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Dispelling the myths about university deregulation

Hiking fees doesn't deter poor students from going to university.

As the Coalition government attempts to deregulate higher education fees, two important arguments that opponents tend to focus on need to be addressed; that these changes will deter students from low-income families from going to university due to higher fees and that it will not result in a competitive market.

Evidence from the rise in tuition fees in England suggests only one of those argument stands up to scrutiny.

Myth: Deregulation of university fees will create a competitive market.
Myth: Deregulation of university fees will create a competitive market. Photo: Rob Homer

Between 2004 and 2014 the UK government trebled the maximum amount universities in England could charge per year from £3000 to £9000. However, contrary to assumptions, the hike in tuition fees in England has not deterred young people from poorer backgrounds from going to university.

Indeed, over this period the number of young people from low-income backgrounds applying for a university place actually increased 70 per cent. This is despite the fact that the average debt for students is now £44,000 ($80,000) and that the Institute of Fiscal Studies think-tank estimates that three-quarters of students will still owe debt in their fifties.

It is a reasonable enough assumption that young people growing up in poverty would balk at the prospect of spending several decades paying off debt after university, especially as there is no guarantee they will even get a decent job at the end of it.

However, there appears to be a number of reasons why this isn't the case. Over the past few decades many occupations in the UK have gone from recruiting school leavers to insisting on undergraduate, if not postgraduate qualifications. The erosion of trade union power combined with de-industrialisation during the 1980s and 1990s means that in the UK most decent-paying jobs now require a degree.

Britain is currently experiencing the longest drop in living standards since the 1870s and it seems that young people feel they must take on the financial risk of debt in order to get a well-paying job. Indeed, if you are on a sinking ship and you are offered a place on a lifeboat for the price of $100k, to be paid off over the course of your lifetime, you'd probably take it. You probably wouldn't dive into the shark-infested ocean and hope for the best.

It seems that in England students see the opportunity of improving their lot in life as worth the cost of fees, no matter how long it takes to pay off the debt. That doesn't justify the rise in tuition fees, but it does explain why poorer students are increasingly choosing to study at university.

The best argument against the deregulation of tuition fees is that it will do nothing to create a competitive marketplace. In 2012 when the UK government allowed universities to choose what to charge for a degree with an upper limit of £9000 per year, ministers claimed this figure would be used only in "exceptional cases". In fact the reverse is true. The average university in England now charges £8700. The reason for this is fairly obvious; if a university were to charge less it would be seen as being of worse quality.

The British job market is already defined by the country's class system with job adverts looking for applicants from "a good university"; eg.  one that's older than most people's houses. No university wants to look like it is a second-rate institution. There is not even a market within the universities themselves as courses which do not require expensive equipment, such as history, cost the same as courses such as medicine, which clearly cost much more to run.

Also, from a student point of view, there is little point in saving perhaps a thousand pounds at enrolment if on graduating you cannot find a job. If a prestigious university is charging more or less the same fee as a less illustrious institution, why choose the latter?

Those that oppose the deregulation of fees in Australia would, therefore, be on safer ground if they focussed on the government's argument that it will create a competitive market in the higher education system.

There is overwhelming evidence from the UK that tells us that this simply doesn't work as universities will invariably charge as much as possible, even for degrees in the humanities that are cheap to run. Most young people with their heart set on a job that requires a degree will still choose to study at university even if there are higher fees. This is especially true when an economy is in trouble.

Therefore, the failure of free market theory in the higher education sector is the argument Australian progressives must make against tuition fee deregulation.

Pete MacLeod is a Scottish writer based in Australia.

@petemacleod84