Education is leading the two sides of politics to change sides

A strange thing is happening in politics. People who in earlier times could have been expected to vote for the right-wing party are now more likely to be supporting the party on the left, while those who would have voted for the left in times past are now more inclined vote for the right.

This is something the insiders – the political scientists, pollsters and party professionals – know all about, but the politicians prefer not to admit. So it’s news to the rest of us.

You could see it alluded to in all the learned explanations of why Donald Trump romped home in the presidential election that was too close to call. But you can also see it in our own elections. Indeed, it’s a “secular” (long-term) trend occurring in the politics of most rich countries.

Did you see some commentator saying the Republicans were now the party of the working class? What! It’s truer than it sounds. Our own Farrah Tomazin wrote that the election saw “the realignment of the Republicans as a party that appeals to the working class while the Democrats have increasingly become the party of college-educated, upper-income suburban voters, especially women”.

A distinguished American professor of anthropology added that “Trump voters trend older, white, rural, religious and less educated”. It seems most “voters of colour” still voted Democrat, but enough Latinos and others defected to Trump to give him an easy win.

And, as I say, you see a similar role reversal going on here in Oz. Professor Ian McAllister of the Australian National University, who oversees its Australian Election Study, a large sample survey of voters following every federal election, says we’ve been gradually moving the same way since the 1990s.

His study, following the federal election in May 2022, found it showed a continuation of “major sociodemographic shifts in voting patterns based on gender, generation and social class, with significant implications for the future of the major parties”.

Historically, the two big parties represented the rival interests of voters playing different roles in the economy. Labor looked after the workers supplying their labour, while the Liberals looked after those small and big businesspeople supplying their capital.

The standard division between the working, middle and upper classes was based on people’s occupational status: blue-collar, white-collar, owners and managers.

But that economy-based division is being replaced by more people voting according to their social values and identity. McAllister says this shift is being driven by rising levels of education. Whether someone has a university education is now the best single predictor of how they vote.

As a general rule, those people with a university degree end up with values and preferences that are quite different from those of people who don’t have a degree, or left school early.

So, just as college-educated Americans are more likely to vote Democrat, Australians with a degree are more likely to vote Labor. People without tertiary education are more likely to vote Republican, Liberal or National Party.

It follows – again as a broad generalisation – that the more highly educated are more likely to live nearer the centre of big cities, where the better-paid jobs tend to be, while the less highly educated are more likely to be found in the outer suburbs and the regions.

Over the 34 years to 2023, the proportion of adults with a university degree has risen from 8 per cent to almost one-third. Each year, more than half of students completing high school go on to uni.

So, as each year passes, people in the oldest generation, who are less likely to be graduates, die, while the youngsters taking their place in the electorate are more likely to be graduates.

In his report on the 2022 federal election, McAllister found that Labor still attracted more working-class votes, although its share of them had fallen to just 38 per cent. The Coalition lost votes from university-educated voters, high-income voters and home owners – groups that, in the previous election, were more likely to have supported it.

A much higher proportion of girls are going on to uni these days, which helps explain why more women vote Labor than for the Coalition. And higher education does much to explain why Labor’s support is much stronger among younger voters.

McAllister has found that, as the Millennials get older – some are now in their early 40s – they’re less likely to drift to the right the way earlier generations did as they aged.

You might see the Liberals’ loss of six heartland seats to the teals as a clear example of the secular trend we’re discussing: Liberal voters who cared about climate change, a federal anti-corruption commission and more women in parliament, switching their vote to the teals.

But McAllister found it was more complicated than that. Only about one-fifth of former Liberal voters changed their vote. What got the teals across the line was strategic voting by those seats’ minority Labor and Greens voters. Knowing their party was never going to win, they threw their weight behind the teals, who did have a chance of winning.

As voters around the rich world become less likely to vote according to their economic class and more likely to vote according to their social and cultural values, political scientists have developed a fancy new theory that characterises parties on the left as GAL and parties on the right as TAN.

GAL stands for green, alternative (relaxed about gender fluidity, for instance) and libertarian (“my body, my choice”). TAN stands for traditional (“I liked it the way it was” and “the world should be run by men”), authoritarian (“we need strong leadership”) and nationalist (“why are they letting in all those strange immigrants?”).

So when, in coming months, you see Peter Dutton banging on about inflation, all those terrible immigrants and all the crime on the streets, and campaigning hard in the outer suburbs and regions, the media will tell you he’s borrowing from the Trump playbook. But now you’ll know there’s a lot more to it.

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Economists have a glaring problem: themselves

By MILLIE MUROI, Economics Writer

Economists don’t often get the chance to look at themselves. They spend their lives keeping a close eye on the actions, behaviours and motivations of others: people like you and me. But the self-reflection they have done recently points to a glaring issue.

When I was first getting my bearings in economics nearly 10 years ago, there were four giant posters at the front of my classroom. The heads of four economists, including Adam Smith, Milton Friedman and John Maynard Keynes, stared smugly down at me as I took notes on all the important things: demand, supply and how to pass my economics exams.

The profession looks a little different now, although maybe not as different as we would like to think. It remains disproportionately pursued by one gender – and those who are relatively well-off.

It’s a sentiment shared by Treasurer Jim Chalmers who said in a speech to high school students last week that we still need to strike a better gender balance, starting with school and university enrolments.

“The economics profession will need to reflect the diversity of our country – I’m thinking especially of attracting more women into these roles,” he said.

Why does this matter? Because the people who study economics are the ones who go on to make some of our most important economic decisions: the governor of the Reserve Bank, the chair of the Productivity Commission, and the head of the Department of Finance to name a few.

All three of these positions are now occupied by women for the first time: Michele Bullock, Danielle Wood and Jenny Wilkinson.

Gender is just one of the diversity metrics we need to monitor. But it has a big impact.

A survey of professional economists in the US showed that while there wasn’t much difference in the perspective of women and men when it came to economic methodology, there were notable ones on policy. Women, for example, were 32 percentage points more likely to agree that income should be distributed more equally.

As Wood wrote in 2018, teams of people who are too similar – in terms of gender, race, age and class – perform poorly because of their narrow range of perspectives and because they are more likely to lapse into “group think” where bad ideas go unchallenged.

“Study after study has demonstrated that more diverse teams make better decisions,” she wrote.

So, what is the state of the economics profession? It’s a question that Jacqui Dwyer, head of the Reserve Bank’s information department, has probed – and it starts at high school.

First, there has been a dramatic fall in the size of the economics student population. Over the past decade, year 12 economics enrolments have been sitting about 70 per cent lower than in the early 1990s.

“Most of the fall occurred during the mid-1990s, with enrolments then drifting down before persisting at relatively low levels for the past decade,” Dwyer said. Part of this is because of the introduction of business studies in the early 1990s, which has become a substitute for economics that students see as easier to learn with clearer career prospects – and which teachers see as easier to teach.

This has, in turn, led to fewer schools offering economics as a discipline. Government schools in particular have dropped off. While almost every school in NSW across the government and non-government sectors offered economics in the 1990s, only about 30 per cent of government schools now offer the subject.

This has led to less uptake of economics by students from less advantaged backgrounds, while the share of advantaged students picking up the subject has grown.

There’s also been a stark fall in female participation. Male and female students accounted for roughly equal shares of year 12 economics enrolments in the early 1990s. Since then, female participation has fallen off: males now outnumber females, two to one.

These numbers are crucial because they feed into the economics student populations at universities. While enrolments have grown in fields such as management and commerce, STEM and banking and finance since the 1990s, the number of economics students has flat lined.

Another factor weighing on economics enrolments at university is the perception that economics is a “riskier” subject to study with a less well-defined career path than other disciplines.

That’s despite economics graduates having among the highest average earnings (only beaten by engineering graduates) and one of the widest array of employment options, in terms of industry and occupation.

Economics students do, however, face some challenges in landing their first job out of uni. The unemployment rate of economics graduates is higher than disciplines such as health, education and business, especially just after graduation (although, as Dwyer notes, it’s a similar rate to those in science and information technology).

The fall in the number of economics students also impacts economic literacy in the broader population. This is important because those who are economically literate make more informed economic choices, better understand the world around them and can influence public discussions and government action.

They can also make public policy more effective by aligning their expectations or behaviour with its intended purpose.

Unfortunately, diversity issues continue into university. Unlike at high school, the gap between female and male participation has always existed, recently sitting at a similar ratio to what we see in high schools.

Even worse, there’s been a sharp worsening of diversity in socioeconomic status. “Economics has become a socially exclusive subject, with a higher share of students from advantaged backgrounds than is the case for most other disciplines,” Dwyer said.

More than half of university economics students are from high socioeconomic backgrounds, whereas only about 7 out of 100 were from the bottom 25 per cent.

The economics discipline is often criticised for its shortcomings: flawed predictions, incorrect assumptions and policy blunders.

While it will always be an imprecise science, If we want to improve public policy and the questions and discussions shaping them, the state of the economics discipline must change, reflecting the diversity of the people it studies.

As Chalmers has pointed out: “numbers are very important. But the main reason we study economics is not numbers, it’s people.”

If we want economics to serve people, we need the faces at the front of that classroom, and in the classroom, to reflect a wider set of perspectives that better mirror how our economy – and its people – work. That’s step one of improving the state of the discipline.

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Our troubled universities have become the politicians' plaything

If it wasn’t for their sterling success in fattening their own salaries, I’d be tempted to feel sorry for the nation’s vice chancellors. They’ve been screwed around for years by federal governments of both colours, and the mess they’re in – some of which they try to cover up – gets ever deeper.

They’re another victim of our decades-long dalliance with “neoliberalism”. But now the task is to sort out this and other messes a misguided experiment has left us with.

Successive federal governments have engineered a kind of backdoor privatisation of our universities. They remain owned by the states and heavily regulated by the feds, but have increasingly been told to pay their own way.

The feds have sought to greatly increase the proportion of school-leavers going on to university, but limit the cost to their own budget. They’ve done this partly by requiring students to cover some of the cost of providing their degrees themselves, but mainly by encouraging the unis to attract overseas students and charge them full freight.

I’m happy to defend the fairness and good sense of the original HECS – the higher education contribution scheme – but successive governments have increased and distorted the fees in ways that can’t be defended. The most egregious is the Morrison government’s crazy “job-ready graduates” scheme, under which it reduced the fees for some degrees, but doubled them for arts and some others.

Last month the federal Education Department revealed that the cost of a three-year arts degree is likely to reach $50,000 for students beginning their studies in 2025. The alleged purpose of the increase was to discourage young people from taking courses that didn’t lead to jobs where the demand for workers was great. Predictably, it didn’t work. And only an ignoramus would regard an arts degree as of little value.

Last week the new vice chancellor of Western Sydney University, Professor George Williams, complained bitterly about this, saying young people were being priced out of their dreams and fearful of being left with a HECS debt for the rest of their lives.

No one understands better than the Albanese government that the fees charged for different degrees should be based on the graduate’s likely lifetime earnings. But characteristically, it is hastening at a snail’s pace, hoping to fix it one day.

Many problems have arisen from the universities’ ever-growing dependence on raising revenue from overseas students. The big eight unis devote much effort to finding ways to game the various league tables of the world’s universities, knowing a high rank will allow them to charge higher fees to overseas students.

But now The Guardian Australia has reported that many overseas students can’t speak basic English, yet were passing courses and being awarded degrees. Cheating and plagiarism is widespread, it’s been told. I’m sorry to say I have no trouble believing these claims. But I have more trouble sharing the universities’ alarm over the Albanese government’s intention to impose uni-by-uni caps on how many overseas students they may admit.

Although federal politicians are happy to share the credit for our unis’ high international rankings, and delighted to have them less reliant on the federal budget, they’re just as liable to turn on the unis when their dependence on overseas income becomes a problem.

The hard line the Morrison government took with overseas students during the pandemic and the closing of our borders contributed to the unexpected surge in overseas students after the borders reopened.

It’s idle for the universities to deny that the surge has contributed to the shortage of rental accommodation. And it’s understandable for the government to want to ease the pressure on rents. But the surge is likely to be temporary and the various measures the feds have taken to correct their own mistakes are likely to fix the problem without any need to resort to caps. Sometimes pollies wield big sticks without intending to use them.

Some economists have questioned the official estimates of the value of overseas students’ contribution to the economy – up to $40 billion a year – which the vice chancellors have used unceasingly to claim credit for being Australia’s third-largest export after iron ore and coal.

The calculation seems inconsistent with the way the value of other services exports are measured. On a more consistent basis, the $40 billion might be nearer to $20 billion. If so, it’s support for my conclusion that the pollies’ backdoor privatisation of the unis has left us with the worst of both worlds.

Academics complain that their uni seems to have more administrators than academics. But what would you expect when you take a government department and demand that it start behaving like a profit-making business?

Just as the chief executives of big businesses are hugely overpaid, so now are vice chancellors – who, admittedly, do run huge organisations. The employees at the top justify their high remuneration by their success in holding down the wages of the employees below them. But the most deplorable thing the unis have copied from the private sector is the way they’ve used casualisation to rob young academics of any job security.

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Paying for the cowpat sandwich Morrison handed Albo

It never pays to be too sorry for politicians. They’re all volunteers, they’re well paid for what they do, and even the nicest of them have thrust themselves ahead of many others to get as far as they have.

But I can’t help feeling a bit sorry for Anthony Albanese. He got himself elected by promising not to change much, but I doubt he expected to be handed quite such a cowpat sandwich from the smirking Scott Morrison.

As part of his efforts to prove he could keep taxes lower than Labor, Morrison avoided fixing anything much and allowed waiting lists to build up. Now everywhere Albo and his ministers look, they find problems.

These problems will be expensive to fix. This week it’s Education Minister Jason Clare’s turn in the spotlight. The final report on the Universities Accord, which was released on Sunday, reveals plenty that needs fixing.

For openers, the previous government’s job-ready graduates scheme has been a disaster. Under the guise of encouraging students to pick courses that left them job-ready, it cut fees for teaching and nursing, while more than doubling the fees for such courses as arts and humanities, including economics and law.

As the experts predicted, this had little effect on the courses chosen. But it did have its intended effect: saving the government money. One expert suggests that returning tuition fees to something more reasonable could cost the government about $1 billion a year.

The report recommends that the fees for particular courses be set according to the expected lifetime earnings of someone with that degree. Good idea.

I’ve always been happy to defend the HECS-HELP debt scheme as a way of getting people to contribute towards the cost of their education. With repayments geared to the size of their income, and an interest rate far below commercial levels, it should not deter youngsters from poor families from attempting to better themselves.

But unsympathetic governments have fiddled with the scheme incessantly, and with the (hopefully brief) return to high inflation, it’s not surprising Gen Z is so dissatisfied. But Clare seems disposed towards the tweaks the report proposes.

Annual indexation of the debt would occur after deducting the year’s repayments, rather than before. The debt would be indexed to the lower of the rise in consumer prices or the wage index. And the rates at which repayments were required would be applied to successive slices of your income, just as income tax is applied.

There are shortages of workers with various tertiary qualifications at the moment, and the report sees the demand continuing to grow. At present, about 60 per cent of workers have trade or degree qualifications, and we need to reach at least 80 per cent by 2050, the report says. This would involve more than doubling the number of Commonwealth-supported students each year to 1.8 million.

Clare worries that not enough disadvantaged young people are making it to – and through – uni. (Let me tell you, people have been worrying about this at least since Gough Whitlam’s day. And even making university free didn’t help much.)

At present, people from poor families – those of “low socio-economic status” in academic-speak – account for about 17 per cent of enrolments, compared with 25 per cent of the population. Other target groups are First Nations peoples, people with a disability and people living in regional and remote areas.

The report proposes that uni students’ places be funded on a needs basis, similar to Gonski’s scheme for schools. Unis would receive a base amount per student, plus further loadings according to the particular students’ disadvantage.

This would mean regional and outer-suburban unis got a lot more funding per student than the sandstone central-city Group of Eight. But the extra money would be used to reduce the chances of disadvantaged students failing to complete their course for monetary or other reasons.

There would be fee-free courses to prepare chosen students for the rigours of university learning, and financial support for students required to undertake presently unpaid work placements.

It all sounds a big improvement. Quite apart from fairness, it’s clear that the higher the proportion of young people the government wants with a uni degree, the more it will need to include people from disadvantaged backgrounds.

But note this: none of these good ideas has been costed, let alone accepted by the Albanese government. We don’t know whether those that are accepted will start in this year’s budget or in 10 years’ time.

As for Gonski-like arrangements, the real Gonski needs-based funding for schools has still not been fully implemented more than 12 years later.

Let me quote Clare back at himself: “We’re not going to tackle this problem if we think that we can solve all the problems at the door of the university when someone turns 18.”

Just so. With education, it’s best to start at the bottom and work up. But we won’t solve many of our multitude of problems until some pollie has the courage to say maybe we need taxes to be higher, not lower.

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Universities teach us much about government mismanagement

I’m starting to worry about Anthony Albanese and his government. As politicians go, they’re a good bunch. Well-intentioned, smart and hard-working. Only occasionally got at by their union mates.

They’re anxious to fix things, which is surely what we elect our politicians to do. Things the previous lot either neglected or worsened. But, like all pollies, their overriding objective is to stay in office.

And I fear they lack what John Howard called the “ticker” to make the tough decisions. To knock heads together when needed. To make the unpopular decisions their predecessors shied away from.

Above all, to say to voters what a tradie says to a home owner: “I can fix it, but it’s gonna cost ya.”

Everywhere you look in the federal space you find problems: aged care, the National Disability Insurance Scheme, government employees who’ve gone for years being underpaid, especially women in the “caring economy”, who’ve been exploited for decades. Medicare, with its overstretched hospitals and staff, overpaid specialists and underpaid GPs. The way the increasing frequency of extreme weather events is making insurance unaffordable.

Housing – whether it’s home ownership or renting. The decades of neglect of public housing. The rundown of the public service and its expertise and its replacement by untrustworthy management consultants charging exorbitantly for self-serving advice.

What many of these problems have in common is that they’re the consequence of both parties’ decades-long experiment with “smaller government” and lower taxes and the always-dubious notion that, because the private sector is inherently more efficient than the public sector, handing institutions over to private owners and the provision of various public services over to for-profit providers would leave us much better off.

No. Government is smaller only because so many of its bits have been sold off. The new private owners have rarely hesitated to whack up their charges, but our taxes don’t seem any lower. Put it together, and we’re paying more for services whose quality has declined.

Education Minister Jason Clare’s plans to fix universities are an extreme example of supposed “reform” gone wrong.

Last month, he issued an interim report promising five immediate actions to start fixing the sector’s many problems, ahead of the more comprehensive changes to be proposed in the accord panel’s final report in December.

These involve setting up 20 additional “study hubs” in regional areas plus up to 14 outer-suburban hubs, abolishing the Morrison government’s rule requiring students who fail to pass 50 per cent of their courses to be sent away, giving uni places to all First Nations students who meet the eligibility requirement for the course, guaranteeing uni funding for a further two years, and persuading state governments to appoint more people to uni councils who actually know something about universities.

That list is too modest to fault, but nor is it likely to do much good. When it comes to universities, everywhere you look you find problems. The academics tell you the government isn’t giving them enough money to do good research; the students tell you the teaching isn’t good enough, with too much of it palmed off onto casuals. Too many students drop out of their courses without anyone much caring. Young graduates seeking a career in academia get no job security and are treated badly.

The Morrison government’s crazy Job-ready Graduates scheme cut the tuition fees for degrees it approved of – teaching, nursing and agriculture – while doubling the fees for the humanities degrees it disapproved of. There’s been no decline in people doing arts degrees, just a lot more debt for those who do.

The HECS student loans started life in the late 1980s as carefully designed and fair, but governments’ attempts to get the money repaid faster have stuffed up the fairness.

The plain truth is that successive governments have brought about a sort of back-door privatisation of our universities with disastrous results. They’ve been trying for ages to get the unis off the federal budget. Their big let-out has been to allow the unis free rein in overcharging overseas students.

They’ve succeeded in giving unis the worst of both worlds. Unis have been filled with layers of high-paid managers, whose main role seems to be to annoy the academics. If businesses can fill up with casuals and keep accidentally underpaying people, we can too.

Vice-chancellors have become fund-raisers, always hunting for new sources of revenue. They spend much time finding ways to game the various international rankings of universities, which impresses the parents of overseas students and allows the big-city unis to charge higher fees.

One problem for Clare is that though the unis are agreed the system is bad and needs big change, they can never agree on what the changes should be.

But the biggest problem is that nothing can be fixed without costing the government a lot of money. This is where Clare risks raising expectations the government can’t meet. We’re stuck with smaller government in the sense that the pollies aren’t game to ask us to pay more for a better one.

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Handle with care: Productivity Commission's advice on getting richer

If you accept the Productivity Commission’s assumption that getting richer – “advancing prosperity” – is pretty much the only thing that matters, then the five priority areas it nominates in its five-yearly review of our productivity performance make a lot of sense.

But when you examine the things it says we should do to fix those five areas, you find too much of its same old, same old, preference for neoclassical ideology over empirical evidence.

And you find no acknowledgement that part of our claimed failure to improve the productivity of the “government-funded non-market services sector” has occurred because, over recent decades, governments have acted on the commission’s advice to keep the public sector small and taxes low by outsourcing the provision of human services to profit-motivated businesses.

Which, if anything, has made matters worse rather than better. As witness: the mess we’ve made of aged care and vocational education and training, and the ever-growing cost of the National Disability Insurance Scheme.

The report is quick to explain that improving productivity does not mean getting people to work harder. Perfectly true. It’s supposed to mean making workers more productive by giving them better training and better machines to work with.

Except that when you see the commission recommending a move to “modern, fit-for-purpose labour market regulation” – including, no doubt, getting rid of weekend penalty pay rates – you realise the commission has learnt nothing from the failure of John Howard’s Work Choices, nor from the failure of the reduction in Sunday penalty payments to lead to any increase in weekend employment, as had been confidently predicted.

So, what the commission is really advocating is that the balance of power in wage bargaining be shifted further in favour of employers and away from workers and their unions. Which probably would lead to people working harder for little or no increase in pay.

What the commission should have said, but didn’t, is that workers would be more co-operative with bosses’ efforts to improve the productivity of their firms if they were more confident they’d get their fair share of the benefits.

At present, they have good reason to doubt that they would.

What’s conspicuously absent from all the bemoaning of the slowdown in our rate of productivity improvement, is any acknowledgement that there’s also been a huge fall in the rate of the flow-through to real wages of what improvement we are achieving.

Until that’s fixed – until the capitalist system goes back to keeping its promise that the workers will get their fair share of the benefits of capitalism – Australia’s households have no rational reason to give a stuff about what’s happening to productivity.

Back to the point. Productivity improves when you produce the same things with fewer inputs of labour or capital, or produce more – either more quantity or better quality – with the same inputs.

And the report is exactly right to say that steadily improving our productivity is the key to improving the nation’s material standard of living. The rich world has more than two centuries of proof of that truth.

The first of the report’s five priority areas is achieving a “highly skilled and adaptable workforce”. Dead right. This is economics 101. Economists have known for yonks that investing in “human capital” is the obvious way to increase productivity.

(And it’s the better-educated and trained workers who can most easily adapt to the changing demand for labour that the digital revolution and other technological advance will bring.)

But the commission long ago stopped pointing this out, while state and federal governments put their efforts into quite different objectives. The Howard government, for instance, spent hugely on expanding parents’ choice of private school.

“I’m a Callithumpian, and I’d like to send my kid to a Callithumpian school, where they won’t have to mix with sinners.” Next, we had the limited success of the Gonski-inspired push to fund schools based on student need rather than entrenched privilege and religion.

And then we wonder why school results have got worse and so many kids leave school with inadequate numeracy and literacy. How they’ll be advancing our prosperity in an ever-changing world I hate to think.

Which raises a recent “learning” by economists, that doesn’t seem to have reached the commission: if you ignore what your “reforms” are doing to the distribution of income between the top and the bottom, don’t be surprised if your productivity goes off.

For some inexplicable reason, growth in the number of the downtrodden makes the average look worse.

Meanwhile, with universities, the highest priority of successive federal governments – Labor and Liberal – over the past 30 years has just been to get them off the budget.

The feds have made them hugely dependent on attracting overseas students and charging them full freight. One way they’ve coped is by making university teaching by the younger staff part of the gig economy.

Apart from putting the public unis (but not the few private unis) on a starvation diet during the lockdowns, the Morrison government’s last effort to punish what it saw as a hotbed of socialism was a hare-brained scheme to encourage students to choose courses that made them “job-ready” by, among other things, doubling the tuition fees for a BA.

Fortunately, this failed to discourage the students, but did make the humanities a far more profitable product for the unis to push.

To be fair, another recent “learning” does seem to have got through to the commission. It’s third priority for attention is “creating a more dynamic and competitive economy”.

Research by Treasury has found strong empirical evidence that our economy has become less dynamic – less able to change and improve over time. Fewer new firms are being created, and fewer workers are being induced to change their jobs pursuing higher pay.

Our industries have become more oligopolised – allowed by our permissive takeover laws - and, not surprisingly, their profit margins (“markups,” in econospeak) have been creeping up.

No official will admit it, but it seems pretty clear that the reason the Reserve Bank has been raising interest rates so far and so fast – despite falling real wages – is the part that oligopolistic pricing power is playing in our high inflation rate.

And now further Treasury research has confirmed that our high degree of industry concentration (markets dominated by a few huge firms) has given employers greater power to limit the rise in wages.

All this makes it unsurprising that our rate of productivity improvement has weakened. It also helps explain why, over the past decade, virtually none of what improvement in the productivity of labour we have achieved has been passed on to real wages.

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Budget is a guide to who's a Morrison mate and who's not

Despite all the accusations being hurled at Scott Morrison, to my knowledge he’s never done what so many election-winning leaders do and promised to “govern for all Australians”. A promise not made, and thus not broken. All governments tend to look after their party’s friends and supporters, but Morrison has made this a defining feature of his reign.

There was a brief period early in the pandemic when he was in all-in-this-together mode. That was when, utterly uncharacteristically, he doubled the level of unemployment benefits – JobSeeker, to use its latest label – for a few months.

But it wasn’t long before it became clear he was playing favourites. The lockdown left many overseas students without part-time work and eligible for no government support. They were told to find their own way home, which many did.

Suddenly, the universities became public enemy No. 1. The same party that had gone for years urging the unis to find new sources of income and be less reliant on the federal taxpayer were attacked for becoming too reliant on revenue from overseas students.

While businesses large and small lined up for the JobKeeper wage subsidy scheme, our publicly owned universities were declared ineligible. Thousands of jobs were lost and, unlike with most other industries, are unlikely to return any time soon.

Our few privately owned universities were eligible, however. Similarly, public schools weren’t eligible, but independent schools were.

The government’s disdain for universities continued in last week’s budget. While Treasurer Josh Frydenberg was handing out prizes as though at a Sunday school anniversary, the universities got next to nothing.

True, the new “investing in Australia’s university research commercialisation payments” program will cost $1 billion over five years. But almost all of that will involve transferring money from existing programs.

The funny thing about the budget’s centrepiece, the cost-of-living package, is that though it doesn’t seem all that generous – a one-off $250 cash payment to pensioners and other welfare recipients, an extra $420 to those eligible for the low and middle income tax offset, and a 22c a litre cut in petrol excise for six months – at an overall cost of $8.3 billion it’s the most expensive new measure in the budget.

Because its intention is to mollify all those feeling pain from the recent jump in living costs, this is the most inclusive of the budget’s measures, with most families standing to benefit.

But though the $250 payment is aimed at those at the bottom of the income ladder, and the extra tax offset will help more than 10 million taxpayers, the cut in petrol excise will be of greater benefit to businesses and higher income-earners, simply because they use more petrol.

One group of big winners favoured in the budget are the tiny minority of people and businesses in the regions. Frydenberg announced “an unprecedented regional investment that includes transformational investments in agriculture, infrastructure and energy in the Hunter, the Pilbara, the Northern Territory and North and Central Queensland”.

Do you remember Barnaby Joyce’s Nationals demanding rural assistance in return for allowing Morrison to sign up to net zero emissions by 2050? At the time, the assistance wasn’t disclosed. Now it is.

They’re getting $7.4 billion for dams, a $2 billion “regional accelerator program” to accelerate growth in the regions, and a $1.3 billion regional telecommunications package to expand mobile coverage across 8000 kilometres of regional transport routes. Thanks a billion.

No budget would be a pre-election budget without further tax breaks to that huge voting bloc, small business. This time they’ll be getting a $120 tax deduction for every $100 they spend on training their employees, and on investment in digital technologies. That’s $1.7 billion over three years.

No doubt many small businesses will benefit from another measure to encourage more apprenticeships. The new apprentice gets $5000 and the employer who takes them on gets a wage subsidy of up to $15,000. I’ve read that tradies are the new key political demographic.

Sometimes, groups get special treatment not because they’re mates, but because governments fear offending them. A prime example are West Australians and their government. Under a deal done by Morrison when he was treasurer, because they’d convinced themselves they weren’t getting a fair share of the annual carve-up of GST revenue between the states, federal taxpayers will be paying the West Australians an extra $18.6 billion over the six years to 2025-26.

This despite the surge in iron ore royalties making Western Australia the only government in the land running a budget surplus. Tough times.

So, who wasn’t on the budget’s receiving end? The help for first-home buyers was token, and for renters, non-existent. There was a bit more to ease the continuing problems in aged care, but Frydenberg was easily outbid by Anthony Albanese.

Frydenberg has greatly reduced childcare costs for second and subsequent children, but Albanese is promising to make it free for virtually all families.

As voter loyalty to particular parties declines, politicians encourage a what’s-in-it-for-me approach to elections and pre-election budgets. If so, it’s important to know whether you’re a mate or a non-mate.

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Sense about improving education, before the political bulldust flies

In the looming election campaign we’ll be hearing a lot of silly, scary and self-serving stuff. Who’s better on the ukulele, ScoMo or Albo? Who’s the more “human”? Which side “won the week”?

We’ll see the content of carefully compiled “dirt files”. Each side accusing the other of hypocrisy. The other side’s policies have been/would be absolutely frightening.

Great. I can’t wait. But last week I ran across the thoughts of someone who’s had much experience in governance, but isn’t running for office. He was on about education – a topic of direct or indirect relevance to us all – but one that won’t be heard once all the shouting starts.

He’s Professor Peter Shergold, former head of the Prime Minister’s Department under John Howard, but these days chancellor of the University of Western Sydney and writer of government reports.

At every level of education – early childhood education and care, schools, universities and vocational education and training – the polite judgement on our performance is: could do better.

Shergold had many sensible things to say in a report to federal and state education ministers that lobbed only after the plague had begun.

He starts by putting education in a broader, more balanced context. “Education must prepare young people both for active citizenship in a democratic society and for purposeful engagement with the labour force,” he writes.

“This is vital at a time when trust in democratic governance and institutions is at a low level and cognitive technologies are transforming the future of work.”

School leavers don’t just need to be employable. They need to be adaptable, flexible and confident. Education must provide students with the essential attributes they require for lifelong learning in whatever fields of endeavour they may choose, he says.

The professional and applied skills they need will change significantly over their lives. The jobs they do will be transformed. Most will switch careers.

Academic achievement is important but not the sole reason for schooling. We need to focus more on preparing the whole person, no matter what career path they choose. Many senior secondary students enjoy school. Some, for a variety of reasons, just want to leave as soon as possible. Both groups need to be supported by more flexible learning.

Education will remain the foundation of a “fair go” Australia, Shergold says. Senior secondary students from disadvantaged backgrounds should be supported to ensure they can follow the same pathways available to others.

Literacy, numeracy and digital literacy should be recognised as essential skills for every student. At a time of technological transformation, when the future of work is uncertain, these attributes are more important than ever, he says.

Students must be supported to attain capabilities in these areas before they finish school. “Every young person who leaves school without them is having their economic and social future short-changed.”

All pathways through school should be delivered to the same high standard. While university will remain an aspiration for many young people, academic pathways should no longer enjoy more privileged access to school resources than apprenticeships, traineeships or other vocational education and training.

Shergold gets more specific in a report he wrote for the NSW Education Department with someone whose name seems familiar, a David Gonski. They find that vocational education and training – VET – is plagued by problems across the nation.

Skills development hasn’t received the level of government investment required, which has helped reinforce the public perception that VET is less valuable than university education. This misconception is too often instilled in students while they’re still at school.

When they move on from high school, they enter a world bifurcated between university and vocational education. Forced to choose, many opt for a uni degree, for which there are no upfront costs, rather than paying fees for certificate-level vocational education.

Partly because career advice is so poor, many parents and students believe the demand for vocationally qualified workers is in decline. This is utterly mistaken, Shergold and Gonski say.

Federal figures on skilled occupations show shortages in many trades, including mechanics, panel beaters, plumbers, electricians, bricklayers, plasterers, carpenters and cabinet-makers. A rapid rise in demand is forecast for certificate-trained workers in child care, aged care and disability care.

Get this: a “significant proportion” of uni graduates then move to VET to enhance their employability. It’s clear to me that a lot of kids who struggle through uni (with many failing to make it) would have been better going to VET.

Little wonder Shergold and Gonski want to bring universities and VET into a single system. They want much better career advice, which should be available to people throughout their working lives, including those obliged to make mid-career changes.

They want senior secondary schooling to be less obsessed with having kids direct all their efforts to maximising a single number, the Australian Tertiary Admission Rank. There are better ways for unis to select good recruits. And high schools could do more to get students started on a vocational “pathway”.

All this is worth debating in the coming weeks – but ain’t likely to be.

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Morrison's budget report card: could do a hell of a lot better

When it comes to the relative strengths and weaknesses of the two main parties, polling shows voters’ views are highly stereotyped. For instance, the Liberals, being the party of business, are always better than Labor at handling money, including the budget. But this hardly seems to fit the performance of Scott Morrison and his Treasurer, Josh Frydenberg.

Dr Mike Keating, former top econocrat and a former secretary of the Department of Finance, has delivered a two-part report card in John Menadue’s online public policy journal.

His overall assessment is that the Morrison government is guilty of underfunding essential government services on the one hand, and, on the other, wasting billions on politically high-profile projects.

Keating traces these failures to two sources. First, the government’s undying commitment to Smaller Government, but unwillingness to bring this about by making big cuts in major spending programs, such as defence, age pensions or Medicare.

This is a tacit admission that Smaller Government is an impossible dream. Why? Because it’s simply not acceptable to voters. But this hasn’t stopped Morrison and Frydenberg persisting with the other side of the Smaller Government equation: lower taxes.

The consequence is that they underfund major spending programs, while engaging in penny-pinching where they think they can get away with it. Too often, this ends up as false economy, costing more than it saves.

For instance, Keating says, the Coalition has reimposed staff ceilings. By 2018, this had cut the number of permanent public servants by more the 17,000. But departments now make extensive use of contract labour hire and consultants to get around their staff ceilings, even though it costs more.

Second, Morrison’s determination to win elections exceeds his commitment to businesslike management of taxpayers’ money. He’s secretive, reluctant to be held accountable and unwilling to let public servants insist that legislated procedures be followed.

Apparently, being elected to office means you can ignore unelected officials saying “it’s contrary to the Act, minister”.

Let’s start with Keating’s list of underfunded spending programs. The government has increased aged care funding following the embarrassment of the aged care royal commission, but spent significantly less that all the experts insist is needed to fix the problems.

On childcare, this year’s budget increased funding by $1.7 billion over three years, but this is insufficient to ensure that all those parents – mainly mothers – who’d like to work more have the incentive to do so. This is despite the greater boost to gross domestic product it would cause.

The National Disability Insurance Scheme is clearly underfunded – which is why we have a royal commission that’s likely to recommend additional funds. (I’d add, however, that it’s perfectly possible for underfunding to exist beside wasteful spending on private service-providers costing far more than the state public servants they’ve replaced.)

On universities, the government has recognised the need to provide more student places, but failed to provide sufficient funding. On vocational education and training, the extra funds in this year’s budget were too little, too late. They won’t make up for the 75,000 fall in annual completions of government-funded apprenticeships and traineeships over the four years to 2019.

While housing affordability has worsened dramatically, the government’s done nothing to help. Its modest new assistance to first-home buyers will actually add upward pressure to house prices. What it should be doing is increasing the supply of social housing.

Turning to wasteful highly political, high-profile spending, Keating’s list is headed by the JobKeeper wage subsidy scheme. He acknowledges, as he should, that the scheme was hugely successful in maintaining the link between businesses and their workers, so that the fall in unemployment after last year’s lockdowns ended was truly amazing.

Keating also acknowledges that the scheme was, unavoidably, put together in a hurry. At the start of recessions there’s always a trade-off between getting the money out and spent quickly and making sure it’s well-spent. The longer you spend perfecting the scheme, the less effective your spending is in stopping the economy unravelling. The stitch that wasn’t in time.

Remember, too, that since the objective is to get the money spent and protecting employment, it doesn’t matter much if some people get more than their strict entitlement. In these emergency exercises, it’s too easy to be wise after the event. And the more successful the scheme is in averting disaster, the more smarties there’ll be taking this to mean there was never a problem in the first place, so the money was a complete waste.

But it’s now clear many businesses – small as well as big – ended up getting more assistance than the blow to their profits justified, and many haven’t voluntarily refunded it. Keating criticises the failure to include a clawback mechanism in the scheme and rejects Frydenberg’s claim that including one would have inhibited employers from applying for assistance.

Next, he cites the contract with the French to build 12 conventional submarines. The process that led to the selection of the French sub was “completely flawed”. There was no proper tender, with the contract awarded on the basis only of a concept, not a full design.

Five years later we still didn’t have a full design, but the cost had almost doubled. The government was right to cancel the contract, but the cost to taxpayers will be between $2.5 billion and $4 billion.

Finally, spending on road and rail infrastructure projects, which was booming long before the pandemic. Keating quotes Grattan Institute research as finding that overall investment has been “poorly directed”.

More than half of federal spending has gone on projects with no published evaluation by Infrastructure Australia, suggesting many are unlikely to be economically justified.

“In short,” Keating concludes, “there is an enormous management problem with the government’s infrastructure program. The projects are much bigger, but often poorly chosen, and poorly planned with massive cost overruns.

“The key reason is that the government announces projects chosen for political reasons.”

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Reform not a dirty word when it benefits the many, not the few

The idea that the economy needs to be “reformed” has been hijacked by the business lobby groups. Their notion of reform involves making life better for their clients at the expense of someone else. But that doesn’t mean there aren’t things that could be changed to make the economy work better for most of us, not just the rich and powerful.

Trouble is, Scott Morrison shows little interest in any kind of reform, whether to advance business interests or anyone else’s. Reform involves persuading people to accept changes they don’t like the sound of, and increases the risk they’ll vote against you at the next election.

Morrison’s government is making heavy weather of our most urgent problem – getting all of us vaccinated against the virus ASAP – so maybe it’s not such a bad time for him to Keep it Simple, Stupid.

But we do have an election coming up, in which it’s customary to think about what improvements could be made over the next three years. And it’s not illegal for us to dream about what could be improved if sometime, somewhere we ever found leaders interested in doing a better job as well as staying in office.

Next to the pandemic, the most important problem we need to be working on is climate change. That’s stating the obvious, I know, but not to Morrison and his Treasurer, Josh Frydenberg, whose recent intergenerational report paid lip service to the issue but then proceeded to project what might happen to the economy and the federal budget over the next 40 years without taking climate change into account.

What’s surprising is that another Coalition government, Gladys Berejiklian’s in NSW, did take account of global warming in its state intergenerational report. It found that more severe natural disasters, sea level rises, heatwaves and declining agricultural production would reduce incomes in NSW by $8 billion a year in 2061 under a high-warming scenario compared to a lower warming one.

Clearly, climate change will be bad for everyone in the economy – some people more than others – while acting to reduce our emissions of greenhouse gases will be a cost to our fossil fuel industries.

But the world’s demand for our coal and gas exports is likely to decline whatever we do. Our government doesn’t believe climate change needs to be taken seriously but, fortunately for more sensible Australians, the rest of the world does, and is in the process of forcing “reform” on our obdurate federal government.

In the meantime, however, our electricity industry is finding it hard to know what to do because the Morrison government won’t commit itself to a clear plan on how we’ll make the transition to all-renewable power.

Worse, our abundance of sun and wind relative to most other countries makes us well placed to become a world renewables superpower – exporting “clean” energy-intensive manufactures, maybe even energy itself - if we act quickly.

Right now, however, our need to choose between being a loser from the old world or a winner in the new world is sitting in the too-hard basket.

Moving to less strategic issues, Danielle Wood, chief executive of the Grattan Institute, gives a high priority to lowering barriers to workforce participation by women, by making childcare more affordable and improving paid parental leave.

We’ve long seen the benefits of free education in public schools. Making “early childhood education and care” free would not merely make life easier for young families, it would get more of our kids off to a better start in the education system and allow women to more fully exploit the material benefits of their extensive education, not just to their benefit but the benefit of all of us.

The benefits of getting an education greatly exceed getting a better-paid job – education broadens the mind, don’t you know – but it makes no sense for girls, their families and the taxpayer to put so much effort and money into gaining a better education, then make it so hard for them to do well in the workforce when they have kids.

One factor that’s widening the gap between rich and poor in the advanced economies is years of “skill-biased” technological change, which is increasing the wages of highly skilled workers while doing little to increase the wages of unskilled workers. Indeed, many routine jobs are being replaced by machines.

This says one way to ensure Australian workers prosper in the digital future of work is to ensure our workforce is well educated and highly trained. We must be willing to spend – to invest – however much it takes to have a workforce capable of providing the more analytical, caring and creative skills employers will be demanding.

We need to do more to help our teachers teach better so that fewer kids leave school early without having acquired sufficient education to survive in the world of work. Some teachers are better at it than others; they need to be used to train younger teachers on the job and rewarded accordingly.

Universities need to be better funded by the federal government, so they can afford to give students a higher quality education, vice-chancellors aren’t so eternally money hungry, unis stop exploiting younger staff with insecure employment and aren’t so dependent on making money out of overseas students and thus obsessed by finding ways to game the international university league tables.

How’s all this to be afforded? By all of us paying somewhat higher taxes, how else? By politicians giving up their election-time pretense that taxes can come down without that leading to worse quality government services rather than better.

Throwing money at problems doesn’t magically fix them, you must use the money effectively. But when mindless cost-cutting is the source of much of the problem, nor is it possible to fix problems without spending more.

If our politicians would speak to us more honestly along the lines of “you get what you pay for”, that itself would be a welcome reform.

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Top economists think much further ahead than Morrison & Co

If Scott Morrison and Josh Frydenberg are looking for ideas about what more they could be doing to secure our economic future – after all, they’ll be seeking re-election soon enough – they could do worse than study the views of the 56 leading economists asked by the Economic Society of Australia to comment on this month’s budget.

Two points stand out. First, almost all the economists were happy to support the budget’s strategy of applying more fiscal stimulus to get unemployment below 5 per cent. They were pleased to see the government abandon its preoccupation with surpluses and debt.

As Professor Fabrizio Carmignani, of Griffith University, said, “the good thing about this budget is that it was not about repairing the deficit and debt accumulated in 2020”. Professor Sue Richardson, of Flinders University, said: “the debt and deficit mantra was never justified”.

Second, with one notable exception, the economists were critical of the government’s choice of things to spend on. The exception was its big spending on the “care economy” – aged care, childcare, disability care and mental health care – which most respondents welcomed. Indeed, quite a few thought there should have been more of it.

After that, the economists had plenty of constructive criticism of the government’s priorities. For instance, quite a number were happy to see big spending on “infrastructure”, but critical of the government’s narrow conception of what constitutes infrastructure.

Carmignani said: “there is in this budget – as in the past – an almost blind confidence in the power of investment in physical infrastructure to drive future growth and development. In fact, the future prosperity of Australia depends on innovation that requires social rather than physical infrastructures”.

Professor Gigi Foster, of the University of NSW, said: “childcare should be viewed as the social infrastructure that it is, and invested in as such. Instead, when we heard ‘infrastructure’, it was mainly code for transportation”.

So even in the area of physical infrastructure, the budget shows a lack of imagination. Professor Michael Keane, also of the University of NSW, said very little of the infrastructure money was “allocated to such urgent needs as renewable energy, climate change adaptation, environmental sustainability, water resources, etcetera. This shows a real lack of ambition.”

Richardson agrees. “The future is one of zero net greenhouse gas emissions,” she said. “The transformation of the energy, agricultural, transport and manufacturing systems that this requires is enormous, will require unprecedented levels of investment and needs to start now.“

Now that’s interesting. Historically, treasurers and their advisers have regarded the budget as the place for discussion on finances and economics, not the state of the natural environment nor the challenge of climate change.

The economy in one box, the environment in some other box. The natural environment has been seen as of such little relevance to topics such at the budget and the economy that it has barely rated a mention in the five-yearly supposed “intergenerational report”.

But that’s not how our leading economists see it. At least a dozen of them have criticised the budget’s failure to respond to the challenge of climate change. Professor Warwick McKibbin, of the Australian National University, warned that “the world is likely to be taking significant action on climate change which will substantially impact Australia’s fossil fuel exports and the future structure of the Australian economy”.

Another topic barely mentioned in the budget – one of the industries much damaged by the pandemic – was universities. Unsurprisingly, more than a dozen respondents noticed the omission. They’re self-interested, of course, but they make a good case.

Dr Leonora Risse, of RMIT University, said succinctly: “investment in the university sector [is a] generator of productivity-enhancing skills, knowledge and research”. Meanwhile, McKibbin added that “a key ingredient is an investment in human capital”.

But the academics’ concern is wider than their own patch. Risse has called for more attention to the long-running drivers of growth, such as “investment in the workforce capabilities, resourcing, wages and working conditions of high-need, high-growth sectors” such as the care economy.

Dr Michael Keating, a former top econocrat, said restoring past rates of economic growth won’t be possible without addressing the structural problems in the labour market. “This will involve much more investment in education, training and research” but “the extra money in this budget for apprentices and trainees only makes up for past cuts.”

Notice a theme emerging? Budgets should be about investment – spending money now, for payoffs to the economy later – but investment needs to be in people, not just in physical and traditional things such as roads and railways.

It’s easy to accuse academics of pontificating atop their ivory towers, but they seem able see much further into the economy’s future needs than our down-to-earth politicians.

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Morrison moves the deck chairs on the hulk of our universities

A new rule of politics seems to be that no matter how badly the pollies have stuffed up some area of government responsibility, they can always make it worse. Enter the hapless federal Education Minister Dan Tehan who, doubtless acting under instructions from the boss, has just announced another set of passive-aggressive changes to university funding.

If, like a good Quiet Australian, you haven't been paying close attention, you may have gained the impression that the government is acting to help our unis to take in more local students – helping fill the vacuum left by the disappearance of overseas students – and changing the structure of tuition fees to encourage students into more occupationally oriented courses, which will make them "job-ready graduates" going into fields where the need for graduates is expected to be greatest.

You probably haven't noticed that, according to Tehan, the package includes "an additional $400 million over four years" for regional unis, and "a further $900 million" for the National Priorities and Industry Linkage Fund.

Except that the whole package is "budget neutral" – a bureaucrat's way of saying it will cost the government not an extra cent. Since the government's expecting extra demand for uni places over the next three years, this is tantamount to its first major cost-cutting exercise after taking fright at the blowout in the budget deficit caused by the lockdown of the economy. So the "extra" and "further" funding will be coming not from the government's pockets but those of the universities and their students.

The government will fund an extra 39,000 places by 2023 – an increase of about 6 per cent – as the recession prompts more school leavers to stay on in education (and avoid taking a gap year), but will compensate for this by cutting the amount of its funding per student.

According to calculations by Professor David Peetz, of Griffith University (whose former job as a senior federal bureaucrat helps him find where the bodies are buried), the government will cut its funding by an annual $1883 per student, with the average increase in tuition fees of $675 per student reducing the net loss to universities to $1208 per student. (The fee changes won't apply to existing students, however.)

That is, the unis are being asked to do more with less. It's a safe bet their main response will be to further increase their ratio of students to staff. Unis will become even more of a sausage factory – which will be really great for the nation's investment in "human capital".

My guess is that the changes to the structure of tuition fees – with a hodgepodge of big cuts, small cuts, small increases, big increases and no changes – are intended to give the appearance of doing something to increase employment, to gratify the parliamentary Liberal Party's antipathy towards the universities (hotbeds of leftie activists who think Black Lives Matter and have kids who wag school because the silly-billies are worried about climate change) and to divert attention from the way the unis have been short-changed.

With the fee for humanities degrees up by a mere 113 per cent, it's quite a diversion. I'll be diverted only to the extent of quoting from a speech by a Business Council official in 2016: business needed the skills of "critical thinking, synthesis, judgment and an understanding of ethical constructs". The humanities produced people who can "ask the right questions, think for themselves, explain what they think, and turn those ideas into actions".

Ah, maybe that's what the backbench doesn't fancy.

Professor Andrew Norton, of the Australian National University, a recognised expert, doubts that the fee changes will do much to change students' preferences away from courses they think they'd like. And Peetz points out that it's the unis, not the government, that will be bearing the cost of the fee reductions for those courses the government prefers.

Which brings us to Professor Ian Jacobs, boss of UNSW, who points to the perverse incentives the changes will create (assuming the Senate is mad enough to pass them). Unis will be tempted to offer most places in those courses with the widest gap between the high government-set tuition fee and the cost of running the course. They'll be pushing BAs harder than ever.

This, of course, is exactly the way you'd expect the vice-chancellors to behave when you've taken government-owned and regulated agencies, spent 30 years pursuing a bipartisan policy of cutting their federal funding (from 86 per cent to 28 per cent of total receipts, in the case of Sydney University) and pretending they've been privatised.

Then, after they've turned to getting about a quarter of their funding from overseas students, but the coronavirus obliges you to ban foreign travellers, you hang them out to dry, refusing them access to the JobKeeper wage subsidy scheme because they should never have allowed themselves to become so dependent on a single source of revenue.

For a while I thought the crisis had got Scott Morrison governing for all Australians. It hasn't taken him long to revert to playing friends and enemies.

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We need more helicopter pollies caring for our kids

Sometimes I think that if our politicians spent as much time trying to fix the country as they do playing political games – slagging each other off and finding ways to “wedge” their opponents – we’d be in much better shape.

The world becomes ever more complicated and right now our future is looking, as a pollie might say, “challenging”. Not least among our challenges is ensuring our children have better lives than ours.

So far, you wouldn’t be sure we were making much progress on that project. Leaving aside the way we’ve shifted the tax system in favour of the old at the expense of the young, there’s the less-than-wonderful state of our education and training.

Our schools aren’t winning many prizes on speech day, and though our universities have become much bigger, you wouldn’t be sure all the extra youngsters going in are emerging with valuable degrees. You get the feeling some of them would have been better off going to TAFE.

Speaking of TAFE – sorry, “vocational education and training” - why is it still being treated as the poor relation in the education system? Has it recovered from the disastrous attempt to save money by making vocational training “contestable”?

You may not have noticed but, with Parliament not sitting last week, Scott Morrison and his minister thought they’d better get on with some work in the “education space”.

It was, to be polite, a week of modest accomplishment.

After decades of squeezing the universities – and turning the vice-chancellors into funding-hungry ringmasters who’re no longer sure what the circus is meant to prove – Julia Gillard introduced “demand-driven” funding of undergraduate places.

Predictably, the universities – particularly regional unis - went crazy, cutting entry standards and signing up everyone they could.

Gillard’s view that a much higher proportion of young people should go on to further education was sound, but did that mean everyone was off to uni now?

Enter the Coalition government, which decided demand-driven funding was costing too much. Why not deregulate the setting of uni fees? When that was shot down, it took some years for the government to decide simply to freeze the number of funded places.

Last year it relented, promising to increase places in line with the growth in the working-age population – but on condition of improved performance. Ah yes, performance indicators. That’s what we need.

But which? A committee of five vice-chancellors was commissioned to ponder the question. Last week Education Minister Dan Tehan released their report and accepted their recommendations. From next year the unis will get an extra $80 million, provided they demonstrate success on graduate employment, dropout rates, student satisfaction, and adequate participation rates for Indigenous, low socio-economic status and regional-and-remote students.

I have great sympathy for the government’s desire to stop the vice-chancellors using students as cash cows and get back to their main job of giving our kids a high-quality education.

But I doubt KPIs are the way to do it. Monetary incentives are a poor way to encourage better behaviour, partly because they’re too easily gamed. And nobody knows more about gaming performance indicators than our vice-chancellors, who devote much time to thinking of easy ways to boost their uni’s rank on the various international league tables of universities (because this attracts more overseas students and you can charge ’em more).

Moving on to VET, last week saw the release of a “Vision for Vocational Education and Training” following a meeting of federal and state ministers as part of the Council of Australian Governments.

As a collection of motherhood statements, it’s first rate. A sample: “VET and higher education [unis] are equal and integral parts of a joined-up and accessible post-secondary education system with pathways between VET, higher education and the school system.”

This seems to be an assertion that we already have just the thing we don’t have, but desperately need. How are we to achieve it? Not to worry. The ministers are working on it. (They say that COAG is where good ideas go to die.)

Meanwhile, Andrew Norton, of the Grattan Institute, has used the long-running Longitudinal Survey of Australian Youth to conclude that not too many of the less-academic students going to university – among the 40,000 students a year with ATARs (tertiary admission ranks) of 50 to 70 – would have done better for themselves in VET.

Low-ATAR uni students are more likely to fail subjects and get low marks, and when they graduate are less likely to find professional jobs or earn high salaries.

Less-academic men doing humanities or science degrees might have earned higher lifetime incomes had they done vocational diplomas in construction, engineering or commerce.

But less-academic women often do teaching and nursing degrees. These “deliver good employment outcomes to students across the ATAR range,” Norton says. “These students are unlikely to do better in a vocational education course.”

Hmm. Teaching may be good for less-academic students, but I’m not sure how good less-academic teachers are for teaching.

I think that if universities are willing to admit – and take big fees from – less-able students, they have an obligation to give them more help.

Norton says “a good tertiary education system steers prospective students towards courses that increase their opportunities and minimise their risks. Australia’s post-school system does not always achieve this goal”.

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Universities: both sides should clean up the mess they've made

Among the many issues needing early attention from the winner of the federal election is universities. Trouble is, neither side seems to have much idea of how to fix the mess both parties spent decades creating, before Julia Gillard brought things to a head with the brainwave of moving to “demand-driven” funding.

Her idea of shifting control over the size of annual federal-funded undergraduate admissions from budget-conscious bureaucrats in Canberra to individual universities ignored the decades of funding repression to which the unis had previously been subjected.

Governments of both persuasions had gone for years trying to get the universities off the budget books by a process of de facto privatisation. Unis were given the power to charge (government-set) tuition fees to local students – HECS – and unrestricted power to charge overseas students – but with commensurate cuts in government grants.

The result has been to make vice chancellors as money-obsessed as any company chief executive, but without the private sector’s simple profit-maximising objective. Universities have lost their way, no longer sure what they’re doing or why they’re doing it.

Meanwhile, when Gillard opened the unis’ access to the federal coffers the predictable happened: vice chancellors went crazy, slashing entry requirements and cramming in as many more under-qualified undergrads as they could.

This seems to have been particularly true of second-string and regional unis. Australian Catholic University, Swinburne and Sunshine Coast more than doubled their domestic undergrad enrolments between 2008 and 2017. Another six increased their enrolments by more than half.

Gillard’s move to demand-driven funding was linked to her policy of raising the proportion of school-leavers going on to higher education to 40 per cent. A worthy goal – except that everyone took “higher education” to mean going to uni.

So, at a time when federal and state governments were engaged in their disastrous experiment with using “contestability” to get TAFE off their budgets, it suited both status-conscious parents and money-strapped lesser universities for the unis to cut their entry standards and poach kids who would have been better served getting a technical education.

Returning to the feds’ budget preoccupation, after the unis’ inevitable demand-driven raid on the federal purse came the Finance Department’s inevitable cry of pain: we can’t possibly afford this hugely increased cost.

The accountants’ solution – one that couldn’t have made sense to anyone who understood how un-market-like universities are – came in the Abbott government’s first budget: match the deregulation of uni places with the deregulation of uni fees (and cut uni grants by 20 per cent while you’re at it).

Fortunately, the Senate firmly rejected this bizonomics stupidity. But this left Abbott’s successors bereft of ideas to limit the unis’ cost to the budget. They ended up doing what they could do without parliamentary approval: canning the demand-driven system.

Which brings us to the election campaign. Labor is promising to restore demand-driven funding – but also to instigate an inquiry to find a more sensible division of roles between the two parts of higher education. Hopefully, the latter would undo the damage done by the former.

The Coalition is persisting with its spending cuts. But, because regional universities are claiming to be hard hit by those cuts, it promises special spending to help them (think National Party rent seeking).

But none of this would fix the real problem with the way universities have allowed their funding problems to undermine their commitment to high-quality undergraduate teaching and even high-quality research.

They’ve gone too close to turning undergrad teaching into a money-making sausage machine, where you have to be really dumb not to pass, where you don’t need to attend lectures because it’s all online, where lecturers – who will perish if they don’t get their publications up – limit their students’ access time, and where the lecturer is a casual because the person who should be doing it has brought in a big research grant and been rewarded by being allowed to “buy out” their teaching load.

Universities treat their junior academic staff badly (we get flexibility, you get insecurity) and have become bamboozled by KPIs and other faddish “metrics”. Their worryingly high dependence on fees from overseas students means the sandstone “Group of Eight” unis have become obsessed by lifting their place on the various international rankings of universities.

Why? So they can attract more overseas students and charge them higher fees. While their academics find ways to game their KPIs, their many “pro-vice chancellor (something in brackets)” search for ways to use their academic appointments and research direction to game the international rankings.

I think a much more comprehensive inquiry is needed.

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The social sciences: so essential we neglect them

As I’m sure you’re only too well aware, today is the first day of the inaugural Social Sciences Week. Just as I’m sure you knew that someone somewhere in America declared a day last week to be Read a Book Day.

Why do people name days, weeks, months and even whole years after worthy causes? Perhaps because there are so many worthy causes, and they’re hoping to gain theirs a little more attention amid the tumult.

We just want to be sure our fellow citizens are aware of who we are and what wonderful things we do, the organisers tell you. And once they’ve got their higher profile, there just might be a message or two they’d like to get through to the government and keeper of the purse strings.

What lifts Social Sciences Week above the ruckus is that last year by some mischance one of its sponsors made me a member of their club – shades of Groucho Marx – thus converting me to the cause. You have been warned, dear reader.

But just what are the social sciences, I hear you cry. Glad you asked. The week is being sponsored by the associations representing sociologists, criminologists, anthropologists and political scientists, plus the Academy of Social Sciences in Australia (whose members include demographers, geographers, accountants, economists, statisticians, historians, lawyers, philosophers, educationalists, psychologists and specialists in linguistics, management and marketing) and the Council for HASS – humanities, arts and social sciences.

In short, social scientists study human behaviour in all its dimensions. Nothing of much importance, then.

Not being ones to boast, the social scientists would like you to know their former students pretty much run the world. They’ve produced the majority of ASX-listed chief executives. Probably just as true of the public service and politicians.

Add the arts and humanities, and most of the tertiary-educated workers in Australia have HASS degrees. Almost three-quarters of university students are in HASS courses. Most of the overseas students paying full freight for their degrees – and now constituting one of our top export earners – do HASS courses, particularly business courses.

But though the social sciences and humanities dominate the work of universities, they don’t dominate their leadership. That honour more often goes to academics from a STEM – science, technology, engineering and maths – background.

And ratios of students to academic staff are much higher for HASS than for STEM courses. Truth is, law and more particularly, business, are the milch cows of universities, used to cross-subsidise subjects considered more worthy.

And you thought STEM was the neglected, put-upon Cinderella of academia? You’ve been spun. Just as every pollie wants you to believe they’re the underdog in the election, so the academics compete to be seen as hard done by. In that comp, STEM is winning. Its trouble is a shortage of customers to justify all the money it gets.

When it comes to research funding, there’s a hierarchy of perceived worthiness. The research aristocrats are the medicos. Since they devote their lives to saving ours (sometimes without thought of reward), we bow down before them.

They get their own special source of federal research funding – the National Health and Medical Research Council – plus money from bequests, philanthropists and patients with say, diabetes, being asked to kick the tin for diabetes research.

The rest of academia fights for a share of the funding distributed by the feds’ Australian Research Council. Here STEM is the upper class, the social sciences come a long way back as the middle class, leaving humanities as the poor relations.

A study from 2012 found that HASS produced 34 per cent of university research, and accounted for 44 per cent of the fields of research judged worthy of research funding, but got just 16 per cent of the lolly.

In this year’s hugely competitive funding round, 423 STEM projects got up, but only 113 social science projects did. This isn’t so surprising since none of the research priorities nominated by the council falls into the social sciences.

It makes no sense. As Senator Arthur Sinodinos said while minister for industry, innovation and science, “the advancement of the Australian economy relies on robust research from physical science and social science alike.

“The social sciences ... provide valuable insight into how to turn a scientific discovery into an informed policy for the nation, and how to implement that policy to ensure effectiveness.”

Just so. The Medicare funding system we value so highly was designed not by any medico, but by two professors of health economics. The huge expansion of university places we’ve seen was made affordable to taxpayers by an economics professor’s discovery of the income-contingent loan, known as HECS.

If applied to research grants, such loans would allow increased funding for social science research without cutting the funding to STEM. That’s what social science can tell you that STEM can’t.

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Too many school leavers are off to uni

If you had a youngster leaving school, what would you encourage them to do? Get a job, go to university, or see if there was some trade that might interest them? For a growing number of parents, that's a no-brainer: off to uni with you. But maybe there should be more engaging of brains.

It's widely assumed that, these days, any reasonably secure, decently paid career must start with a university degree.

Don't be so sure. The latest projections by the federal Department of Employment (since renamed by Malcolm Turnbull's spin doctors as the Department of Jobs and Small Business) are for total employment to grow by 950,000 over the five years to 2022.

The department projects that fewer than 100,000 of those extra jobs – less than 10 per cent – will be for people with no post-school qualifications.

More than 410,000 of the jobs – 43 per cent – will be for people with a bachelor degree or higher qualification.

But that leaves more than 440,000 of the jobs – 47 per cent – for people with the diplomas or certificates (particularly the "cert III" going to trades people) that come from TAFE.

Now, even the Department of Jobs possesses no crystal ball. But these educated guesses should be enough to disabuse you of the notion there'll be no decent jobs for people who haven't gone to uni.

But graduate jobs are better paid, right? Yes, but not by as much as you may think.

Figures issued by the Australian Bureau of Statistics on Monday show that, in August last year, the median (middle) pre-tax earnings of employees with a bachelor degree were $1280 a week, whereas for employees with a cert III or IV trade qualification it was $1035 a week.

And my guess is, if we keep stuffing things up the way we have been – taking in too many uni entrants and too few TAFE entrants – that gap will narrow, with certificate-holders' wages growing faster than graduates' wages.

While we were engrossed watching the Barnaby show, Labor's shadow education minister, Tanya Plibersek, was announcing its election policy to conduct a "once-in-a-generation" review of post-school education, with a view to establishing a single, integrated tertiary education system, putting universities and TAFE on an equal footing.

Her announcement was welcomed by the ACTU and the Business Council. Both sides know well how badly we've stuffed up young people's choice between uni and TAFE.

Plibersek was hardly going to admit it, but the problem goes back to missteps by the sainted Julia Gillard when education minister, made worse by state governments of both colours.

In 2010 she replaced the system where the feds set the number of new undergraduate places they were prepared to fund, and the numbers in the various degree categories, introducing a system where uni entry numbers were "demand-driven".

After decades in which their federal funding had been squeezed, the vice-chancellors couldn't believe their luck.

Particularly those at regional and outer suburban unis went crazy, lowering their admission standards and admitting hugely increased numbers. Did they employ a lot more academics to teach this influx of less-qualified students? Not so much.

It's likely many of these extra students will struggle to reach university standards – unless, of course, exams have been made easier to accommodate them.

Those who abandon their studies may find themselves lumbered with HECS-HELP debt without much to show for it. Many would have done better going to TAFE.

Meanwhile, TAFE was being hit by sharp cuts in federal funding (no doubt to help cover the extra money for unis) and subjected to the disastrous VET experiment.

The problem was that parts of the states' union-dominated TAFE systems had become outdated and inflexible, tending to teach what it suited the staff to teach rather than the newer skills employers required and students needed to be attractive to potential employers.

Rather than reform TAFE directly, however, someone who'd read no further than chapter one of an economics textbook got the bright idea of forcing TAFE to shape up by exposing it to cleansing competition from private providers of "vocational education and training".

To attract and accommodate the new, more entrepreneurial for-profit training providers, the feds extended to the VET sector a version of the uni system of deferred loans to cover tuition fees. State governments happily played their part in this cost-saving magic answer to their TAFE problem.

The result was to attract a host of fly-by-night rip-off merchants, tricking naive youngsters into signing up for courses of dubious relevance or even existence, so the supposed trainers could get paid upfront by a federal bureaucracy that took an age to realise it was being done over.

Eventually, however, having finally woken up, the present government overreacted. Now it's much harder to get federal help with TAFE fees than uni fees.

Far too little is being done to get TAFE training properly back in business after most of the for-profit providers have faded into the night.

The Turnbull government surely knows more must be done to ensure all those who should be training for technical careers are able to do so. In last year's budget it established an (inadequate) Skilling Australians Fund, and more recently suspended the demand-driven uni funding system.

It would be better if it joined Labor in supporting a thorough-going review of our malfunctioning post-school education arrangements.

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Unis should never be allowed to set their own fees

The Productivity Commission has changed its ideological tune, shifting away from the slavish adherence to an idealised version of the "neoclassical" model of the economy for which it and its predecessors became notorious.

It's moved to a more nuanced approach, recognising the many respects in which real-world markets differ from those described in elementary textbooks.

This shift has been underway since the present chairman of the commission, Peter Harris, succeeded Gary Banks in 2012.

You could see it in the commission's 2015 report on the Workplace Relations Framework, which acknowledged, readily and in detail, the factors that made the simple neoclassical, demand-and-supply model unsuitable for analysing the labour market.

But it's even more apparent in the commission's blueprint for a very different approach to economic reform, Shifting the Dial. Consider this.

Remember the plan in the Abbott government's first budget, of 2014, to deregulate the fees universities are allowed to charge students doing undergraduate degrees?

It was a logical next step following the Gillard government's decision some years earlier to deregulate the number of undergraduate places each university was permitted to offer.

The unis had responded by hugely increasing the number of government-funded places, at greatly increased cost to the federal budget, after successive governments had spent decades trying to quietly privatise the unis and get them off the budget.

The economic rationale was that "market forces" – competition between the unis – would prevent them for using their new fee-setting power to overcharge students.

It was a reform that all right-thinking people should support, and those terrible popularity-seekers in the Senate should never have blocked.

Get this: as part of its plan to improve the teaching of uni students, and in the course of explaining how some students are being charged higher fees than they should be, the commission also shows why deregulating fees would have been a crazy idea.

At the same time as it allowed unis to set their own fees, the government's intention had been to cut its funding of places by 20 per cent. It wasn't hard to see that, as unis continued to raise their fees each year, the government would keep cutting its own funding contribution until it was no more.

The commission argues (on page 109) that government "regulation" of the maximum fees unis may charge for particular undergrad courses "is necessary because price competition [between universities] is difficult to establish in the domestic university market.

"This is primarily because the vast majority of domestic students have access to income-contingent HELP loans and consequently have a low price sensitivity, which was a necessary by-product of enabling university access on merit, rather than family income."

Get it? The elementary model's promise that "market forces" – competition between sellers, plus the self-interest of buyers – will stop firms overcharging rests on an assumption that customers have to pay the price upfront.

In the case of uni fees, however, the upfront price is paid by the government, and students incur a debt to the government, which they don't have to start repaying until their income reaches a certain level at some uncertain time in the future.

How long they'll be given to repay the debt is also uncertain, though it's certain their repayments will be geared to their ability to pay, and the only interest they'll pay is the rate of inflation. Cushiest loan you'll ever get.

With the cost of university tuition to a student so far into the future and so uncertain, it's unrealistic to assume students will shop around to find the lowest-charging uni. (Actually, they all charge the maximum allowed.)

Remember, too, that the fee is less than the full cost of the tuition, meaning the unis are "selling" a product whose retail price has been heavily subsidised by the government.

The commission notes that price competition is further limited by the geographic immobility of students. Because more than 80 per cent of commencing students live at home, and moving out would add greatly to their costs, you might get competition between the unis in a particular capital city, but that's all.

But even that's unlikely. The elementary model assumes "perfect knowledge" – both buyers and sellers know all they need to know about the prices and qualities of the products on offer.

In reality, knowledge is far from complete, and is often "asymmetric" – sellers know far more than buyers, usually because the sellers are professionals, whereas the buyers are amateurs.

The commission explains why all unis – big-name or bad-name, city or country – charge the maximum fees allowed.

"In the absence of good information, lower prices may undermine the prestige of a university and its capacity to attract good students," the commission says.

This is an admission of a weakness in the elementary model that affects far more than uni fees. The assumption of perfect knowledge leads to the further assumption that the prices market forces allow a firm to charge fully reflect the quality of its products relative to the quality of rival products.

As behavioural economists have pointed out, however, quality is something that's often very hard for buyers to know in advance. Only after they've bought it and tried it will they know. Think bottles of wine.

So whereas economists assume buyers' foreknowledge of differences in quality is what determines differences in the prices of similar products, buyers who don't know the differences in quality assume they can use prices as a quality indicator. Higher price equals higher quality.

So why don't lesser unis seek to attract more students by charging lower fees than the big boys? Because it would be taken as an admission of their inferior quality, and could lose as many customers as it attracted, maybe more.

The assumption that market forces would prevent unis from abusing their freedom to set fees as they chose was extraordinarily naive, as the commission is now happy to explain.

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