The Coalition and Labor took very different higher education policies to the 2019 federal election. The contest was between tightly capped total spending under the Coalition and a restored demand-driven system under Labor, letting universities enrol unlimited numbers of students for bachelor degrees.
Labor leader Anthony Albanese’s announcement yesterday of extra university places if Labor wins the 2022 federal election offers more money and slightly changed criteria for distributing it among universities. Unlike in 2019, it is not a radically different alternative to the government’s policies. But there are ways of better achieving its goals.
Up to 20,000 more places
Labor promises to deliver up to 20,000 extra student places over two years. Enrolment data for 2020 and 2021 are not yet available, but on 2019 figures Labor is offering, in theory, about a 3% increase in total places.
The expected cost is A$481.7 million over the new few years. To put this in context, the federal budget forecasts tuition subsidies of just over $7 billion a year.
Under the Coalition’s Job-Ready Graduates policy, which began in 2021, the link between funding and student places is not straightforward, which explains Labor’s “up to” caveat.
In earlier funding systems, the idea of a student place was central. A student place was the equivalent of one year’s study for a full-time student. Each university had a minimum number of places it had to deliver for its funding. New places were often allocated in specific numbers by discipline or course.
Under the current system, universities are funded without setting minimum numbers of student places. Universities decide how to distribute that money between student places, which under Job-ready Graduates have a wide range of dollar values.
In 2021, law, business and most arts student places have an annual public subsidy of $1,100. An extra $1 million in public funding would finance 909 of those places. But nursing, engineering and science have a public subsidy of $16,250, so $1 million would cover only 62 places.
The Job-ready Graduates framework creates a tension between maximising opportunities to study, which is done most effectively in courses with low subsidies, and promoting courses with in-demand skills, which consume more of each university’s available funding.
Labor’s criteria for distributing new funding
Labor sets out three broad criteria for allocating its new money to universities:
ability to offer extra places in areas of national priority and skills shortage, including clean energy, advanced manufacturing, health and education
efforts to target under-represented groups such as the first in their family to go to university, people in regional, remote and outer-suburban areas, and First Nations people
Labor’s priority fields are high-subsidy courses, so will generate fewer student places per million dollars spent. This creates a tension with equity goals.
The most successful policy to date for increasing representation was demand-driven funding. After lifting funding caps, growth in enrolments of students from low socioeconomic status backgrounds outpaced the rate for other socioeconomic groups.
Enrolments in lower-subsidy courses would help meet access goals, even if these course choices do not match Labor or Liberal views of what students should be studying.
Student applications data reflect student demand, Labor’s third criterion for allocating funding. The data show increased student interest in the “society and culture” cluster of courses. This includes arts and law with the $1,100 public funding rate, despite their high student contribution of $14,500 a year.
Parallels with Coalition policy
Labor’s interest in using higher education policy to meet national priorities and skills shortages is conceptually similar to the Coalition’s “job-ready graduates” approach, although with slightly different lists of preferred courses.
Labor’s equity criteria for allocating funding to universities also have parallels with the Coalition. The current policy is to focus funding growth on regional universities and campuses in areas with relatively high population growth.
The main novelty in Labor’s list is that “first in family” has not explicitly been used in policy before. But new students have been asked about their parents’ education since 2010. The Coalition’s policy on regional and high population growth areas is likely to catch areas with relatively high proportions of first-in-family students.
The Coalition reintroduced demand-driven funding for Indigenous students from regional areas this year. They also have high rates of first-in-family enrolment.
The key difference between the parties is the amount of extra funding for the chosen universities rather than the underlying criteria for how it is distributed. But more funding converted into more places undoubtedly matters for under-represented groups.
A more ambitious agenda?
Demand-driven funding, as Labor promised in 2019, is the most effective funding policy response to the problems it sees. It best matches the supply of places with student demand, by giving the funding system the capacity to create enrolments in the courses students want to take.
Furthermore, applications tend to follow the labour market without any special policy incentives. With demand-driven funding there is no trade-off between access goals and priority shortages to overcome skills shortages.
Labor’s decision to abandon demand-driven funding is probably due to the Commonwealth budget being more stretched now, as a result of COVID-19, than it was in 2019.
Labor knows the so-called “Costello baby boom” students will reach university age in the mid-2020s. They create a real need for more student places, but also mean demand-driven funding could drive a big increase in higher education spending.
Modest changes at no cost to government
While demand-driven funding is probably not going to return in the next few years, Labor could make other changes that will ease current policy tensions and be fairer for students.
There is a direct relationship between student contributions and the subsidy rate. A modified funding system could narrow the range of contributions, which this year stretch from $3,950 to $14,500 a year.
Discipline-based subsidies that are less varied than the 2021 range of $1,100 to $27,000 would ease, although not eliminate, the tensions between promoting courses in areas of skill shortage and increasing student places.
Such a system could deliver more student places per $1 million of public funding in skill priority courses than under current policies.
Fundamental flaws remain in place
For universities and prospective students there is no obvious downside to Labor’s proposal. On the announcements to date it would not fix the structural problems created by Job-ready Graduates, but I doubt such a flawed policy will last long-term, regardless of who wins the next election.