March 20, 2019

Labor funding policy brought efficiency hike

THE AUSTRALIAN

New research shows that the demand-driven funding system for higher education, introduced by the former Labor government eight years ago and to be reinstated by Labor if it wins the federal election, is linked to a significant boost to university efficiency.

The findings, revealed in The Australian today, show there was a marked improvement in the productivity between  011 and 2013, coinciding with the phasing in of the demand-driven system, which removed limits on numbers of university places and drove a significant expansion of student numbers.

In most universities, the efficiency gains continued up until at least 2016, which is the last year examined by the researchers. The policy took full effect from 2012 and had an impact on domestic commencing student enrolment.

The findings, by Keith Houghton and Mark Clisby of the Higher Education and Research Group, use a measure they call the REEF Index, which takes into account the two major outputs of universities, education and research, when measuring university efficiency.

Their methodology is agnostic as to whether a university derives its level of efficiency mainly from teaching or mainly from research.

Writing in The Australian today, Professor Houghton and Mr Clisby say the “results support the conclusion that uncapping of federal funding of (student) places is not a threat to the efficiency of the university sector as a whole”.

Their results suggest universities gained from economies of scale when they enrolled more students as the caps on student places were phased out from 2011.

They also suggest the “economy of scale” effect, which improved efficiency, outweighed the potential risk of enrolling larger numbers of less academically able students who, because they were unable to complete their courses or needed more teaching resources to help them succeed, reduced university efficiency.

The researchers also found the improvement in university efficiency that occurred with the introduction of the demand driven system did not disappear. 

“The increased efficiencies observed persist beyond the initial policy implementation,” they write.

But the continuing efficiencies were not there for all universities. “While the great majority of universities experienced gains in efficiency — some exceeding 30 per cent — over the five-year period (2011 to 2016), a few

showed signs of lower overall efficiency,” they write.

In a separate result, Professor Houghton and Mr Clisby found that universities with lower numbers of casual staff were more productive.

This outcome challenges the conventional wisdom that employing casual lecturers, which enables classes to be taught more cheaply, improves efficiency.

Professor Houghton, a former Australian National University dean of business and economics, said the link between fewer casual staff and greater efficiency was an association and did not imply causation.

However, he says he can speculate that the efficiency improvement due to fewer casual staff is because having a higher proportion of full-time academic staff leads to higher research efficiency because casual staff do not contribute to research.

The researchers also examined student attrition, which rose from 2012 to 2014, when the demand-driven system attracted more students, including those less prepared for university study.

While Group of Eight universities, which attract more academically able students, generally did not suffer a loss of efficiency due to higher student attrition, other universities did.

TIM DODD, HIGHER EDUCATION EDITOR