Home > Economic policy > For-profit education: plenty of blame to go around

For-profit education: plenty of blame to go around

October 30th, 2015

Success has a thousand parents, failure is an orphan. The truth of that proverb is illustrated by the blame game now going on around the disaster that is for-profit Vocational Education and Training (VET) in Australia. In the last couple of weeks, I’ve seen dozens of different stories illustrating the extent of the failure. The Oz alone has at least ten.

Reading these stories, it’s clear that this isn’t a matter of bad apples or abuse of the rules. The for-profit sector as a whole is delivering abysmally poor results while chewing up billions of public dollars.

Unsurprisingly, Labor is blaming the government for allowing this to happen. Equally unsurprisingly the Oz is running the line, pushed by Minister Simon Birmingham that it’s all the fault of the ALP who extended the FEE-HELP scheme to the VET sector in the first place.

I had to check back on the history, which reveals that this was actually an initiative of the Howard LNP government, announced in its final year, implemented by the Rudd Labor government, and carried on by the Gillard and Abbott governments. Victorian governments of both parties led the charge at the state level. So, there’s plenty of blame to go around.

But, that’s history. The real problem is that no one is willing to admit the obvious lesson, already evident from the US; for-profit education, funded by public subsidies, is a recipe for disaster.

I should concede though, that Birmingham is already edging towards the right answer, saying that he is and not as keen as he was to extend subsidies to bachelor and sub-bachelor courses at private colleges.

Another piece of good news is that the ACCC and Auditor-General are finally getting their teeth into this, doing what should have been done by the supposed regulator, the Australian Skills Quality Authority, which has been asleep at the wheel ever since it was established.

But no amount of tightening up at the edges can fix this problem. The only solution is to abandon subsidies to for-profit providers and put a serious effort into restoring and upgrading the TAFE system.

Finally, a blast from the past. Back in 2012, ACPET, the for-profit VET lobby group cited me as saying

“I think we will continue to see many examples of (dodgy) educational institutions. They are going to be much more common than examples of successful profit driven training or educational enterprises”.

The report in question (paywalled) concluded by quoting me as saying

The only solution is ultimately for the federal government to take over this area [of VET] and to then have a much more robust accreditation system for private providers than we have, and a much more sceptical one”

ACPET suggested that my position was reminiscent of the Flat Earth Society. At this point, I’d say the Flat Earth Society has at least as much credibility as ACPET.

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  1. Uncle Milton
    October 30th, 2015 at 12:57 | #1

    But was the problem the inherent fatal flaws of for-profit VET, or ASQA’s poor performance as a regulator?

  2. John Quiggin
    October 30th, 2015 at 14:03 | #2

    The outcome is an exact replica of the US case (Google U of Phoenix). Sweden not as bad but still a failure. So yes, inherent flaws.

    Problem isn’t just VET. Publicly subsidised for-profit schools in US (Edison, many charters) also disastrous

  3. Ikonoclast
    October 30th, 2015 at 15:07 | #3

    The bottom line is that markets are only useful for a limited number of applications. In other cases, market failure is the norm. Public goods like health, welfare and education are best delivered by methods other than markets. This has been proven over and over again. Natural monopoly services are also best delivered by state enterprises.

    On the other hand, private enterprise is great at delivering the irrelevant and unnecessary fripperies of life. Private enterprise should be be permitted to deliver these things BUT without subsidy and while paying the full cost of all negative externalities, social and environmental. So by all means allow private enterprise to deliver beer, ice-cream, car races, and reality TV shows. This is what P.E. excels at; the irrelevant and the unnecessary. Just ensure it is not subsidised and protected from negative externality costs while doing so.

  4. Troy Prideaux
    October 30th, 2015 at 15:20 | #4

    @Ikonoclast
    That makes a fair bit of sense, but it also raises a question for you: where do you place something like pharma on this spectrum? P.E. has proven to provide substantial innovation and has no doubt provided millions of people with improved and prolonged quality of life, but has also gouged the public for such and promoted a world of over prescription?

  5. Uncle Milton
    October 30th, 2015 at 16:54 | #5

    @Ikonoclast

    Presumably on your view food (other than ice cream), clothing and housing – all necessary for sustaining life – should not be delivered by P.E.

  6. Ikonoclast
    October 30th, 2015 at 17:56 | #6

    @Uncle Milton

    Correct. These need to be delivered by state enterprises or by worker collective enterprises. It’s worth noting that wholly family owned and family worked farms and businesses are worker collectives. So every time someone praises small (mainly family) businesses and farms they are in fact praising worker collectives. It’s an interesting thought.

    Technically, these worker collectives are still private enterprise so I need to more careful with the terms I use. It’s a specific type of private enterprise I am against. It is that type where owners and workers are split into separate classes.

  7. James Wimberley
    October 30th, 2015 at 18:04 | #7

    It’s worth looking at France. The backbone is a legal duty on employers to spend at least 2% of payroll on training. They can do it themselves, or pay the balance as a tax. Employers can contract out. IIRC this leads to quite a lot of nepotistic payments to relatives as “consultants”, but on the whole self-interest keeps the system reasonably honest. A commercial training provider faces a genuine market of informed customers in the HR departments of companies. I’m less clear how the public side works, but suspect it’s mostly direct provision.

  8. Uncle Milton
    October 30th, 2015 at 18:16 | #8

    @Ikonoclast

    I think the only country that has no private sector involvement in the provision of food, clothing and shelter is North Korea. Not that that is an argument against what you propose, of course 🙂

  9. Donald Oats
    October 30th, 2015 at 18:53 | #9

    I’ve never understood the fascination with private school/tertiary education, except for the odd niche area (playing the scrugge-Humpel-znnt instrument being such a niche area). Another strange idea to me is the one of allowing, indeed encouraging, primary and high schools to teach different material depending upon nothing more than the geographic location of the school, i.e. which state or territory it is in. Eastern seaboard students are no more or less equipped to handle English or Mathematics as their western seaboard counterparts, or us in the middle. As someone who had to shift states twice in two years, I found subjects were all over the place in terms of how advanced the material was. The next time a talking head from IPA pops up on The Drum advocating for this right to teach different stuff all over the place, someone should challenge them to give a rational argument for that, other than “freedom.”

  10. Ikonoclast
    October 30th, 2015 at 20:15 | #10

    @Uncle Milton

    I had better not get us too off topic.

  11. October 31st, 2015 at 06:12 | #11
  12. Ivor
    October 31st, 2015 at 09:25 | #12

    I blame right-wing Labor and of course public universities also run their international students programs at a profit.

    They are raking in millions and education goes disproportionately to those who can pay – so the rich get richer.

    This all goes back to a Golding Report and Garnaut in the 1980’s.

  13. Stockingrate
    October 31st, 2015 at 11:33 | #13

    @Ivor

    The mercenary, managerialist, for-profit approach of public educational institutions may be damaging the general interests of Australians more than is the for-profit private sector (as bad as that is).
    The excessive focus on for-profit foreign students in public institutions is a disaster for Australians as the perverse incentives for VCs and other administrators, divert attention and resources away from the general interest.

  14. October 31st, 2015 at 23:09 | #14

    In Recollections of a Bleeding Heart – a portrait of Paul Keating PM (2002), Don Watson claims that “[the Hawke/Keating Labor Government had] through HECS (the Higher Education ‘Contribution’ Scheme, first introduced in 1986) enabled all young people to get the higher education and training they needed.” In fact, it was Gough’s actions, unfulfilled because of the 1975 dismissal, and not Keating’s, that started to put tertiary education in the reach of more ordinary Australians.

    As the subsequent course of events shows, contrary to Watson’s claim, HECS was the genesis of the corporatisation and privatisation of much of Australian education system.

    The consequences of the actions by the ‘bleeding heart’ Federal Treasurer Paul Keating, some of which are described above, are there for all to see.

  15. November 1st, 2015 at 08:58 | #15

    I forgot to include the page number in the above citation. The page number is 88.

  16. J-D
    November 1st, 2015 at 12:17 | #16

    I want to repeat the same two points I made the last time we discussed this: it’s abundantly evident that a for-profit model works for some kinds of education; and a major factor in dividing cases where it works from cases where it doesn’t is the absence or presence of recognised credentials.

    If somebody sets up in business offering to teach people to cook–just for example–the success or failure of their business will depend on how satisfied their customers with what they learn and their experience cooking afterwards. The situation changes if the cooking school is also officially authorised to award a vocational credential that is recognised as a relevant qualification for work in the industry. In the first scenario the cooking school makes a direct difference to people’s lives through its effect on how well they can do something they want to do, although it’s possible that this will also indirectly affect their employability. In the second scenario the cooking school can directly affect employability, and both students and governments react differently.

  17. November 1st, 2015 at 13:56 | #17

    I have a friend who worked for many years in TAFE. One of her activities was supporting students from highly disadvantaged backgrounds to engage or re-engage in education. A lot of the early stages was about learning basic skills and life skills, before learning directly vocational skills.

    She and her colleagues doing similar work have basically been squeezed out of the system in recent years, due to the changes in TAFE (I’m telling this second hand of course but I think I have the gist of it right).

    It’s a wicked waste on all counts – devoted educators, and students who were gaining not only employable skills but a sense of self belief and capacity to participate in society, have been betrayed. My friend is very resilient but thinking about the way she and those she worked with have been treated because of this idiotic neoliberal ideology makes me so angry.

  18. November 1st, 2015 at 14:03 | #18

    Just to add, as the connection of my friend’s experience to JQ’s post may not be clear – the connection is is that the TAFE system in the state in question was put under pressure to run like the private providers, who of course don’t provide the kind of services my friend was providing.

  19. Ikonoclast
    November 1st, 2015 at 15:32 | #19

    The issue with education and certain other fields is that the value of the outcomes to society cannot be measured in money terms alone. A key mistake of current ideology (neoliberalism or neoconservatism) is that the only values which count are money values. From there it is a short step to putting the money measure to everything and using no other criteria for making social decisions. In addition, even in the money paradigm, only short term gain and loss are measured. No real calculations are done to assess future long term gains and losses.

    The neocon notion is that economics and economic values should rule our lives. As John Ralston Saul has pointed out, economic criteria should be second order criteria at best. First, you work out what to do, what is needed, what is the best for society and all its citizens. You decide this by democratic debate. Then, you work out how to do it economically.

    That is to say we should work out our society’s goals and then work out how to get there economically. Instead, we abdicate from intellectual, social and democratic responsibility and set up a quasi auto-pilot system which uses only economic parameters and only a minority of decisions makers (owners and managers of capital) rather than the full distributed intelligence of our entire society.

  20. Uncle Milton
    November 1st, 2015 at 16:29 | #20

    Another lesson from the VET fiasco is that there are a lot of pitfalls in creating private markets from scratch, maybe including (cough, cough) a market for carbon emissions.

  21. Ikonoclast
    November 1st, 2015 at 17:17 | #21

    @Uncle Milton

    I agree. That is a very profound thought. There is no such beast as a free, ideal market. There are only any number of real markets embedded in real societies and real social institutions. The attempt to abstract the conditions of the ideal free market and then implement that market and those conditions back into any real society has proven to be more prone to disaster than success, at least in the neoliberal era.

    I think “free market” is a misnomer anyway. All markets are regulated. Many markets are rigged. The questions really are how do we decide (democratically one would hope) to regulate and rig our markets. Even overt rigging of markets can be fine if it is democratically decided and results in good social outcomes especially greater equality. There is much to prefer in democratic, overt rigging of markets over undemocratic, covert rigging of markets. We can be sure that if there is no bias for the former there will be much bias for the latter.

  22. Uncle Milton
    November 1st, 2015 at 19:07 | #22

    @Ikonoclast

    Greg Hunt and, lately, Malcolm Turnbull agree with your agreement. That is why they prefer direct action as the way to curb carbon emissions.

  23. BilB
    November 1st, 2015 at 22:30 | #23

    Val, I agree with your anger and frustration. When a system wastes dedicated performers it is failing to be fully effective.

  24. Ikonoclast
    November 2nd, 2015 at 03:07 | #24

    @Uncle Milton

    No, there you are wrong my friend. They prefer their misnamed “direct action” because that is actually a plan to do nothing and allow CO2 emissions to continue unabated. However, I do agree they believe in rigged markets; that is to say markets rigged to make the rich even richer.

    The ready and easy way to price CO2 emissions was to tax them. Correctly implemented as a tax, regulation and compliance would have been simple and effective. The fact that neither of the major parties tried this approach indicates that neither of them wanted to curb CO2 emissions. They only wanted to look like they cared while actually doing next to nothing. They both get large donations from the coal industry and were loath to jeopardise these.

    Actions speak louder than words. The fact that nothing substantial has been done about our CO2 emissions to date indicates the major parties and the corporations who pull their strings intended to see nothing done all along.

    The world is slowly changing away from fossil fuels as solar and wind power become more competitive. But it is still too little too late and fossil fuels still receive massive subsidies all around the globe. The world is way behind the curve on curbing CO2 emissions.

    “The world could be 2C° warmer in as little as two decades, according to the leading US climate scientist and “hockey stick” author, Dr Michael E. Mann. Writing in Scientific American in March 2014, Mann says that new calculations “indicate that if the world continues to burn fossil fuels at the current rate, global warming will rise to 2C° by 2036” and to avoid that threshold “nations will have to keep carbon dioxide levels below 405 parts per million”, a level we have just about reached already. Mann says the notion of a warming “pause” is false.” – Climate Code Red.

  25. Ivor
    November 2nd, 2015 at 07:47 | #25

    @Ikonoclast

    The thrust of your post is market socialism?

    This would go a long way to establishing the conditions for developing a society without exploitation or moral inequality.

    But surely, you have to get rid of Keynesian capitalism first?

  26. Ikonoclast
    November 2nd, 2015 at 09:14 | #26

    @Ivor

    We need to get from where we are now to a form of democratic socialism without following the path of violent revolution. At least that is my view. The ideas of thinkers like Richard D. Wolff seem to offer the best path. He advocates worker owned and managed cooperatives as the alternative to capitalist and corporate enterprises.

    As I see it, this idea would leave in place two institutions we are familiar with. These institutions are national governments and markets. The change to worker owned and managed cooperatives would in turn change and condition governments and markets. It is not possible to predict ahead of time how these changes would proceed in detail. For an interim period, which might be decades or even centuries (after all capitalism has lasted about two centuries in its right), we would indeed see a form of market socialism. I don’t think it is valid to postulate that this type of economic system would be the “final system” or the “end of history” either. I think further political economic evolution could take us beyond market socialism and/or beyond nationalism. A descent into barbarism, by failing to transform and slough off capitalism, is also sadly possible. One cannot predict the future with certainty.

    We need to take one step at a time. With democracy as our touchstone, we need all workplaces, all enterprises, to become democratic. They must be owned and managed by the workers. This would indeed lead to a form of market socialism. However, I think it is false to imagine that progress in the future could only go as far as we can imagine now. The most brilliant and forward thinking person of medieval times could never have imagined capitalism. Too many necessary institutions and technologies for capitalism simply had not arisen. The same holds true for a form of economy beyond any mere imagination of market socialism. We cannot conceive it yet. The conditions for its existence have not yet arisen.

  27. Ivor
    November 2nd, 2015 at 10:36 | #27

    @Ikonoclast

    That is pretty much how I see things particularly if people can learn to see that;

    1) capitalism is not a synonym of markets or private ownership or individual enterprise.

    2) you cannot over-come capitalist crisis tendencies with stimulus, debt, growth or productivity.

  28. November 3rd, 2015 at 22:47 | #28

    As I mentioned before, private high schools are an example of successful private education providers. They aren’t for profit, they have external assessment, their students have parents who will kick up a fuss if the school isn’t run well, and they are in competition with each other, and schools in the government system. Also, their children’s future is seen as a really important investment by many parents. And the bonus is that your kid gets great sports, music and travel opportunities, while mixing with children that may be able to help them in future.

    It seems to me that pretty well all the conditions above (except the bonus) are necessary for them to work well. And clearly private VET providers don’t have some of these in place. So they don’t work.

    And they particularly didn’t work back when the students came from overseas and worked as taxi drivers while waiting for their qualification to come through giving them Australian permanent residency, which is actually what they were paying their dodgy education provider for anyway.

  29. Ikonoclast
    November 4th, 2015 at 05:00 | #29

    @John Brookes

    My personal (anecdotal) experience is the state high school education I got a generation ago was as good as a medium private school education in the 2000s. In other words, I paid fees for my kids to get an education only as good as the one I got from the state for free. My observations and investigations of local state high schools before I sent my kids to a private school indicated that state schools had declined significantly in quality since my era.

    This has all been achieved by starving state schools of money and skewing the playing field to private schools. It’s an interesting kind of inflation. The state service declines and people feel forced to pay private providers to get what the state service used to provide out of taxes. Of course, we now pay taxes and fees. I guess that makes us doubly lucky.

  30. November 4th, 2015 at 13:34 | #30

    I thought of another successful case of private and for profit education providers. A guy I know trains train drivers. He does this for mining companies and for the WA transport authority. Again, there are reasons why this works.

    Firstly, he is paid by people with a fair amount of power. Do a bad job, and they simply don’t use him again.

    Secondly, if a failure in his training translates to a train disaster, he will cop a lot of flak.

    He related a story recently of one of his clients trying to change the way he taught certain safety issues – and explained that he had to teach it properly (according to the rules) because he would be in trouble if he did otherwise and there was a disaster. He invited his client to get the rules changed 🙂

    Surely the worst possible way of funding education/training is to lend the money to the student, and say, “Go ahead and choose what you reckon is best”. This “empowerment of the individual” is nothing more than an invitation to scammers. The student is usually young, naive, lacks the necessary knowledge to make a good decision, and doesn’t have the power to remedy the situation if their provider is no good.

  31. Aardvark
    November 4th, 2015 at 15:48 | #31

    Much of the poor service delivery also appears related to the prospects of the student bearing any financial liability. In the abscence of a co-payment, or any prospect that the student will earn the level of income required to repay the debt then the student themselves have no incentives to pass the course or to ensure the course is even suitable for their needs. I also assume that enrolment makes its easier to substantiate various studentwelfare payments.

    So while some institutions will act unconscionably, others are simply addressing the increased demand from students responding to very poor incentives. In this case I agree with John Brookes

  32. J-D
    November 6th, 2015 at 06:37 | #32

    @John Brookes

    Interesting. What sort of credential (if any) do those train-drivers receive on completion of their training?

  33. November 6th, 2015 at 23:58 | #33

    @J-D
    I don’t know. If they don’t pass the course, they don’t drive trains.

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