As indebted graduates serve lattes, the nation needs a lesson

For the second time, Nick Xenophon has pulled the plug on reform of the higher education sector. Just as he did in 2015, Xenophon and his team have called for a large-scale review of the tertiary education landscape before any substantial reform takes place.

Whatever you think of his politics, Xenophon is right and his concerns echo those expressed by Business Council of Australia chief executive Jennifer Westacott at the National Press Club a couple of weeks ago. Both join a growing chorus of experts who believe policy settings, particularly the demand-driven allocation of undergraduate places, is too ­focused on university degrees while undermining vocational education, particularly the public provider TAFE.

“We have too many highly qualified young people with PhD degrees stacking supermarket shelves or making lattes,” Xenophon said last week. “We need to do better than this.”

Westacott was more subtle, arguing Australia’s $20 billion annual spend was not delivering the best value for money.

“Our current education and training system creates confused and distorted incentives and is unfair in its treatment of students,” Westacott said. “The biased funding model reinforces the myth that a university degree is inherently more valuable or more prestigious than a vocational qualification. That is simply not true.”

She’s right. The uncapping of student places from 2010 onwards, while designed to improve equity constraints for our most disadvantaged students, created instead a convoluted mess of unintended consequences, including dramatically declining admission requirements as universities scrambled to get bums on seats.

Importantly, the fundamental equity concerns remain largely unchanged despite the massive cost to the taxpayer. The enrolment of low-socioeconomic students has edged up only marginally, at great expense.

Called out by some as social engineering, the demand-driven system enshrined the predominance of universities in government policy as students chose teaching and law degrees over trade apprenticeships and other vocational qualifications.

The numbers tell the story: in the three years between 2012 and 2015, TAFE enrolments plum­meted from 1.2 million students nationally to just 870,000.

Unsurprisingly, as graduates have flooded into the increasingly fragile economy, all the signs point to diminished outcomes. An Australian Institute of Health and Welfare report last week confirms it is becoming harder for recent graduates to find suitable and relevant full-time work that is commensurate with their qualifications. Meanwhile, graduate salaries have been more or less static for almost a decade.

Britain also is in the throes of a robust conversation about the need to reinvigorate vocational education. Andrew Adonis, the architect of the student loans system under Tony Blair, has described graduate debt as “Frankenstein’s monster” and a Ponzi scheme after an Institute of Fiscal Studies report found that four out of five students would never repay their debts in full 30 years after graduating.

It’s a view rapidly gaining traction in Britain. Jeremy Corbyn’s surprising performance in the recent election was fuelled by youthful anger over rising debt and poor job opportunities.

As Alison Wolf, an eminent education economist with King’s College London, told The Australian last year: “I think it is morally outrageous that we encourage young people to take out these big loans and give up years of their lives when it is increasingly becoming obvious that in some universities the average earnings of graduates is lower than the ­average salary of non-graduates.” Britain, however, is moving ahead with reform, beefing up its further education sector while ­intro­ducing experimental interventions such as degree apprentice­ships. These innovative quali­fications are funded by a levy of 0.5 per cent on companies with a salary bill of more than £3 million ($4.8m) and provide a bridge between the worlds of work and study. Importantly, students are left debt-free.

The fact is students deserve better. They should have real choice in the qualifications available to them and be able to make decisions that are not tainted by flaws in government policy and false promises.

And it’s not as if the world is standing still. Policymakers and pundits globally talk of the imminent fourth industrial revolution, a collision of technologies that may unleash three ­decades of change as tumultuous as any three in the past millennium. Skills will be at a premium. Knowledge will have a diminishing shelf-life.

Is our education system ready for this? Is the academic-vocational divide sustainable when it is blurring in the world beyond the campus? Should adult education be placed as the new centre of gravity of our education system, with people retraining and re­skilling in the decades following leaving school?

A review of the post-secondary education system is long overdue. Xenophon was right in blocking the government’s reforms. It’s time to think this through properly as a nation and act accordingly.

Stephen Parker is lead partner in the education practice and Julie Hare is associate director of education at KPMG.