May 21, 2014

Horse 1678 - Deregulation of University Fees - A Bad Thing

One of the few investments that a society can make which is absolutely guaranteed to turn a profit is the education of its citizenry. Education people is something which improves one of the four factors of production and whilst land may be improved through better techniques and technology (and in some cases, the demand for new resources previously thought useless*), capital and enterprise can not.
Furthermore, university graduates earn roughly 27% more on average than people who never went to university. That extra 27% income over a lifetime, more than easily makes up for and pays back the costs of education; which on a whole of life survey is actually a pretty good reason why all education in my opinion should be entirely free to the end user.

It can be very easily argued for instance that widespread literacy as a result of offering even a basic education to all between 1890-1920 lifted millions out of poverty; and the vastly increased incidence of university educated people from the 1940s onwards, led to the current technological revolution which we find ourselves currently living in. On top of that, university education in particular is perhaps the greatest single contributor to social mobility yet invented.
For these reasons, I think that the current policy announced in the 2014/15 budget to allow the deregulation of university fees and to allow the universities to charge whatever they like, is possibly the single most destructive education policy ever seen in the history of the Commonwealth of Australia.

Market forces are extremely efficient at finding one thing only - price. Market forces are perfectly fine when it comes to things like commodities or consumer goods where the goods and services are interchangeable - it doesn't really matter for instance what brand of petrol that you put in a car; it doesn't really matter that the price of one can of tomato soup is more expensive that another. However, just because market forces are efficient at establishing price levels, it does not imply that they are the best mechanism for establishing what is best for society.
I don't think that education is one area where the market forces work in the best interests of the country as a whole. It very much acts in the best interests of those people who which to see social class enforced. Like health care, no-one chooses of their own volition to get sick and I argue that it is impossible to choose our parents’ socio-economic status.

Deregulation of university fees would most likely have the immediate effect of a massive shift in the supply curve of university places to the left; a new equilibrium position would be found, such that universities' profits are maximised. That sounds fine and good until you realise that a shift to the left in the supply curve, forces the equilibrium position upwards and the price goes up.
University students by themselves do not have a very large pool of capital upon which they can draw to pay for university fees. An increase in university fees has one of two effects:
1. Either it forces the students to take on debt; which they might have hanging over them for years.
2. Students from higher-socio economic backgrounds have their fees paid for by their parents, which means that in the mean time, due to things like capital accumulation and wealth condensation, those people remain richer and the whole process actually accelerates wealth inequality.

Deregulation of university fees actually helps to enforce class structure in society and by locking out some potential students altogether, condemns them to a life with reduced social mobility. If you want to see the results of this experiment, look no further than the United States or the United Kingdom which are so class entrenched that if someone's ancestors went to university 300 years ago, then they stand a far better chance of going to university today.

In 1974, the Whitlam Government passed legislation which made university fees and education completely free for students. In 1989, Hawke Government set up the Higher Education Contributions Scheme which re-introduced university fees and the last group of students who benefited from free education were those who were born in 1971.
In the time-frame from 1974-1989, the Prime Minister, Tony Abbott, the Treasurer, Joe Hockey and the Minister for Education, Christopher Pyne all went to university for free. Free! Yet here they are, in 2014 as responsible Ministers of the Crown have decided to pull the drawbridge up behind them.

As a taxpayer, I don't mind paying for people to go to university. The smart ones will learn things which will go on to make life better for everyone; those people who study the humanities which supposedly don't return a financial gain, go on to be more interesting people; even the people who don't go on to complete university studies will have learned something. All of them will have had the quality of their labour improved. In the case of TAFEs, Colleges, Apprenticeships, Traineeships, their labour is improved directly.
I suppose that basically I am more or less selfish because deep down, I don't want to live in a country full of uneducated people. I don't want to live in an economy where the only thing that determines where you end up in life, is where you started.
I don't see how throwing education to the forces of the market, improves society. I think that it defiles the premise of the Legislative powerr of the Parliament as defined in Section 51 of the Constitution which is to make laws for the peace, order, and good government of the Commonwealth and thus... a bad thing.

*Crude Oil for instance was a pretty well pointless thing until the invention of refining, petroleum usage and the invention of plastics.

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