they can feint towards the customer — it is cheaper to do so through the marketing department than by substantially lowering class sizes — while putting their main efforts into research, which builds the global position, and into prestige facilities. That is how elite universities behave the world over.

In the high tuition countries the elite group of universities is remarkably stable. The idea that high fees create contestable markets is a fantasy. Competition in higher education does not work like that. This is a positional market, not a shopping mall.

The leading universities can also put money into scholarships for students from under-represented social groups, but the use of academic criteria for entry ensures that they will continue to be dominated by families from affluent backgrounds that can afford to invest in academically strong secondary schools.

Regressive effects

For many poorer families, higher education will become a poisoned chalice. With interest fixed at the bond rate the level of debt could become frightening. While the graduate is out of the workforce looking after children, or earning an income below the repayment threshold, the debt burden will mount rapidly. This brings the commercial colleges into the picture. Their course will be shorter and cheaper. But their credentials will lack ‘zing’ in the labour markets.

The current system is biased in favour of women and low income earners, many of whom do not repay their tuition loans, and encourages the spread of participation. The new system will be socially regressive rather than progressive and will limit the growth of participation in bona-fide tertiary education.

The Senate should seek to limit the rate of interest, or change the package so that higher interest is charged only after the graduate reaches the threshold for repayment of tuition debt, as HECS founder Bruce Chapman has suggested. However, all efforts to put equity back into the package will increase the public cost of the tuition loans system, which will be under heavy pressure already because of the high fees that many universities will charge.

Inexorably, this will push the Pyne system towards a cap on the tuition level that is subject to public subsidy via income contingent repayment. Elite institutions will charge a commercial fee on top of that publicly subsidised component of fees. They will waive that commercial component for some students, on grounds of merit and/or social equity. But a commercial fee will deter participation by poorer families. All that will make it harder for struggling middle level universities to sustain their student base at the level of costs needed to support both teaching and research.

Americanisation, without American wealth

At the level of Australian society, longer term, the overall outcome will be a higher education system that will become more firmly reproductive of an unequal social order. Participation in tertiary education will stop short of the near-universal inclusion of the society which has been achieved already in Canada and parts of East Asia such as Taiwan and South Korea.

Across the world education systems vary in the balance between the social inequality and its reproduction, and social equality/mobility. They also vary in their level of social inclusion — in the overall social rate of participation in upper secondary and tertiary institutions of acceptable standard.

The Nordic systems are more egalitarian, with ‘flatter’ university hierarchies and the presumption that all public education has high value, and all citizens have a right to participate in good tertiary education. The US system tends to be more reproductive of the status quo, in a society that is becoming more unequal. Australia for long has sat somewhere in the middle, with the HECS tuition loan settings pushing the nation towards higher inclusion, without disturbing the longstanding inequality of value between providers. The Pyne-Shiva reform places Australia firmly in the US camp.

It is a remarkable change from the existing higher education system, but a change that will sit comfortably with the upper middle class backbone of the coalition parties. The recycling of privileged families through independent schools, the top universities, and business and the professions will continue as before. These families will be better protected from social competition from below, for example from ambitious migrants.

How nice. The social elite will enjoy greater security. In that respect Mr Pyne has retained his conservative credentials. The Hindu pantheon always was a touch ambiguous. There’s a little bit of Vishnu the preserver in every Shiva.