Universities decline to cash in on Australian fee hikes

Neither students nor universities took much notice of the price signals rooted in the former Australian government’s Job-ready Graduates (JRG) reforms, research suggests.

An analysis of application and enrolment patterns in New South Wales and the Australian Capital Territory has found no firm evidence that universities shifted their behaviour to capitalise on JRG funding anomalies.

JRG more than doubled the fees and almost erased the teaching grants for undergraduate humanities courses, in changes designed to steer students into fields with better perceived job prospects. Critics said this created a perverse incentive for universities to boost their intakes of arts students, because the fees were higher than the combined revenue from fees and subsidies before the reforms.

But the new analysis, by University of Melbourne student Maxwell Yong, unearthed no evidence that universities overall – or university groupings, including the prestigious Group of Eight – had reacted to the reforms by increasing enrolments in courses that delivered higher funding.

“On average, there’s no effect,” said Mr Yong, an honours student in economics. “Some individual universities might have consciously boosted admissions in more lucrative areas. But if so, they were cancelled out by other institutions that ramped up their intakes in less well-funded fields, because that’s the trajectory they were on anyway.”

His study is the first detailed analysis of university applications since the JRG’s implementation last year. He obtained access to data on almost 750,000 applications lodged through Sydney’s Universities Admissions Centre between 2014 and 2022, enabling him to perform statistical analyses of trends before and after the changes.

His research advisers included Australian National University policy expert Andrew Norton and emeritus economics professor Bruce Chapman, architect of the income-contingent student loans scheme pioneered in Australia in the 1980s.

Income-contingent loans are thought to nullify the impact of fee increases or decreases on students’ appetite for higher education, because repayment is deferred for many years. Changes like Australia’s 25 per cent hike on most courses in 2005 and England’s near-tripling of maximum university fees in 2012 had no enduring impact on enrolment patterns.

Mr Yong’s analysis found that the same thing applied when fees were changed to make some subjects more appealing and others unattractive. While demand increased in some fields advantaged by JRG, such as nursing, teaching and agriculture, it declined in other areas supposedly incentivised by the reforms including languages, maths, engineering and science.

And while the share of applications for nursing, teaching and agriculture courses collectively rose by almost 5 per cent after JRG slashed their average fees by over one-quarter, this was mostly due to a pre-existing trend. Mr Yong’s model found that the fee reductions explained less than 1 percentage point of the increase in demand.

His findings suggested that students’ responses to price signals were extremely muted. Doubling fees or eliminating them entirely would affect student demand by less than 4 per cent either way, he extrapolated – and would not affect enrolments at all if universities did not change the number of places on offer.  

Mr Yong said there were numerous possible explanations for universities’ apparent insensitivity to price signals. They might not want to risk reputational damage by lowering their admission scores to boost recruitment in financially advantageous areas.

Universities might also worry about tarnishing their images as “places of scholarly learning” if they were seen as responding to financial incentives. And they might decide to put students ahead of their own fiscal interests, because they were reluctant to exacerbate the pain of Covid by curtailing opportunities for individuals to study their fields of choice.

Another possibility was that responding to JRG price signals simply did not stack up economically. Mr Yong speculated that universities operated on “long-term planning horizons” that made it hard to quickly boost or slash enrolments in particular fields.

Some courses required clinical places while others obliged universities to maximise their use of expensive educational equipment, such as the dentists’ chairs used in oral health degrees. Industrial agreements made it very difficult for universities to “fire a whole department”, while recruiting new staff in popular disciplines could prove equally challenging.

Mr Yong suggested that many universities “hadn’t really considered” their costs per student before JRG’s arrival. “There have been a few attempts to quantify universities’ marginal costs per student, and they’re all pretty unclear, because education as a product is really hard to disentangle from the research side of the university.

“There’s a lot of grey here, and universities aren’t going to make big enrolment change decisions when there are so many things they don’t know about themselves.”

john.ross@timeshighereducation.com