We’ve turned our unis into money-grubbing exploiters

Of the many stuff-ups during the now-finished era of economic reform, one of the worst is the unending backdoor privatisation of Australia's universities, which began under the Hawke-Keating government and continues in the Senate as we speak.

This is not so much "neoliberalism" as a folly of the smaller-government brigade, since the ultimate goal for the past 30 years has been no more profound than to push university funding off the federal budget.

The first of the budget-relieving measures was the least objectionable: introducing the Higher Education Contribution Scheme, requiring students – who gain significant private benefits from their degrees – to bear just some of the cost of those degrees, under a deferred loan-repayment scheme carefully designed to ensure it did nothing to deter students from poor families.

Likewise, allowing unis to admit suitably qualified overseas students provided they paid full freight was unobjectionable in principle.

The Howard government's scheme allowing less qualified local students to be admitted provided they paid a premium was "problematic", as the academics say, and soon abandoned.

The problem is that continuing cuts in government grants to unis have kept a protracted squeeze on uni finances, prompting vice-chancellors to become obsessed with money-raising.

They pressure teaching staff to go easy on fee-paying overseas students who don't reach accepted standards of learning, form unhealthy relationships with business interests, and accept "soft power" grants from foreign governments and their nationals without asking awkward questions.

They pressure academics not so much to do more research as to win more research funding from the government. Interesting to compare the hours spent preparing grant applications with the hours actually doing research.

To motivate the researchers, those who bring in the big bucks are rewarded by being allowed to pay casuals to do their teaching for them. (This after the vice-chancellors have argued straight-faced what a crime it would be for students to be taught by someone who wasn't at the forefront of their sub-sub research speciality.)

The unis' second greatest crime is the appalling way they treat those of their brightest students foolish enough to aspire to an academic career. Those who aren't part-timers are kept on serial short-term contracts, leaving them open to exploitation by ambitious professors.

However much the unis save by making themselves case studies in precarious employment, it's surely not worth it. If they're not driving away the most able of their future star performers it's a tribute to the "treat 'em mean to keep 'em keen" school of management.

But the greatest crime of our funding-obsessed unis is the way they've descended to short-changing their students, so as to cross-subsidise their research. At first they did this mainly by herding students into overcrowded lecture theatres and tutorials.

Lately they're exploiting new technology to achieve the introverted academic's greatest dream: minimal "face time" with those annoying pimply students who keep asking questions.

PowerPoint is just about compulsory. Lectures are recorded and put on the website – or, failing that, those barely comprehensible "presentation" slides – together with other material sufficient to discourage many students – most of whom have part-time jobs – from bothering to attend lectures. Good thinking.

To be fair, an oddball minority of academics takes a pride in lecturing well. They get a lot of love back from their students, but little respect or gratitude from their peers. Vice-chancellors make a great show of awarding them tin medals, but it counts zilch towards their next promotion.

The one great exception to the 30-year quest to drive uni funding off the budget was Julia Gillard's ill-considered introduction of "demand-driven" funding of undergraduate places, part of a crazy plan to get almost all school-leavers going on to uni, when many would be better served going to TAFE.

The uni money-grubbers slashed their entrance standards, thinking of every excuse to let older people in, admitting as many students as possible so as to exploit the feds' fiscal loophole.

The result's been a marked lowering of the quality of uni degrees, and unis being quite unconscionable in their willingness to offer occupational degrees to far more people than could conceivably be employed in those occupations.

I suspect those vice-chancellors who've suggested that winding back the demand-determined system would be preferable to the proposed across-the-board cuts (and all those to follow) are right.

The consequent saving should be used to reduce the funding pressure on the unis, but only in return for measures to force them back to doing what the nation's taxpayers rightly believe is their first and immutable responsibility: providing the brighter of the rising generation with a decent education.

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Our universities aren’t earning the money we give them

Sorry, but the small funding cuts imposed on the universities in the budget don't rouse any sympathy from me.

In an ideal world we'd be investing more in our universities, but our world is far from ideal. And so are our unis. They're inefficient bureaucracies, with bloated administrations and over-paid vice chancellors.

To hear them talk, you'd think unis were the fount of all economic virtue. According to Sydney University's Michael Spence, the budget was "an opportunity missed, because the government's done nothing about the significant cost of research and, of course, university research is fundamental to the innovation economy about which the government is so enthusiastic".

Sorry, prof, but the electorate's too well-educated to swallow such spin. The unis contribute to innovation, but it comes from other sources as well, and the unis' contribution should be better than it is without extra funding.

It's true our unis are obsessed by research, but any innovation this leads to is almost accidental. The research the unis care about is papers published in prestigious foreign journals, which they see as the path to what they're really striving for: a higher ranking on the various international league tables of universities.

Education Minister Simon Birmingham boasts that, on one table, six of our 43 unis are in the top 100, with nearly half in the top 300.

The pollies should stop doing this. It just encourages our "sandstone" unis – the self-dubbed Group of Eight – in their crazy, self-absorbed race.

Had Birmingham's predecessor succeeded in deregulating fees and let the sandstones exploit their monopoly pricing power, they would have delighted in overcharging their students and increasing students' cross-subsidy of the academics' research.

All of us should strive for excellence in our work, but when you start trying to force the pace with league tables and the dreaded KPIs – key performance indicators – you lose the plot.

You shift the rewards from intrinsic to extrinsic, and almost as much effort goes into trying to game the indicators of excellence as being excellent. The big rewards go to those who excel at appearing excellent.

Our big unis are so obsessed by research that academics' promotion is determined almost solely by how many papers you've had published and how prestigious were the journals you got into. Plus how much in research grants you've brought to the uni's coffers.

Apart from the time they spend thinking of ways to turn the same bit of research into more than one paper, our sandstone academics seem to spend more time applying for research grants than doing research.

Then there's the cultural cringe. The sandstone unis are filling their upper positions with sunshine-seeking Poms, Canadians and the odd eccentric Yank, in the belief they'll do better than the locals at getting published in prestigious international journals.

Our academic economists have even conned the federal government into spending taxpayers' money in ways that penalises those economists foolish enough to want to research the Australian economy.

That's because American journals won't publish articles about a small and boring country like ours, but our own journals don't rank in the unis' eternal quest for a higher international ranking.

Notice anything missing? Ah yes, all those students hanging around universities.

The unsatisfactory state of our unis is partly the product of our federal politicians' – Labor and Coalition – decades-long project to quietly and progressively privatise our universities via the backdoor.

Like so much misconceived micro-economic reform, this project hasn't worked well. Put a decades-long squeeze on unis' government funding and what happens? The unis intensify their obsession with research status-seeking and do it by exploiting their market power over students – while building ever larger bureaucracies.

There are some excellent teachers in universities, but they're the exception. The unis pretend to value good teachers – and award tin medals to prove it – but, in truth, there are no promotions for being a good teacher.

Students are seen as a necessary evil, needed because the public thinks teaching their kids is the main reason for continuing to feed academics.

Since Julia Gillard's spendthrift decision to remove the limits on how many uni places the government is prepared to fund, the unis have slashed their entrance requirements so as to rip as much money off the feds as possible.

Are they producing more would-be teachers or journalists or candlestick makers than the economy needs?

Who cares? All the unis know is that cramming more students into lecture theatres yields economies of scale that can be diverted to pay for more research – and pay for some part-time casual to do your teaching for you.

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Why I don't feel sorry for fee-paying students

I have my heroes among leading American economists and psychologists, some of whom I know. One I don't is Alan Blinder. But when he wrote a book called Hard Heads, Soft Hearts, I knew I'd found my guiding star as an economics writer.

There are plenty of lovely souls whose heart bleeds freely for all manner of people who want us to believe they're being treated badly.

But hanging around with economists has left me imbued with the harsh reality of opportunity cost, my version of which says you can have anything you want, but you can't have everything you want. So be careful deciding.

The hard-headed truth is, feeling sorry for almost everyone is little different from feeling sorry for no one. I have only so much compassion to go around.

So, sorry, but among all the people claiming to have been hard done by in this month's budget, I don't have much sympathy to spare for the university students complaining about the increase in their debts.

By contrast, I have much sympathy for all those unemployed people hoping and searching for jobs that don't exist – unless, of course, the government's own figures for job vacancies are grossly understated.

Had industrial fate not intervened to prevent me attending my 43rd successive budget lock-up, I planned to wear my jumbo size JOB HUNTER NOT DOLE BLUDGER T-shirt, put up to it by friends at the admirable Brotherhood of St Laurence.

How prescient that would have been. The budget turned out to include an attempt to traduce the reputation of all job hunters by launching the government's umpteenth Crackdown on the Crackdown on all those "leaners" who lounge about taking drugs when they should be out pounding the pavement.

Did you know that some people are being given the dole before any savings they have are completely exhausted? It's an outrage on us upright citizens, groaning under the weight of massive taxation.

Isn't Centrelink bright enough to understand that forcing the jobless to go cap in hand to the Salvos whenever some large and unexpected expense occurs is part of their punishment?

Not content with cracking down on the unemployed, this budget cracks down on those lazy loafers at Centrelink. Do you realise there are days that pass without people on benefits being harassed in some way?

Do you realise that older people, some just a few years from pension age, aren't hassled nearly as much as young people are? It's wrong, it's discriminatory, and the ironically named Christian Porter and his hardworking sidekick Alan Tudge are just the punishers and straighteners we can trust to stamp it out.

I don't understand those two. Do they enjoy beating up the poor, or is it a hateful job they must do to keep their jobs in the ministry, to gratify all those pathetic voters desperate to feel morally superior to someone?

Nor do I get Malcolm Turnbull. He produces a surprisingly good budget intended to convince us he's not the pale imitation of Tony Abbott we thought he'd become, that the Coalition is committed to fairness after all, but can't resist adding the most lurid attempt to stigmatise anyone of workforce age who can't find a job.

Is Turnbull that much in fear of losing votes to the Redheaded One? Malcolm, you're a rich man, you don't have to sink so low.

(But let's not have too much righteous indignation from the Laborites. They're the crowd who went for six years without affording a significant discretionary increase in our pathetically low unemployment benefits. Perhaps they had to spend too much trying to prove they could punish asylum seekers with just as much relish as the Liberals.)

Back to the revolting uni students. You'd never know it from their cries of woe, but Education Minister Simon Birmingham has thrashed them with a pillow.

Their tuition fees – and hence their debts to the government - are being increased by just 7.5 per cent on top of indexation to consumer prices, spread over three years. When fully implemented, this will increase total fees for a four-year degree by between $2000 and $3600 – with that range roughly aligned with the likely earning-power of the particular degree.

We keep being told that the level of income at which people with debts begin having to start repaying them has been lowered from $52,000 a year to $42,000. What we're rarely told is that the bottom rate of repayment has been lowered from 4 per cent of their income to 1 per cent.

Combining the two changes, the time it takes to repay loans will increase by less than a year.

Uni students come mainly from the comfortable middle class and go to uni to get a certificate that pretty much guarantees them a well-paying job, including a much lower risk of becoming unemployed or staying jobless for long.

It's true the wider public benefits from the money governments spend educating people to graduate level, but equally true that the personal benefits to the particular graduate are about as great.

On average, Birmingham's changes will increase the graduate's share of the cost of their degree from 42 per cent to 46 per cent – and, thanks to the unchanged design of the loan scheme, do so without discouraging students from poor families from bettering themselves.

Sounds fair enough to me.

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Students pay for status under uni fee rise

With the Senate as unco-operative as it has become, it's not at all certain Education Minister Christopher Pyne's proposal to deregulate university fees will become a reality. But if it does it will involve harnessing the university status drive to help balance the budget.

The government's plan is to allow the universities to set their own undergraduate tuition fees for new students from January 2016. But this would be accompanied by a cut averaging 20 per cent in the government's contribution towards the cost of courses.

Joe Hockey has argued that fee control is holding back our unis, stopping them competing with the best overseas.

"Australia should have at least one university in the top 20 in the world, and more in the top 100," he said.

So the economic rationalists' claim that fee deregulation would make the unis more efficient is being combined with a status argument: we need to raise our top unis' rankings on the various international league tables.

What's the link between fees and higher international status? Allowing our top, research-oriented "sandstone" unis to charge much higher fees would allow them to divert more funds to their research effort (probably including paying higher salaries to attract higher-status foreign researchers), the thing that would do most to boost their international rankings.

This is the very motive for the sandstone (Group of Eight) unis' vigorous support for fee deregulation.

Both the proponents and the opponents of fee deregulation assume that the immediate fee increase needed to allow all unis to at least recover the cost of the reduction in the government's contribution to course costs would be just the first of many.

This, I have no doubt, is the main motive for the purse-string departments' advocacy of fee deregulation: giving the unis freedom to raise their fees whenever they want to will allow the government to continue to reduce its own funding of them - not just for teaching costs but also for research via the Australian Research Council.

The fact is, successive governments have been reducing their funding support for unis for decades. Although total spending on universities as a percentage of gross domestic product in Australia is about average among the advanced economies, by 2004 the proportion paid by government was third lowest. Fee deregulation would allow it to go a lot lower.

I don't doubt the econocrats are genuine in their instinctive belief that de facto privatisation of our unis would increase the competition between them, making them more efficient and improving the quality of service to students.

But this motivation would come a distant second to reducing the unis' drain on the budget. And I doubt the econocrats have given any serious consideration to the many instances of "market failure" involved in partially deregulating a government-owned oligopoly with considerable market power.
The scope for stuff-ups - "unintended consequences" - is enormous.

If the tertiary education "market" did operate in roughly textbook fashion, with individual unis lacking pricing power, competition between them would greatly limit their combined ability to raise their fees very far.

And yet it's clear the government and the sandstone universities are confident of their ability to impose big fee increases over a few years.

Why? Because they know that - though it's assumed away in the textbook model - the higher-status unis would be able to get away with making students pay for that higher status along with the cost of their tuition.

The tuition fees unis charge foreign students have long been deregulated. They vary widely between unis, with the sandstones able to charge a lot more than the "red bricks" (as the Poms would call them). As well, the level of fees charged varies by course, with those for higher-paid professions higher than for lesser-paid, regardless of differences in the actual costs of delivering such courses.

The econocrats assume deregulated fees for local students would follow the same patterns, but that's not guaranteed. There ain't a lot of precedent for this radical experiment.

Since the buyers' knowledge of the relative quality of degrees is far from perfect, there's a high risk the lesser-status unis would hike their fees by more than expected precisely to avoid sending a signal that their product was of lesser quality.

The non-sandstone unis don't like the sound of all this, but they won't openly oppose it because they don't want to publicly acknowledge their lesser status.

Meanwhile, some status-seeking students at sandstone unis could be obliged to pay not only the full cost of their tuition but also to cross-subsidise their uni's research effort.

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University status comes at a high price

Has it occurred to you that universities are fundamentally about the pursuit of status? Almost every aspect of their activities focuses on the acquisition of rank. And Christopher Pyne's proposed "reform" of universities is about harnessing the status drive to help balance the budget.

Ostensibly, unis exist to add to the store of human knowledge and to educate the brightest of the rising generation. All very virtuous.

When you think about it, however, you see that unis are about the pursuit of certification, standing, position and prestige. The main way they earn their revenue is by granting superior status to young people seeking to enter the workforce.

In theory, a degree proves your possession of knowledge in a certain area. Often in practice it certifies little more than that you're smart enough and persistent enough to have passed a lot of exams. Either way, try climbing the employment ladder without one.

This makes universities gatekeepers granting access to the good, well-paying jobs in the economy. Which gives them a kind of monopoly power.

In the old days the government paid them to teach, assess and certify young people; these days the young people are required, to an increasing extent, to buy their qualifications directly, making them customers as much as pupils.

Such is the strength of the unis' monopoly over access to the good jobs that most young people would be prepared to pay huge fees and take on very large debts before they resigned themselves to a lifetime of low socio-economic status.

The status symbols issued by unis are themselves subject to a well-understood system of ranking: doctorates rank above master's degrees, with thesis masters outranking course-work masters. Then come bachelor's degrees, with honours degrees higher than pass degrees and first-class honours higher than second class. Not forgetting the ultimate status symbol: being awarded a university medal.

But uni degrees are subject to a second, informal status ranking: employers (and parents) tend to be more impressed by degrees awarded by the older, bigger "sandstone" universities than those from younger, outer-suburban or regional unis.

While in the public's mind the unis' existence is justified by their teaching, few people become academics because of a burning desire to teach. Academics want to do research and, though some become good teachers and enjoy teaching, for the most part teaching is regarded as an unfortunate distraction.

The unis try to conceal the conflict between their priority (research) and the public's (teaching) by claiming that academics at the forefront of their discipline's research effort make the best teachers.

Students know this is rubbish. It pretends good teaching doesn't require possession of teaching skills and forgets that most undergraduate teaching has little to do with the teacher's super-specialty.

Academics know the fast track to the top comes from the quality and quantity of their research, as evidenced by their publication records. Promotion assessments - moving people up the status ladder from lecturer to full professor - give little weight to teaching, contribution to public debate or even the writing of textbooks.

The universities themselves are driven by their desire to raise their status relative to other unis by increasing the quantity and quality of their research. The government publishes regular rankings of our universities and their faculties, largely determined by their research output.

Universities threaten to sack academics who fail to reach research output quotas. They urge staff to compete for government research grants, granted partly on the basis of previously published research. Staff who win grants are rewarded with money they can use to pay part-timers to take over their teaching obligations.

The quality of published research is determined largely by the reputation of the academic journal that published it. All journals are ranked, with American and British journals scoring many points and Australian journals scoring few points.

(Since international journals are reluctant to publish research into Australian issues, this means our government uses our taxes to fund a universities-designed scheme that discourages our academics from doing empirical research on problems of particular relevance to us.)

In recent years the eight sandstone unis' greatest motivation has been to raise their position on a couple of regular international rankings of universities. To this end they've come increasingly to offer senior positions to American and British academics rather than locals, since the foreigners are more likely to get themselves published in more prestigious journals.

Some unis' drive to lift their international reputation involves a policy of never hiring lecturers whose highest qualification is a PhD they themselves granted. Cultural cringe, anyone?

How does this obsession with status-seeking tie in with the Abbott government's plan to deregulate uni fees? Watch this space.

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