Home > Economic policy > Tertiary education should be universal, non-profit and free

Tertiary education should be universal, non-profit and free

July 28th, 2017

Last week, I spoke at the Australian Conference of Economists in a panel on Higher Education Policy. My talk was covered by John Ross of The Australian Higher Education Section which, unlike much of the Oz, seems still to be more interested in accurate reporting than political pointscoring. I talked to Steve Austin of ABC Radio Brisbane http://www.abc.net.au/radio/brisbane/programs/mornings/mornings/8733698

To sum up my main points

* As a society we should set a goal of providing appropriate tertiary education (that is, post-school through university or TAFE) for all young people. Instead, policy is still heavily influenced by nostalgia for the days when working class kids (actually, just males) could leave school at Year 10 and be apprenticed to a trade, middle class kids could leave school at Year 12 and get a nice safe job in a bank, and universities were the preserve of an elite, either smart enough to jump the hoops to get in or with parents rich enough to pay

* The provision of a universal publicly funded service like this should not be entrusted to for-profit firms, as has been shown by the VET FEE-HELP disaster

* We should abandon the market liberal rhetoric of choice, competition and incentives and instead focus on professionalism and a service ethos.

* Once we get close enough to the goal of universal tertiary education, we might as well finance it through the tax system as we do with schools, and develop some special policies for those who, for one reason or another, miss out. I’ll post more on this sometime.

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  1. Smith
    July 28th, 2017 at 14:41 | #1

    Both the government and opposition would argue that we already have a policy of providing appropriate tertiary education for all young people. Where they substantially differ from you is that they say the cost should be met in part by the young people directly and in part through the tax system. Where they differ from each other is the relative size of each part.

    They would also disagree with you about the market liberal rhetoric but this is a second order issue. It’s really about the funding. If we want European-style tax funded provision of higher education and other things we will have to pay European-style taxes. It’s as simple as that.

    If the tax system funded it all then there would be no need for any university marketing which I think has reached absurd proportions. I saw an ad for an MBA program from a second rate (at best) university recently which read like a parody.

  2. Ikonoclast
    July 28th, 2017 at 15:13 | #2

    I agree with all the main points. Let’s hope we see sensible policies like this soon. Would the second term of our next Labor govt be too much to hope for?

  3. may
    July 28th, 2017 at 16:09 | #3

    i’m still ranting on and narky about the bloody 80’s.

    “oo let’s rationalise everything” and boy did they ever!

    rationalise is what malfaesants do when they have been caught.

    delete if you like JQ—i’m just chucking a wobbley.

  4. Stockingrate
    July 28th, 2017 at 16:11 | #4

    We should also remove the perverse incentive provided to the administrations of public institutions (G8 etc) to profit more from selling places to foreign students than to locals.

  5. I am and will always be Not Trampis
    July 28th, 2017 at 17:05 | #5

    universal most definitely,
    non-profit absoltely

    free ?? so the privileged can get more privileged. pretty silly to me.

  6. John Turner
    July 28th, 2017 at 18:08 | #6

    @I am and will always be Not Trampis
    If concomicant with universal free tertiary education we implement a more progressive tax system along the lines of what the scandinavian countries do then I don’t see how it reinforces privilege. I’d be very happy to pursue policies similar to these countries and also introduce free childcare provided by a not-profit community sector or as an extension to the existing school system.

  7. John Turner
    July 28th, 2017 at 18:09 | #7

    @I am and will always be Not Trampis

    If concomicant with universal free tertiary education we implement a more progressive tax system along the lines of what the scandinavian countries do then I don’t see how it reinforces privilege. I’d be very happy to pursue policies similar to these countries and also introduce free childcare provided by a not-profit community sector or as an extension to the existing school system.

  8. Collin Street
    July 29th, 2017 at 11:45 | #8

    free ?? so the privileged can get more privileged. pretty silly to me.

    You have, I think, a number of choices:
    + eliminate the social cachet/impact of formal educational qualifications, by… building an entirely-new educational/qualifications framework involving quality-assured-but-still-somehow-informal training that means your fee-fees don’t get hurt, or
    + keeping the regulatory straitjacket that forces people who want to build bridges to learn the difference between copper and bronze, and those who want to become surgeons to distinguish between nerves and arteries, and either
    ++ paying for the training for those people who manage [through talent and some privilege] to qualify, or
    ++
    … or some other option where we all sit around in drum circles and thereby learn how code python, or something?

    Now, my opinion, backed by reasonably-well-established history, is that of all the things we’ve tried — and we’ve tried an awful lot of things over the past five thousand years — the best combination of “people not dying because asprin got confused with paracetamol” and “social mobility and class mixing” comes from government-funded training for all those who want it and who qualify.

    What do you think? What’s your plan? Cards on the table time. Don’t just leave it as free-floating ill-defined resentment, tell us what you think should be done. Argue a case, don’t just bitch and snipe.

  9. totaram
    July 29th, 2017 at 15:39 | #9

    @Collin Street
    “Now, my opinion, …” etc.

    I agree completely, with my limited experience of having taught and researched in University level institutions in a few countries.

  10. Vegetarian
    July 29th, 2017 at 18:09 | #10

    Having taught at high school and university level, I feel qualified to say many people are NOT suited to university education.
    We’ll still need tradesmen, carers etc.

  11. July 29th, 2017 at 18:34 | #11

    @Vegetarian
    Vegetarian: did you read the post? “Higher” is spelled quire differently from “tertiary”.

    Is there much evidence that given a free choice if tertiary education options, young people will systematically make bad choices? The case against relies heavily on the bubble in American legal education, made much worse by money-gruooing on bothe supply and demand side, and the dumb US policy of open-ended subsidies for student debt. Against this, there is a long history of open enrolment in European universities by all qualified school-leavers. It’s been socially regressive, as the lack of tutorial and pastoral support discriminates against those with lower social capital. But it’s not SFIK led to significant distortions in the highly skilled labour markets.

  12. hc
    July 30th, 2017 at 18:45 | #12

    I find these suggestions contentious.

    I don’t think you like conventional welfare economics but the policy of charging nothing to users creates deadweight losses since people’s willingness-to-pay at a zero price will be less than the marginal cost of provision.

    Distributionally the policy is inequitable since those who don’t want to study at university (and their parents) will pay for those who do. It is a pure act of faith to suppose everyone needs a university education. The plausible (and often identified) outcome is that the policy will cause a redistribution from working class families to the rich and middle class.

    The school system is not even remotely close to providing a free public good. The private schools are thriving and even public schools involve significant costs by users. I see no reason why private suppliers cannot service the vocational end of the tertiary market. As you agree the public universities have thoroughly corrupted managerial values. Competition from alternative suppliers makes sense.

  13. Julie Thomas
    July 31st, 2017 at 07:39 | #13

    Actually I think that nursery education should be universal, non-profit and free.

    It is in the early years that education is most important for preventing the wasting of human capital that happens when children do not have access to the resources that are available in functional families.

    It is during the nursery years when our attitude to learning and education is established and when we can identify individuals’ talents and abilities and every child has a desire to be part of a society and every child has has some potential, some talent that can be developed and so become a respected part of their society

    It is background inequalities in life chances particularly in early life that makes some children unable to take advantage of primary secondary and tertiary education.

  14. derrida derider
    August 5th, 2017 at 15:16 | #14

    No, Harry, the efficiency argument for free education is a classical public economics one, founded in classical welfare economics.

    The current working generation pays taxes to educate the current student generation as an investment, the debt being repaid through ordinary tax when those students become workers. And the investment is, for the current taxpayer generation, a very good one – the rate of return is high (typical estimates of the SOCIAL rate of return from higher education are at or near double digits, and the marginal extra income due to someone’s education is generally taxed at about half of that, taking into account both income and consumption taxes).

    Which of course is quite separate from equity arguments, from arguments about agency problems (parents not always acting in the best interest of their offspring) or arguments that education is a merit good, valuable beyond the income it generates.

  15. Fran Barlow
    August 6th, 2017 at 04:00 | #15

    It will come as no surprise that I agree completely with John Quiggin here, who was careful to refer to post-secondary education rather than university education per se.

    I’m not even sure that Scandinavian-style tax structures are in practice necessary to fund such a policy. While highly progressive tax structures are useful in restraining distributional inequality and controlling money supply, the link between revenue collection and support for public policy programs is tenuous at best.

    I also agree with Julie above on far more generous and ubiquitous support for quality early education, and its persistence through the 12+ years of formal school education. As a teacher, you’d expect me to take that view of course. Early childhood and primary education is where the low hanging fruit is in empowering our future citizens to be the best they can be. Drop the ball here and you are going to be playing expensive and often, ineffective catch up. There should be OOH care for secondary children too, IMO. That would make a huge difference, particularly in areas where low-SES was the norm. Again, DOCS can never hope to identify and respond to unmet need with the effectiveness and efficiency that the proverbial ounce of prevention does.

    Well done John though for speaking up on post-secondary and opposing profit-based education. There really is a conflict between these two things most of the time.

  16. hc
    August 6th, 2017 at 11:35 | #16

    @derrida derider

    Most educational benefits are private. Ignoring HECs the taxes we pay are not education specific.

  17. Smith
    August 7th, 2017 at 09:49 | #17

    @derrida derider

    You can’t deny, surely, that there are private benefits to university education. On average, people with degrees earn more than people who don’t, in some cases (doctors, dentists, corporate lawyers etc) much more.

    Yes, they also pay higher taxes and yes, society benefits from having educated people, but investment bankers with their finance degrees live in $20 million houses on Sydney Harbour and that is a benefit to them, not society.

    And yes, not every one with a degree earns a lot of money, but if so they don’t have to repay much if any of their student loans. And yes, some people with university degrees do work that is of large and direct social benefit, such as nurses. I’d be happy for their education to be free, but they are the rare exception.

  18. derrida derider
    August 7th, 2017 at 16:07 | #18

    @hc
    “Ignoring HECs the taxes we pay are not education specific.”
    Wrong – the extra income we get through extra education is taxed, and that extra revenue would not be realised in the absence of that extra education.

    And because it is marginal income it is taxed at the marginal rate – which in the case of tertiary education will, for income tax, be at or near the top marginal rate (for other taxes that are neutral, it’ll be taxed at the same rate as any other income). In fact, to the extent that the private rate of return is higher than the social rate of return (due to screening effects in the labour market – that is, a degree signals your productivity rather than creates it) the government will get more than the optimal share of the social return, which from the government’s POV strengthens the financial case for funding it.

    Think of it as a capital investment by today’s government – spending now to get a return in the form of tax revenue later. Its no different than building an NBN, or spending on R&D.

  19. derrida derider
    August 7th, 2017 at 16:14 | #19

    @Smith
    You’ve missed the point. My argument assumes ALL the economic benefits to education are private. In fact judged purely from an economic POV more than all are because of screening effects (AKA “credentialism”) – though empiric research suggests screening effects are not large. Assuming social rates of returns are greater than private rates means assuming either spillovers from skilled workers in the workplace (for which empiric evidence is scant) or non-economic benefits to society – that is, that education is a merit good.

    FWIW I’m in favour of the last, but its not what we’re discussing here.

  20. Smith
    August 7th, 2017 at 16:18 | #20

    @derrida derider

    “the extra income we get through extra education is taxed”

    Actually, it’s the extra income we get for any reason that is taxed. Two people, one with tertiary education, one without, who have the same income pay the same amount of tax. hc is right. There is no education-specific tax.

  21. Smith
    August 7th, 2017 at 16:32 | #21

    @derrida derider

    Hmmm … taking your argument at face value for the moment, what about foreign students (who make up a large fraction of tertiary students)? If education was free, they would pay nothing, go home and their governments would the tax revenue. Then there are the Australian students who get their degree and move overseas.

    In any case, the current system, for domestic students, approximates your “optimal” scheme. Students can borrow 100% of the costs, and if there is no extra return (approximated by their incomes below the HELP threshold) then it costs them nothing and the government gets no extra tax revenue.

  22. hc
    August 7th, 2017 at 18:01 | #22

    @derrida derider

    James Packer does not have a university degree.

  23. Collin Street
    August 7th, 2017 at 18:33 | #23

    hc :
    @derrida derider
    Most educational benefits are private.

    Note that this assertion includes a-fortiori the assertion that the bulk of the marginal product of education flows through to the educated employee and doesn’t significantly increase the employer’s bottom line.

  24. Bernard J.
    August 9th, 2017 at 00:20 | #24

    Some of the commenters here seem to be missing the point that quality education delivers significant non-economic benefits to all of society and not just financial benefit to those educated.

    Absent social support of students’ educations, perhaps those who benefit from the the education of others should pay for those provided benefits that are not paid for through salaries. After all, if students should pay for what they get, then…

  25. hc
    August 9th, 2017 at 10:40 | #25

    @Bernard J.

    I think no-one does not understand this. Currently students pay 1/3 the cost of their education while society foots the 2/3 remainder. Are the external benefits that big? It is a difficult question. People who have higher skills are better paid which is a private benefit and sometimes pay more tax, a public benefit. Some say that better-educated people make better social decisions e.g. at election time. Again a social benefit. I don’t think the current 1/3:2/3 split is wildly unfair to students but a 0:1 split is wildly unfair to society and allocatively inefficient since students at the margin will value their education at less than the actual cost of paying for it.

  26. zoot
    August 9th, 2017 at 14:56 | #26

    @hc
    Are you arguing that primary and secondary education, where a near 0:1 split is almost universal, are wildly unfair to society?

  27. Smith
    August 9th, 2017 at 17:14 | #27

    @zoot

    0:1 is only (sort of) true for public schools, who account for 84% of school enrolments. It’s a good question though. The answer might be that there are no private benefits to a public school education.

  28. hc
    August 9th, 2017 at 18:25 | #28

    I think primary and secondary education are a bit different. They are costly particular when, like me, you have 3 kids and put them all through private schools. It kept me poor for 20 years – taking almost 40% of my salary at my primary job and forcing me to do outside work – with many sleepless nights as well as I wondered how I would pay the massive 3-monthly bills. But very happy with the outcomes. No regrets though it might have taken a few years off my life.

    The public schools are not costless either but there is obviously a bigger subsidy element. I don’t object to this because, with some inconsistency, I am happy to see redistributions specifically directed towards young children.

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