Letter from Australia: The regional advantage

There is nothing quite like the indignity of having your preconceptions smashed to pieces.

Over many years I’ve been thinking and writing a lot about graduate outcomes and whether an oversupply of graduates would wreak havoc on the graduate employment market and what that means in terms of credentialism and under-employment.

The issue got an airing recently by Karen Chester, deputy chair of the Productivity Commission. In a presentation that touched on the emerging world of work, Chester took aim at universities arguing they needed “more skin in the game” in terms of graduate outcomes.She spoke of the substantial cohort of “additional” students.”

“The additional being the product of a world of uncapped demand,” she said. Indeed, domestic student numbers increased from 834,000 in 2010 to 1,081,000 in 2017.

“And whether in that uncapped world, universities (with little ‘skin in the game’) have delivered for those students. Especially the student for whom the better path to employment might not reside in expensive sandstone learning.”

Chester suggested there needed to be a realignment of financial incentives for universities with student outcomes that might “encourage (them) to tailor the education they provide to workforce needs”.

Regional disadvantage

The idea of funding completions and not just enrolments is not a new idea. There has also been talk from the Coalition of a 7.5% performance based fund contingents on things such as graduate outcomes.

But there are many reasons why every time it gets raised it quickly gets shoved back into the too-hard box. One, it would be very hard to administer, as plenty of examples from the US have shown us. Two, predicting workforce demand has proven nigh on impossible over many decades. And three, this would be especially so in a world where jobs, careers and skill sets are uncertain and unknowable – AI, machine learning, automation and all that jazz.

Another lesser but valid reason is that regions, in particular, feel they would be effectively screwed under such measures. As many a regional VC has told me, they understand all too well that they are often used as stepping stones to more prestigious institutions.

Students with sub-par entry requirements often enrol in these universities and once they have their study mojo happening, they all too often transfer to another metropolitan uni with a better-looking logo and smarter reputation.

However, all is not as it seems. I’ve been pouring over the latest report on graduate outcomes which looks at average employment levels and salaries three years after graduation and breaks the data down into individual institutions, as well as disciplines.

What I found was not entirely expected.

Regional advantage

First up, some regional universities have far better graduate outcomes in terms of both full-time employment and salaries than their prestigious, sandstone counterparts.

For example, the survey tells us that Charles Sturt University (regional, lots of online students) has the highest employment rate three years after graduation (93.6%) of Australia’s 39 universities. That’s a bit of a shock.

On the flip side, the University of Melbourne (Australia’s highest ranking institution, a mecca for super high-achieving school leavers) has the second lowest rate (84.2%). The same goes for graduate salaries. Melbourne graduates earned on average $65,000 (£36,000) three years after graduation, while Charles Sturt graduates earned a whopping $78,300 (£43,300).

Then I looked at postgraduate outcomes, thinking that Melbourne’s particular model of broad undergraduate degrees and postgraduate professional education might be driving a certain lowly dynamic.

While full-time employment rates had been inverted somewhat (Melbourne was fourth highest at 94.7% while Charles Sturt sat close to the median at 92%), when I looked at salaries I was flabbergasted. Sure a Group of Eight university (University of NSW) had the highest postgraduate salaries ($114,800), six of the top eight were regional-based universities.

Central Queensland University had average salaries for postgraduates three years out at $108,300. Federation University ($105,000) and Southern Cross ($100,000). Not to put too fine a point on this, these are not brands synonymous with prestige and international rankings. Meanwhile, postgraduates from the genuinely world-class Melbourne University earned an average of $86,400.

The question is why?

I mean, Melbourne and its ilk attract the lion’s share of super-high achieving school leavers. So what’s happening here?

In search of answers

Thankfully Andrew Norton from the Grattan Institute and Lisa Bolton from the Social Research Centre, which conducts the surveys, came to my rescue.

First up, regional universities in recent years have radically increased the number of online students they have. Online students tend to be mature age and part-time, which means they are most likely already employed when they start and finish their degrees. Conversely, the Group of Eight attract large numbers of high-achieving school leavers who are in their very early 20s when they graduate. Salary increases over time, no matter where you live.

Second, discipline is an important factor. Universities with large numbers of nursing and teaching students will do well in the salary stakes because of high salaries on entering the profession, but which don’t continue on an upward trajectory over time. Data provided to Wonkhe by Norton shows that in 2014 (the year for which the final-year cohort was surveyed for the report), CSU had 1800 education and health students but just 131 science students. Melbourne, on the other hand, had 2108 science students and 42 health students. It had none in education (it’s offered as a postgraduate course).

Science, arts and creative arts are all low-reward degrees, according to myriad data.

Scale and strategic focus

Norton tells me he has a couple of theories.

The first is that it’s a matter of scale. “The Go8 universities are very big compared to the top universities in other countries (such as the Russell Group), and therefore not that elite, comparatively speaking,” he says.

The other is that the Go8 choose to build their reputation via research not teaching because they assume the best and brightest will come anyway. As Norton says: “Average quality of teaching is not better at Go8 universities than at other universities (as we know from student surveys).”

Public funding for teaching is neutral between universities, and student contributions are capped. “Though the Go8s have more income and wealth, it is spent on research rather than teaching. It’s unlikely that the Go8s genuinely add more human capital than other universities, and Australian employers tend to pay on observed performance rather than potential (as seen in uniformity of starting salaries).”

It’s a bit harsh but fascinating stuff. If it were possible to measure the value added to individuals throughout their degree it is completely plausible that regional universities are doing the heavy lifting.

However, both Norton and Bolton say that if the survey was taken again five years after graduation, the data would likely take on a different shape with Go8 graduates potentially hitting their straps as they get older and gain traction in their careers. The impact of high-earning medical and dentistry graduates (most of whom study as postgraduates in Go8 universities) would also be factored in.

But back to the Productivity Commission’s Karen Chester. Many of the “additional students” have been taken in by these very institutions that are topping graduate outcomes surveys.

It would seem, on this data, at least that the demand-driven system is delivering exactly what was intended of it – a transformational education experience for people who would otherwise have struggled to get a place.

I completely agree with Chester when she said: “The tertiary sector is set up against becoming a chef at 40 or a dementia worker at 50. Retraining is inconvenient and expensive. And the approach of education institutions remains outdated and outmoded.”

She’s right. But for the time being, graduates are still benefiting from their university degrees. In 2007, three years after graduating 92.6% of graduates were in full-time employment. In 2018, the figure was 89.2%. That’s far from a crisis.

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