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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Jobs in the services sector have smartened up

So much for our ailing economy. Did you see that 264,000 additional jobs have been created in the first eight months of this year, with 88 per cent of them full-time?

That's a remarkable increase of 2.2 per cent in total employment, according to trend figures issued by the Australian Bureau of Statistics this week.

Where did all those jobs come from? We won't know for certain for a week or two, but I can tell you now: not from agriculture, the production of goods (mining, manufacturing, utilities and construction) or the distribution of goods (transport, postal and warehousing; wholesale and retail trade), but from household and business services.

How can I be sure all the net increase in jobs will have come from the services sector? Because that's been the case for about the past 40 years.

This isn't all that surprising. As the Reserve Bank's head of economic analysis, Dr Alexandra Heath, observed in a speech last week, one of the most pronounced changes in the structure of our economy [and all advanced economies] has been its move away from a goods-producing economy towards a more services-oriented economy.

This isn't because we're producing fewer goods – we aren't – but because the growth in our production of services has been much faster.

"Australians are producing more services, consuming more services and trading more services with other economies than ever before," Heath says.

One reason for the shift to a services-based economy is that Australian households have experienced remarkable growth in their real incomes, she says.

We've had uninterrupted growth for more than 25 years, and real income per household has more than doubled since the early 1960s.

"As incomes rise," she says, "households typically spend more of their income on household services – such as health, education and restaurant meals – than on goods."

But demand for business services – that is, businesses providing services to other businesses - has seen its share of gross value-added grow from less than 20 per cent in the early 1990s to more than 25 per cent today.

The category includes professional and technical services; information, media and telecoms; rental, hiring and real estate; and financial and insurance services.

Part of this growth is just the reclassification of existing activity from goods to services as businesses that produce and distribute goods have increasingly outsourced non-core activities to specialist providers in the services sector.

The trend to outsourcing has been encouraged by technological advance that's lowered the cost of communication and logistics (moving things around) and meant that the scope and complexity of what can be outsourced have increased over time.

(Though, in my humble opinion, firms that outsource their telephone answering to overseas call centres where people you can't understand repeat scripted lines regardless of the context, and have little power to fix your problem because the firm back in Oz doesn't really trust them, will one day reap the customer revenge they so richly deserve.)

It should involve cost savings to outsourcing firms because specialist providers are able to achieve greater economies of scale and pass some of the benefits on to their customers.

So outsourcing is an example of one of the key building blocks of our modern prosperity: ever-greater specialisation and exchange, leading to ever-greater productivity. (This ought to be true when profit-driven businesses do it; it's not always true when governments do it badly or with ulterior motives.)

But outsourcing doesn't explain all the growth in business services. Some of those services are totally new.

And Heath says there's evidence that the nature of the work being done in the business services sector is generally changing faster than in other sectors. "This all suggest that business services are at the centre of how technological change is transforming the Australian economy," she says.

Traditional business services, such as accounting and legal, have been joined by management consulting, internet providers and computer system design.

The growth in outsourcing of business services, and the increasing integration of business services with other sectors of the economy, fit with evidence that "supply chains" are getting longer. That is, there's an increasing number of stages through which goods and services pass.

Not surprisingly, the goods production sector is the most fragmented – has the longest supply chain – because it uses the most "intermediate" inputs to produce its final products.

Research suggests that the reorganisation of production associated with the lengthening of supply chains has led to a shift towards more high-skilled labour, Heath says.

There's growing evidence that advances in computer technology have helped drive a shift from routine to non-routine jobs, creating new jobs as well as making others obsolete.

The share of people employed in the business services sector has almost doubled over the past 50 years, to be about 20 per cent of the workforce. Most of this growth has been in "non-routine cognitive" jobs, as you'd expect when computerisation is an important driver.

(Similar forces are working in the household services sector – all those extra doctors, teachers and academics – although it has also seen a significant increase in demand for non-routine manual jobs.)

If you look more directly at the types of skills and abilities required in the business services sector you see that, since the mid-1990s, there's been a shift towards occupations requiring higher-level cognitive skills such as systems analysis, persuasion, originality, written expression, complex problem solving and critical thinking.

Heath concludes that the business services sector "has played a key role in the way the economy has responded to technological progress.

"In the process, business services have become more important, more specialised and more integrated with other sectors. There is some evidence that this has been associated with higher productivity growth."

Figures from the labour market "also support the idea that business services industries are at the heart of how technological change is transforming the structure of the economy".

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