Is Deregulation Americanization? Think Again.  


With the release of the 2016 federal budget on May 3rd, the deregulation of university fees is once again rearing its head. While the coalition has reportedly shelved deregulation in the short term, it is unlikely that the government has abandoned the idea altogether. Scared of coming under attack by Labor in advance of a possible election, the coalition has gone as minimal as possible in order to keep deregulation in their back pocket. In the interim, the Turnbull government is proposing to cut funding and charge students more.

Behind the scenes, education minister Simon Birmingham is reportedly considering a number of options in order to “refine and improve” the deregulation proposal that has twice failed to garner parliamentary support. One option on the table would allow universities to raise fees by as much as 25%. Does this signal the death knell of former education minister Pyne’s proposal to allow for unfettered fee deregulation, a plan that would have permitted universities to charge domestic students the same amount as international students? In previous parliamentary debates, Labor members Kim Carr, Jill Hall, and Terri Butler condemned Pyne’s proposals as the “Americanisation” of Australian Higher Education. Along with the catchcry of “$100k Degrees,” this has been a mainstay of the ALP’s alleged “scare campaign” on the issue. Pyne was fond of citing the quality of American education as a model to emulate (never mind that the relationship between cost and quality is correlational not causal). Yet the deregulation din of the last two years has muted a crucial fact: tuition fees at most US public universities are not deregulated. Only Texas, Florida, and Virginia have fully deregulated fees. Fees have more than doubled at Texas public universities since deregulation was enacted in 2003, and one recent study showed that escalating fees have suppressed Hispanic enrollments. There is now bipartisan support to repeal the law.

Recently I asked several colleagues who teach at public universities in the United States how students would likely react if the state governments that regulate tuition fees permitted universities to charge resident undergraduates the same amount as non-residents—both interstate and international students. By analogy, this is effectively what the Australian government proposed during the last round of the deregulation debates. Not surprisingly, everyone I surveyed balked at such an idea. One academic at the University of California said that students “would no doubt riot if UC tuition rose to $38,000 [the current nonresident fee] per year.”

Deregulation in Australia could be justifiably characterized as Americanization in a narrow sense. The coalition’s proposal does risk emulating one unenviable aspect of US higher education—namely, the dramatic increase in tuition fees over the past 30 years, resulting in student debt in excess of 1 trillion dollars.

Yet public debate in Australia has entirely conflated the issues of fee increases and deregulation. As a case in point, Melbourne VC Glyn Davis has written in support of deregulation on the basis that decreased government funding over many years leaves universities with no other choice than to increase fees. However, nowhere does Davis present any evidence that uncapped fees are necessary.

Even the most thoughtful critics of deregulation acquiesce to the view that deregulation is a fait accompli in the US. For instance, Jaimie Miller argued that “fee deregulation has proved a fiscal disaster in the US. Australia would be insane to go down the same road.” Yet to deregulate fees without any caps would entail running Australian higher education off a cliff.

That deregulation is not a prerequisite for high quality education can be illustrated if one considers the University of California. All undergraduates at each of the UC’s ten campuses pay approximately $13,000 US per year. It’s important to bear in mind that these campuses operate independently with separate administrations, budgets, professors, and students. They do not compete on price. And what about the quality of these universities? League tables are at best proxies of quality and should be interpreted cautiously. Yet absence of competition has not impeded six of these universities, among them the renowned UC Berkeley and UCLA, from ranking among the top one hundred universities worldwide. California also boasts a number of elite private universities, but it also has a number of less prestigious private providers whose high price tags belie the notion that “universities that price themselves out of the market will have empty theatres and tutorials.” Recent years have seen more competition between public universities across the US due to decreased government funding. These institutions increasingly recruit nonresidents to cross-subsidize residents, charging on average $23,000 per year to out-of-state students. While this amount is less than the average private institution, it shows that anyone who believes that competition prevents escalating fees is being either naïve or disingenuous.

A related point also lost in current debates pertains to notion that international fees would function as a cap on domestic fees. This is not a genuine ceiling because Australian universities already can charge international students whatever the market will bear. La Trobe VC John Dewar recently argued against any limit on fees because “History has shown, both here and in the UK, that Universities will increase prices to any maximum ceiling. The better option is to let market forces and competition regulate the price students will pay, with a strong regulator providing additional scrutiny to ensure fairness.” Dewar comes closer than most to admitting that fee deregulation is atypical. As with most of the US, the UK does not have a fully deregulated system. In fact, domestic student fees there are capped at approximately 17,000 AUD (international fees range from 17,000 to $50,000 AUD per year). Dewar implies that regulatory measures will prevent fees from escalating to the current international level, but there is a conspicuous blind spot in his argument. He fails to recognise that international fees are by their very nature subject to competitive international market forces. It is no coincidence that the fees international students currently pay at Australian universities—on average between $15,000 to $33,000 (excluding “high value” courses such as medicine)—are in the same range as those charged to students at both private and public institutions in the US and the UK. If fees at overseas universities continue to rise (and there is every reason to believe they will), then it seems highly doubtful that Australian regulators would compel its universities to charge domestic undergraduates less than the going international rate.

That deregulation is a retrograde model of education funding was made abundantly clear by Obama’s 2015 State of the Union address, in which he announced legislation “to lower the cost of community college—to zero.” After hearing this speech, I was tempted to write the education minister a brief letter, saying: Dear Mr. Birmingham, 1980s America is calling. It wants its failed higher education policy back. The trouble is, deregulation of public universities was never America’s policy to begin with.

Chris Peterson, The National Alliance for Public Universities

The views and opinions expressed above are personal and belong solely to the author.





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