Education Talk: The Demand Driven Funding System and Education Accessibility in Australia

Education Talk: The Demand Driven Funding System and Education Accessibility in Australia

Are drop-out rates really the measure that we should use to determine value of the demand driven system?

By Paul Wappett, CEO, Australian Institute of Business

Recently, the Productivity Commission released its report into the effectiveness of the demand driven system of funding the Australian Higher Education system, concluding that:

  1. it had been successful in enabling students from particular social-economic demographics to access higher education in greater numbers than had previously been the case;
  2. students within those demographics had achieved lower than average pass rates and completion rates;
  3. graduate employment and salary outcomes were largely commensurate for those students who had successfully completed their qualifications.

Some seized on the second of those conclusions and pursued a narrative along the lines of, “it’s a bad idea to permit people who are not ‘up to’ uni to enrol in courses”. Much of the media coverage of the report’s findings (and, indeed, the Productivity Commission’s own media release) used a lede that the demand driven system had been given a “mixed report card”.

Yet, the demand driven system was explicitly and unashamedly about increasing participation in higher education, particularly amongst those who had been previously underrepresented, including Aboriginal and Torres Strait islander people, first-in-family students and people from lower socio-economic communities. In announcing the system in 2009, then Education Minister Julia Gillard said, “[Australian people being amongst the most highly educated and skilled on earth] is a vision for all Australians; not just a few Australians. Our nation will never be at its best if we ignore the skills and capacities of those who are not born into privileged positions.” She set a target for 40% of 25-34 year olds to have at least a bachelor level qualification by 2025.

Assessed against that objective, there can be no debate; the demand driven system has done what it set out to achieve. Participation in higher education is at the highest levels in Australia’s history, particularly amongst previously underrepresented demographics.

It is legitimate to debate whether the increased funding burden is a good use of taxpayer funds, but not as an argument about who should get to enjoy the benefits that a university education brings.

The Grattan Institute’s 2012 study, “Graduate Winners” found that university graduates enjoy a lifetime advantage in earnings of approximately $800,000 versus Year 12 graduates who complete no further study. The causal relationship between the two is indisputable; access to education provides economic benefits that are not available through other means. But it’s not just a private benefit; in addition to the higher wages, university graduates are less likely to be unemployed, leading to higher tax revenue and lower welfare payments that benefit all Australians.

While the PC report cites the disproportionately high attrition rates amongst the equity cohort (for example, 22% attrition compared to 12% for the non-equity cohort), the gnashing of teeth that this has prompted is staggering. The essence of the argument is that the benefits to which four-fifths of the equity cohort now have access, but to which they previously would have been denied, ought not be available to them because the remaining fifth of them “waste” taxpayer funds.

But what about those 78%? Surely, the benefits that are already flowing to them (the report demonstrates that their graduate outcomes in terms of employment, employment in managerial or professional occupations, and average weekly pay, is at substantially the same levels as those of “traditional” students) are a sign of a real meritocracy.  Surely, the fact that this education and those earnings will enable them to provide greater opportunities and living standards to the next generation helps to dismantle structural disadvantage.  Surely, the additional productivity and expertise that the 78% will bring to an Australian economy increasingly reliant on knowledge rather than brawn will help our international competitiveness and lead to economic growth.

Secondly, while that percentage is higher than for non-equity students (who drop out at 10%), because the equity cohort is substantially smaller than the traditional cohort, the actual number of equity students who dropped out of university is much lower than the number of traditional students who dropped out.  Sure, let’s have a discussion about drop-out rates across the board, but let’s not demonise the already vulnerable.

In any case, can we say that those 22% received no benefit from having been enrolled into university.  Gates dropped out of uni. So did Jobs. And Zuckerberg. Closer to home, Scott Farquhar and Mike Cannon-Brookes dropped out of UNSW to form Atlassian. Janine Allis dropped out and created Boost Juice. Now, not every one of the 22% is likely to achieve those heights, but sometimes the confidence you get from having been accepted into something you thought was not available to you gives you the spur to pursue your passions. Sometimes, the few subjects you complete before you drop out give you the base to try the career that you’ve always dreamed of.  And you know what: education and knowledge are not a race.  The Productivity Commission report measured outcomes by the time a student turns 25.  There’s a lot of time left to go back to university.  Many of those students who dropped out of an undergraduate degree do exactly that; at Australian Institute of Business, the private higher education provider I lead, about 50% of our students are admitted to study towards an MBA based on their management experience rather than an undergraduate degree (although many of that cohort dropped out of undergraduate degrees to enter the workforce and came back to study later).  Don’t underestimate the confidence that comes from having been admitted to university, even if they don’t complete a course.

The Australian economy is changing shape.  We need an educated and capable workforce.  Already, the Government has effectively ended the demand driven system for education. Let’s hope that’s not short-sighted.


This opinion editorial written by AIB CEO Paul Wappett was published by The Australian on 24 July, 2019. 

Illustration: Eric Lobbecke

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