Getting graduates into jobs, easing cost to the taxpayer

In 2002, treasurer Peter Costello introduced a baby bonus payment, urging parents to “have one for mum, one for dad and one for the country”. It was a confident time, with Asia on the march, a budget in surplus and John Winston in The Lodge. That cohort is now coming of age, finishing school, heading off to university, taking up a trade or a gap year. Except COVID-19, and the policy response to thwart it, have turned the world upside down. In trying to get ahead of the pinch points from a 20 per cent rise in the number of children turning 18 a year by 2030, the Morrison government is overhauling university fees. First, it wants to raise the number of available places to meet the demand of the demographic bulge, as well as cope with the rush of young people who will survey a 16 per cent youth unemployment rate and decide to delay entry to the labour market wasteland, and invest in learning. Second, the government wants to incentivise students to pursue areas of study and occupations that meet the future needs of employers.

Education Minister Dan Tehan aims to cut by almost half the price of studying teaching, nursing, clinical psychology, English and languages. Agriculture and maths students would get an even bigger price incentive, while those opting for science, health, computing and engineering would receive a 20 per cent discount. The losers in this fee shuffle are in the arts and humanities, who’ll pay more than double, and law and commerce students, slugged an extra 28 per cent. At one level it makes perfect sense to steer graduates to where jobs will be in a post-pandemic economy. Does Australia really need more lawyers? Or would-be journalists, for that matter, notwithstanding the rise and rise of the public relations industrial complex?

A benign view is higher education is a delicate ecosystem of price signals, cross-subsidies, taxpayer funding and foreign student revenue. To be blunt, however, the sector has become a mishmash of incentives and perverse responses. The latest changes push in different ways, some helpful, others not. The package aims to increase the overall number of places by 39,000 by 2023 and 100,000 by the end of the decade. But, other than via inflation, the taxpayer will not be on the hook for more for this expansion; they will pay less per student, and some students and institutions will make up the difference. We are in the era of user pays, where the real pay-off for higher education accrues to an individual, although there are dispersed, economy-wide benefits in higher productivity and income.

As well, university models will come under strain. There will be less money coming from teaching courses the government wants to encourage; the cash cows that fund them now, such as arts, will have fewer paying students. Or maybe not. The evidence suggests 18-year-olds, price-savvy about sneakers and smartphones, tend to follow their hearts and guts in learning options. A student loan debt is often put on the never-never, to be paid off in some distant future. Reality bites when a graduate works and the state claws back what taxpayers stumped up. Right now, we just don’t know how this will play out for students and universities because the signals are running all over the shop. Mr Tehan argues the package will better align the cost to students and taxpayers to what it costs to teach subjects. Yet certainly not for those who want to pursue, say, philosophy, art history, music or political theory, the foundations of Western civilisation.

Already there are complaints the government has launched a missile in the culture wars. As we argued at length last weekend, the universities have lost their minds and souls, especially in the humanities, succumbing to extreme race and critical theories, identity politics, illiberalism and cancel culture under the “Great Awokening”. We hope there’ll be a counter-revolution in the academy promoting free speech, inquiry, rigour and a true diversity of views. Perhaps a few tenured radicals finally will call it quits. In any case, the government has a more prosaic agenda as it contemplates a possible trillion-dollar net debt by 2030 and escalating unemployment. What haunts Scott Morrison, as it should all Australians, is a hard truth he shared this week. Unless you get people into a job before they’re 22 and no later than when they’re 25, “the chances of spending a lifetime on welfare go through the roof”. That, and the promise of the baby bumpers, is the spur to get the best settings for higher education and their future.