Regulation of what and why?
The topic of this series of annual forums, governance and regulation, begs the questions: of what and why?
When the ‘what’ refers to individual institutions the answers relate primarily to university mission (purpose, direction and goal focus) and self-governance at various levels from the Council or Senate as the governing body (including Finance Committee), the Executive as the strategic managing body, Academic Board as the internal quality assurance entity, and Faculties and Centres, Business units and Administrative services, including their policies and procedures for self-regulating and monitoring, and for external reporting on capacity, needs and performance, including accountability reporting for the use of public funds. This is a rich and dynamic area for inter-institutional comparison and process benchmarking. Within the Go8, we have been developing benchmarking tools (e.g. Go8 Dashboard, Go8 Facilities surveys, Go8 Verification System), we are exploring common tools with the AAU, LERU and C9 (e.g. via Academic Analytics), and will convene an international symposium in 2014 on productivity improvement in universities, considering opportunities for increasing productivity (efficiency gains without loss of quality) in learning and teaching and research, and back-office administration. Currently, Go8 universities are exploring options for collaboration via cloud computing for administrative systems.
The ‘why’ answers at the institutional level are more elusive, for several reasons. First, universities are, at least in-principle, self-governing – although in recent years, regulation policy changes of the Australian Government, and the behaviour of the national higher education regulator, have constrained aspects of university self-governance – a problem we hope will be rectified following the report of Kwong Lee Dow and Valerie Braithwaite into TEQSA’s performance and their call for the size and scope of the regulator to be reduced. Second, the establishment Acts for universities in Australia give the governing Council or Senate broad powers to do all lawful things necessary to advance the purposes of the university. Typically those purposes are expressed at a high level (e.g. “The object of the University is the promotion, within the limits of the University’s resources, of scholarship, research, free inquiry, the interaction of research and teaching, and academic excellence” (University of Sydney Act 1989). Third, the establishment Acts are ‘enabling’; they are, in the quaint language of lawyers, ‘always speaking’, such that “a university can do what a university can do” – what it is legally able to do under its Act is defined by, albeit not confined to, what other entities with the title ‘university’ have done or are doing, for instance, in commercial activities, whether or not commercial activities are listed in the Act expressly as functions of the university (Phillips Fox, 2001).
Fourth, the combination of the foregoing three factors means than a university’s functions are not necessarily fixed, although some may be constant – especially relating to the core function of higher education and the production of qualified graduates. Importantly, the governing body has the authority to sanction new functions in response to, or anticipation of, changes in the external operating environment. By so doing, a university can also modify its ‘mission’ and ‘vision’ – its sense of what it is, why it exists, who it serves, where it is going, and how it knows how well it does what it stands for. There is no Act that defines or fixes a university’s mission. This conception of university mission as an open rather than closed aspiration is important, not least for the capacity of universities to adapt and evolve. It will be relevant also when we come later to considering the notion of balance in the supply structure of a nation’s higher education system and the role of any ‘mission-based funding compacts’ between government and universities.
[Slide 2: Higher education policy models]
When the ‘what’ and ‘why’ questions about governance and regulation are answered in respect of higher education systems they relate to: national purposes and goals; system scale, structure and balance; steering mechanisms and incentives; and the accountability cluster of provider licensing, quality assurance, consumer protection, performance monitoring and reporting, and compliance with the plethora of mandates in areas of privacy, non-discrimination, security, health and safety, ethical conduct of research, defence trade controls and so on and on.
There is also a significant set of second-order questions. For instance, in respect of system regulation: what is to be regulated, for what reasons, and what are the principles for guiding how best to conduct regulation? Again the TEQSA debacle illustrates the need not only to legislate for risk-based regulation but to ensure that the regulators know what the legislation permits and what it does not authorise. In respect of system governance, to what extent is governance or steering necessary for a nation’s higher education system? Here we should recall that ‘steering’ as a metaphor is distinguished from ‘rowing’, in order to allow operating discretion for local managers to achieve results, and to employ diverse ways and means of meeting set goals rather than have their processes micro-managed by central controllers (Osborne & Gaebler, 1992). Governance as steering, therefore, suggests guiding and monitoring rather than directing and determining. Would the rowers end up at different destinations if they had to navigate the changing circumstances without the steerers? I guess that depends on the severity of the circumstances, the quality of the steerers and the rowers, and which way they are facing! However, in systems that involve high levels of financial support from government there is a risk that taxpayers’ funds will be used poorly and gaps in service provision will emerge if all the rowers are setting their own course, and there is no knowledge or capacity to ensure that broader community needs are met.
It is 25 years since we had an open policy discussion about higher education system scale, shape and steering, with the release of the 1987 Green Paper by JS Dawkins, then Minister for Employment Education and Training. Indeed, these may be seen as areas of policy drift if not neglect in the Australian context. Alternatively, matters of structure and steering may be seen no longer to matter and to reflect outmoded models of state control. Either way, they are issues that need revisiting in the changing world of higher education, for many of the conceptual foundations and policy assumptions underpinning such constructs as ‘structure’ (especially notions of institutional ‘type’) and ‘steering’ (especially notions of conformance to national requisites without regard to global developments) are challenged by changes, to date and impending, in the scale and composition of student participation, on a national and international basis, along with changes in the technologies of higher education and research, changes in the academic workforce, changes in the sources of finance for students and institutions, and the dynamics of these changes in a competitive environment, including the emergence of multiple forms of higher education supply, increasingly involving non-university and non-public providers, and providers in industries other than the traditionally-conceived education industry.
Many of the concepts, as well as the terminology, relating to higher education structure and steering still reflect a predominantly Q1 view of the world, whereas things are moving in a Q4 direction (see Slide 2). Some, though not many, argue that higher education should be driven and shaped by market forces alone, and regard the higher education industry as one of the few remaining economic sectors yet to be unshielded from market imperatives. Yet governments have established public higher education institutions to function for the benefit of communities, including but not limited to educating progressive cohorts of learners. Societies have a profound and long-term interest in their higher education institutions that goes beyond the immediate interests of current students, academic staff and administrators (World Bank, 2000). Notwithstanding the various omens, whether those of a technology-determinist bent or those of a consumer-revolt bent, depicting the demise of the university as an institution, there are strong social forces sustaining it. What we need to consider is how Q1 and Q4 policy interests might be reconciled, without fettering institutional responsiveness to changing needs and circumstances, and without diminishing the longer-term benefits for the society of its investment in higher education institutions. In that regard, the Go8 has outlined a set of principles that might serve as a basis for the discussion we have to have. The most relevant principle for this conversation is that of structural diversity, although when you see the principles as a package you can understand that structural diversity is both a means to giving effect to other principles and a consequence of the interaction of other principles. That is to say there is no desired structure as an end in itself, and structure is fluid rather than static.
[Slide 3: Higher Education Policy Principles]
Application of the ability-to-benefit principle in higher education
“Higher education institutions should be primarily concerned to establish systems of access for the benefit of all persons who have the necessary abilities and motivations” (World Declaration on Higher Education for the Twenty-First Century: Vision and Action, UNESCO, 1998)
In the dying days of the Gillard Government we saw desperate efforts to find extra funding for schools while protecting the uncapped system of taxpayer-funded university admissions, whose costs were continuing to blow out alarmingly, by cutting back assistance to students and research programs, and imposing an efficiency dividend on universities, including funds for teaching and research block funding. Those lazy ‘saves’ seemed to be driven more by a political narrative and quest for a legacy than by policy worth; they certainly were not subject to any assessment of cost-effectiveness or policy coherence – neither for schools nor higher education. The containment of costs in the May 2013 Budget followed two earlier containment exercises, one in the MYEFO 2012-13 with the cut to forward funding for the ironically titled ‘Sustainable Research Excellence’ program, which was designed to raise funding for the indirect costs of research, and the other in the previous year when sub-Bachelor degree programs were removed from the so-called ‘demand-driven system’. More recently, under the Rudd return, we saw efforts to unscramble the mess over capping tax deductibility of self-education expenses, and mollify disgruntled university students and staff, with a search for alternative savings. The re-appointed Innovation Minister, Senator Kim Carr, this time with responsibility for higher education as well as research, called for ideas that could generate the necessary savings and address concerns about quality, without the adverse impacts of the Gillard measures.
In that context, the Go8, whose member universities are disproportionately and seriously affected adversely by the various ‘saves’, suggested that around $750 million could be saved over the budget forward estimates period by applying the merit principle through an ability-to-benefit test of an ATAR of 60 or better to school leavers seeking direct entry to a Bachelor degree course (and 70 for BEd students), with some of that saved amount reallocated to sub-Bachelor pathways. This suggestion was not universally welcomed. It was contentious even within the Go8, not least because it could be construed as limiting the autonomy of other universities. It was seen as an overly crude approach that applied variously to one part of the entering cohort of students such that it could operate unfairly for some individuals, and could be manipulated by some institutions, such as through bonus points.
The ATAR cut-off was suggested, partly on technical grounds, because it provided a data basis for calculating the potential scope for savings. As it has turned out, Minister Kim Carr, with an inclination to contain growth in intakes, indicated a preference for a negotiated approach with each university through mission-based funding compacts, which would have the advantage of allowing universities to use contextual data in their admissions. Presumably, that would involve the Government setting an upper limit on annual outlays, and each university proposing an enrolment mix within its given funding envelope. However the method of implementation has not been revealed, nor the extent of savings that might be sought from this approach, or whether all universities would retain the funding for their current enrolment pipeline plus or minus forward adjustments for growth or decline in intakes. One consequence of permitting variations in the number of places within a set funding envelope could be variable rather than standard public funding rates per place, with interesting implications for the nexus with student contribution amounts. Of course, a change of Government could alter the whole ballgame.
It is not my purpose here to delve into the ATAR debate but rather to use it to illustrate some problems we have in the design of what we might call temporarily ‘Australia’s higher education system’. I say, temporarily, because it is not necessarily a ‘system’, it is not exclusively Australia’s, and it is not all about what we used to understand to be ‘higher education’. Briefly a few points should be noted about the ATAR controversy.
First, there has been some conflation in the policy debate of three quite different approaches: re-capping enrolments; ending the ‘demand-driven system’; and requiring an ability-to-benefit threshold for admission to Bachelor degree studies.
Re-capping means either placing upper limits on the number of students that the Government would fund in any particular university, or putting upper limits on the funding envelope that the Government would resource for particular institutions. There has never been any suggestion by the Go8 for the Government to adopt either of those options. If re-capping also means going back to a centrally-driven allocation of student places by field of study, that option also has never been suggested by the Go8.
Ending the demand-driven system, presumably, means restricting students’ choices about what and where and how they study, in particular by limiting their choices to specific institutions or fields of study. Again this has never been advocated by the Go8. To the contrary, in our public and behind-the-scenes advocacy with all political parties, the Go8 has argued consistently for relaxation of central controls on enrolment volumes and prices. Nor have we advocated for total deregulation. Our argument has been for universities to have operational flexibility with accountability for results, within a policy and financing framework that delivers cost-effective outcomes for the community, including through open competition among all rival providers, public and private alike. This is to suggest: (a) that what we have now is not actually a demand-driven system; (b) that its further evolution and fuller expression is necessary; and (c) that in its present and future forms it will not be a sufficient basis for underpinning a balanced higher education system.
Second, the proposed ATAR cutoff was intended (and costed) only for domestic school leavers aged 17-19 years seeking admission to a funded Bachelor degree program in a public university within 2 years of completing Year 12. It was never a proposal to determine, as in some countries, such as via China’s gao kao or Egypt’s Thanawiya Amma, the life chances of individuals on the basis of their once-in-a-lifetime attainment score in final school exams. It was envisaged that more mature applicants would continue to be admitted on broader criteria, regardless of their school attainment, in recognition of their opportunity to learn from their wider experience. Go8 universities admit more than 50% of their commencing undergraduate cohorts from direct school leavers, whereas other universities generally cater more to the mature-age student market at the undergraduate as well as graduate levels.
Third, the ATAR threshold proposal was complemented by an explicit transfer of savings to provide additional funding for sub-Bachelor degree pathways for immediate school leavers. The reasoning behind that proposal was that many students with ATARs below 70 have been found to struggle with university studies without support. Presumably, less well-prepared students need even greater support to succeed. It is not that they lack aptitude but that they lack adequate preparation. Yet the Government has not accepted the arguments of several reviews that funding rates per student – including for the less well-prepared students – should be increased by the order of 10%, so that any additional student support has to be provided from current funding per student. Generally, students with low levels of school attainment are more likely to benefit from preparatory programmes to improve their readiness for advanced learning, even in fields that require little if any mathematical competence.
Sue Willis, one of Australia’s best informed analysts of student progression, argues that “some of the money being spent on enrolling more low-ATAR students into degrees could be better spent on pathway programs and vocational education and training.” The Monash University data that Sue draws upon show that low-ATAR students, who are selected on the basis of their performance in pathway programs, perform strongly and in a wider range of fields than they would otherwise be able to access:
“Admitting under-prepared students with low ATARs not only increases their risk of non-completion, it restricts their choices. Lower ATAR students admitted directly to bachelor degrees are being selected on the basis of their current preparation, rather than their potential for university study, while graduates of pathway programs have a chance to prepare for a wider range of disciplines, and demonstrate their aptitude for tertiary study.”
Without access to pathways, students may be subject to failure, or have limited study options, or find themselves with qualifications that have little use value for employment and further learning. Lowering the entry bar to a Bachelor’s degree yields no benefits for anyone. It is particularly not fair to induce equity groups into pursuing studies that will not lift them up and may well let them down.
[Slide 4: Absolute change in offers to school leavers with ATARs, by ATAR & SES 2009-2012.]
The admissions debate also seemed to equate low ATAR with low SES. However, in aggregate 4 out of 5 of the students admitted on the basis of an ATAR over the last four year were middle and high SES, and they comprised the bulk of offers at every ATAR decile. Arguably, laissez-faire admissions, post Bradley, have been of greater benefit to students of lower-attainment from middle and high SES backgrounds than to more able students from low SES backgrounds.
One apparent structural flaw in the Australian higher education design is that the base of the system is too narrow to accommodate growth and diversification of the student body cost-effectively. That is, the Australian structure is unbalanced in terms of program levels and pathways relative to the trend of domestic student demand, ironically in a system that has a very wide and diverse range of preparatory and pathway education services for international students.
What has been a major pathway to university study, TAFE, has been enhanced over the last decade through Associate Degree and Diploma courses tailored for particular occupational progressions but its scale has been contracting through cuts in funding and by the increased admissions capacity of universities. Sub-Bachelor courses were excluded from the ‘demand-driven system’ from 2012, partly to stop a cannibalisation of TAFE and partly to save costs, including Commonwealth substitution for state government expenditure on TAFE. Costs have continued to rise, however; indeed, the cost of a university place is higher for the Commonwealth than that for the sub-Bachelor program in TAFE for which it substitutes. Pathways for students have been narrowed, and a number of students who could have benefitted from preparatory programs have gone directly into Bachelor degree studies. Unfortunately, there is no adequate data publicly available to inform us how well those students are doing.
[Slide 5. Commencing Domestic Sub-bachelor Students by Broad Level of Course, Full Year 2012]
Government-supported opportunities for access to higher education at the sub-Bachelor Degree level totalled 25,482 places allocated to public universities and Table B institutions (Bond, Notre Dame and MCD University of Divinity) for starting students in 2012 (including Associate Degree and Other Undergraduate programs, and Enabling courses). This allocation of places represented just 6% of commencing undergraduate students. Enabling courses comprise two thirds (16,428) of all these government-supported access places.
The purpose of enabling courses, where participation is free and universities are paid a top-up in lieu of the student contribution, originally was stated as being “to provide a pathway to higher education for students from disadvantaged groups who do not yet have the academic preparation to enroll directly in award courses” (DETYA, 2001). In the 2012-13 Budget, the Government announced that in 2013 the enabling loading will be increased from an estimated $1,833 to $2,500 per place, and from 2014 to $3,068 per place (with the rate indexed in later years). The distribution of enabling and sub-Bachelor allocated places among universities appears to reflect historical factors rather than low-SES and Indigenous student enrolment shares. The University of Newcastle, for instance, has 2,506 enabling places for commencing students, followed by CQU with 1,400, Charles Darwin with 1,336, USQ with 1,326 and then Edith Cowan with 1,009, whereas Wollongong has 382, Victoria 230,Western Sydney 193, Sydney less than 5 and Deakin, QUT and Swinburne none. Similarly, the allocation of Associate Degree places appears arbitrary, with Charles Sturt having 1,066, RMIT 917, UTas 630, USQ 619, Southern Cross 249, and Deakin 136. All the rest have less than 100, including 20 that have none. Of course, it becomes difficult to increase the number of sub-Bachelor allocated places with the cost of uncapped Bachelor places continuing to rise.
The rationale for enabling courses has become somewhat blurred and the effectiveness of the program is not evident, as there are no publicly available data on the progression and success of students, both those entering via enabling programs and those admitted directly to Bachelor degree studies. In the context of foundation and preparatory programs offered by many university commercial entities and other private providers, and noting the low participation of domestic students in those programs, there may be issues relating to competitive neutrality in the contested market for higher education preparatory services that need to be addressed, along with matters of horizontal equity for students in the light of different conditions for access to loans. Data on the bases of admission of commencing undergraduate students have not been published since 2006. It would help an informed discussion if we had access to those data, and student unit record data on admissions, progression and completions, especially over the period 2008-2013, for all students at all levels. In the absence of monitoring data, there has been, in effect, a social experiment with the lives of young people, randomly across the nation, over the last five years, that no responsible ethics committee would have ever allowed.
[Slide 6. Offer rates by university group, 2010-2013]
In the absence of available student tracking data, we can only look at access indicators – access alone, regrettably has been the policy preoccupation since 2008 – one set being applications, offers and acceptances. Here we see that all university groups have been raising their offer rates, in the case of regionals to over 100%.
[Slide 7. Offer rates by university 2012]
In 2012, 5 universities had offer rates above 100% (i.e. they were going beyond the pool of students who had indicated a first preference to study with them), and 26 universities had offer rates above 80%.
[Slide 8. Change in offer rates by university, 2009-2012]
Offer rates have moved around on an institutional basis over the period. This reflects changes in a number of factors, including: strategic positioning (e.g. in the case of ANU and UWA to achieve greater scale efficiency); and growth in revenue or substitution through enrolment revenue of income lost from other sources and cost increases). This points to another flaw in the system design: universities have to keep taking in more students in order to increase or maintain their operating revenues, partly because they have no pricing discretion over what is, for all of them, their core business – educating domestic undergraduate students.
[Slide 9. Undergraduate students, 1949-2012]
Looking at historical trends for domestic students (international student numbers were not separately and consistently reported before 1992, so they are included in the preceding period but their numbers were relatively small at that time), we can see four spikes. The first and steepest, in the 1970s, is the transfer of state-funded higher education students to the Commonwealth budget after the Whitlam Government’s decision that general taxpayers should pay the costs of all higher education students. The second spike is in the early 1990s with the expansion of enrolments following the Dawkins’ amalgamations of higher education institutions. The third Spike is in the Howard Government’s extension of enrolments to full fee-paying students. The fourth spike is the post-Bradley enlargement of access on an uncapped basis.
[Slide 10. Increase in Domestic Undergraduate Students, 1979-2012]
When we compare rates of growth in access (commencements) and persistence (enrolments), we can see three points at which commencing student growth spurted ahead of total enrolment growth. Again we see the impact of the Hawke Government post 1985 and the Dawkins’ expansion, with the aim of raising graduate supply to the labour market. Then we see a labour market sheltering effect during the mid 1990s. Finally we see a big kick post 2010, driven by universities optimising the opportunity to gain revenue growth through enrolment growth.
It is a moot point that we have a demand-driven system actually operating. The available data indicate that university admissions growth over the last five years has been more supply-push than demand-pull, with growth in offers exceeding growth in applications. Additionally, student options are constrained by what providers have the capacity to offer. The offerings available to domestic students in aggregate, depend on the overall supply structure of the nation’s higher education system. Allowing students to exercise their choice only in universities and only for Bachelor degree courses is itself a serious restriction of the demand-driven principle, because students cannot be supported at an equivalent level if they want to do an Associate Degree or Diploma with a non-university provider, even if that would get them the employment outcome they seek more quickly and at lower cost.
With a narrow base and range of short-cycle pathways, and government funding an unlimited number of students that universities admit to Bachelor Degree programs in the most expensive supply category – the public general university – we have seen the costs to government rising steeply, universities getting bigger, and qualitative distances between universities widening.
[Slide 11. Higher education providers by scale of enrolment, 1987 & 2012]
Over the 25 years since the last policy discussion of higher education structure in Australia we have seen three main changes. First, there has been a loss of horizontal diversity. The public providers in 1987 included autonomous universities and a range of colleges of advanced education (CAEs), formed earlier from amalgamations of former specific-purpose, state-controlled institutions. The CAEs included what would be known as polytechnics in several other countries, and while they had limited autonomy they were mission-directed to serve particular occupational segments and industry innovation needs. This binary divide was collapsed subsequently into a so-called ‘unified national system’ largely in order to give students wider learning options than were available under more narrowly formed and smaller institutions. Importantly, from a system steering perspective, the conversion of specific-purpose and mission-directed institutions into universities involved redefining them from being ‘state’ institutions to being ‘public’ institutions. All the autonomies attaching to the university tradition were transferred to the amalgamated institutions, including the autonomy to set and re-set their own missions.
Second, the private sector has expanded. In 1987, Australia had an almost fully public system, with only a handful of faith-based private providers of teacher education. Now there are over 130 private providers, including 10 that have more than 2,000 students, the benchmark size identified in Dawkins’ 1987 Green Paper as the minimum for a reasonably cost-efficient institution, although none are yet at the 5,000 threshold for membership of the ‘unified national system’. Again, from a system steering perspective, private institutions are market-driven rather than mission-directed.
Third, the scale of the system and the size of universities have grown significantly. With the closure of the binary divide, the large bulk of enrolment growth has taken place in public general universities.
It’s like we have only SUVs on the road. They are big, multi-purpose, family-friendly, often hard to see past, and not always agile. They are not the cheapest vehicle one can buy (although on the Australian road at present they are all the one price!). They range from the elite brands like Audi, BMW, Mercedes Benz, Porsche, the interloper Lexus, and the electric Tesla, and through mid-ranging brands like Citroen, Ford, Holden, Honda, Hyundai, Land Rover, Mazda, Mitsubishi, Nissan, Peugeot, Skoda, Subaru, Suzuki, Volvo, VW, and Toyota (which has multiple campus-like models) to lesser brands like Chery, Kia, Great Wall and Ssangyong. (In vain I tried to find 40 but could only find 26, although there were some scratchings, such as Geely!) Some of these brands (like Kia) are rising up the ranks, as they gain a reputation for reliability and take on some characteristics of the elite brands. Is there diversity among them? Yes, of course, whether 8, 6 or 4 cylinders, whether diesel, petrol or hybrid, whether all-wheel or front wheel or back wheel drive, whether black, white, or silver. Some have more air bags than others. Some are getting easier to enter. Some have built in screens for the young people in the back to play games. Yes there is diversity among the SUVs, but there are no sedans, no utes, no sports coupes, no vans, no trucks on the road. In private garages may be found some of these other vehicle types parked for want of fuel – that is, the private providers cannot compete with the support available to students in public universities. Others, including both public and private models, are overseas and not licensed here – such as the “polytechnic”, “technical university”, “university of applied sciences” and “liberal arts college”.
The question arises as to how balanced is a national higher education system which comprises only autonomous universities and private providers. If the universities do not want to fit a particular need and there is no market incentive for the private providers to do so, how do governments fill the supply gap? One option is to use Q3 financing mechanisms (see Slide 2) such as competitive tendering. Another could be to use mission-based funding compacts with universities to ameliorate market failure, but to do so would be inconsistent with the very notion of them being mission-based. A third option is to provide for the establishment of new provider categories which could be both private and public. Such categories might include “polytechnic” or “institute of applied studies” and other models. However the catch-all, albeit somewhat dismissive, category of “other higher education provider” allows for diversification of non-university providers. If we want diversity of universities it will be necessary to create a new category such as “community university”.
[Slide 12. Number of students, 2002 & 2012]
Over the decade 2002-2012, the number of students enrolled in higher education institutions in Australia increased by 361,101 (40%), from 896,621 to 1,257, 722. Domestic student numbers grew by 220,546 (31%) and international enrolments grew by 140,555 (76%). Enrolments with private providers grew to 65,928, becoming in aggregate larger than Monash, although that number represents only 5% of all enrolments. The opportunities available to domestic students stand in stark contrast to the opportunities for international students. There is potential to make greater use of private provider capacity in serving future growth in domestic student demand.
[Slide 13. Academic rankings of world universities, 2013, student size, graduateness and asset strength]
This crowded slide shows the top 30 universities on the 2013 Academic Ranking of World Universities, and the top 20 world ranked Australian universities. This ranking by the Education Faculty of Shanghai Jiao Tong University is based on research-related metrics. The indicators for each of the universities listed are interesting to compare: enrolment size, graduateness of enrolment (the ratio of postgraduate to undergraduate students), and wealth (in Australian dollars as at July 2011).
In terms of wealth, Harvard is the outlier ($33.7b). Harvard has more than double the wealth of Princeton ($15.7b) which has five times the wealth of Oxford ($3.2b) and Melbourne ($3.5b). Stanford ($20.5b) and Yale ($19.1b) sit between Harvard and Princeton. Wealth matters, but it is not the only thing that matters. UC Berkeley, Cambridge, CalTech and Oxford rank above several universities with more than twice their wealth. Australia’s leading universities generally have net assets on a par with, and sometimes stronger than, Imperial and Toronto, yet don’t rank as highly.
With regard to total student numbers, 5 of the world top 10 have fewer than 20,000 enrolments, (CalTech, Princeton and Johns Hopkins have less than 10,000) whereas none of the ranked Australian universities have less than 20,000 (ANU is the smallest with 20,060). Australia’s top public universities are much larger than the top private US universities and, also tend to be larger than the leading public universities of England and the US, with a few exceptions.
Australia’s top ranked universities, except for Melbourne (0.7) and ANU (0.6), have postgraduate to undergraduate student ratios less than 0.5. Sydney has 0.4 and UNSW 0.36, UTS 0.35 and Flinders 0.33. The rest are below 0.3. The top ranked US universities have postgraduate ratios often above 1.0. Columbia’s is 2.48, Harvard’s 2.16, Chicago’s 1.83, and MIT’s 1.48. Chicago, Columbia and Harvard have big coursework Master’s degree enrolments. Nevertheless, most of the leading US universities have strong concentrations of research degree students and post-Docs, and they are magnets to the top intellectual talent from around the world. It is this ingredient, absorbed in a culture valuing excellence, that most distinguishes the leading universities.
It is not unreasonable, on the basis of these indicators, for Australia to aspire to rise in the world university rankings, and not only have several universities in the top 100 but also a couple in the top 50. To that end, given the current scale and shape of Australian universities, the comparator institutions ought to be the leading public universities of England, the US and Canada, Japan and Switzerland. The top US privates are simply out of reach, even for the leading public institutions of other countries, unless they receive massive capital injections, contain their student numbers and increase their graduateness. Perhaps the likes of China, Korea and Singapore will move in that direction, but talent does not necessarily follow dollars alone.
ETH Zurich (ranked 20th) is a Federal university with special funding in a rich economy, with a smaller student enrolment than any Australian university and a graduate ratio of almost 1.0. Tokyo University (ranked 21st) is smaller than most of Australia’s leading universities in student numbers, except for ANU, Adelaide and UWA. However, Tokyo U has a postgraduate to undergraduate ratio greater than 1. We don’t know its asset base but we do know it is highly prestigious within a status-oriented culture, and therefore likely to attract and retain Japan’s top talent. The University of Toronto (ranked 27th) has over 80,000 students, a postgraduate ratio of only 0.23 and net assets of $1.8b. UT is bigger, less graduate, and not much wealthier (poorer by some comparisons) than most of the ranked Australian universities. Why does it do so well? Why don’t better resourced Australian universities have higher rankings? A key factor is the rankings measure of citations dominated by the North American academic literature, where it may be easier for Canadians than Australians to feature, including through co-authored publications.
While the Toronto exemplar presents an interesting challenge, it would not seem generally to be to the advantage of Australia’s leading universities to grow their undergraduate numbers much further.
[Slide 14. Projected growth for 16-18 year olds, 2010-2040]
It is reported that there have been 190,000 additional domestic students in Australia’s universities between 2008 and 2013. That growth reflected an increase in the participation rate without any growth in the population of the school leaver cohort. In the next few years, however, we will see a demographically-driven rise in school leaver numbers in Queensland, WA and the NT initially, and then from Victoria and, after 2020, from NSW, Tasmania and South Australia. Taken together with increased participation among older age groups, including for qualifications upgrading, we estimate that there will be a need to accommodate at least an extra 500,000 students by 2025.
One question we need to ask is how to accommodate future growth in student demand. Had the growth of the last 5 years not been absorbed in established universities it may have been necessary to build around 20 new universities at an average size of around 10,000, although that would have been very difficult to achieve physically because of the lead times involved in securing land, building facilities, staffing up and preparing programs. As many of the established universities have grown large, should they get bigger, or should there be more universities, or should there be other ways and means of meeting the demand? There is not a lot of time left to start implementing the answer(s). One part of developing an answer is to assess what has been put in place over the last 25 years, and the patterns of development over the last decade or so.
[Slide 15. University Revenue by source, 1939-2011]
It has taken around 35 years to recover from the Whitlam aberration and regain some balance between the contributions to costs of general taxpayers, private beneficiaries, community benefactors, and institutions’ own efforts. A significant development over the last 25 years has been a growing level of dependency on international student fee income. Future real growth in income from that source cannot be taken for granted. There are multiple factors at play, including: changing demographics in traditional source countries; increasing import replacement in source countries; rising competition from providers of other nations, and global provider consortia, including on-line services; currency and cost of living relativities; and recognition of academic quality.
Universities are responding to those questions in their own ways, driven increasingly by the fierce and intensifying international competition for intellectual talent and the reputation race. The research capacity and performance of a university is a major factor in the academic reputation race, and figures significantly in the more respectable world university rankings at the institutional level and by discipline.
The offerings available in specific institutions, such as universities, are largely set by their academic staffing structures. Those staffing structures reflect historical investments, including in response to prior patterns of student demand, local community needs and expectations, including industry and employer requirements, government incentives, and more enduring orientations to scholarship and research ranging from local to global interests. It is necessary to ask, in consideration of these factors, to what extent student demand – which may be fickle, ill-informed and even faddish – should shape university staffing. If more students want to study pharmacy or forensic science, for instance, do we expect universities to hire academic staff in those fields and reduce staffing in areas of lower student demand, such as in philosophy and physics? If so, by what means and how well would Australia’s research capacity in philosophy and physics be sustained? Or does that not matter?
The universities are operating in three very different spaces: one where tuition prices are set by the Government (for domestic undergraduate students) and another where prices are set by the market (for international students at all levels and for domestic students at the postgraduate level). The third space is that of competitive funding for research, both the contest for government-funded national competitive grants and the competition for industry funding of research. With the exception of ANU last century, there has been a connection between university staffing and research capacity mediated through staffing for teaching. But the scale of growth in international student demand, in a narrow range of fields at the undergraduate level, has generally not led so much to enhanced research capacity in Business, Commerce and Economics as to deeper institutional capacity to support research across a range of areas.
[Slide 16. Total research income, by university, 1995 & 2011]
Whereas most countries have increased the formal, horizontal diversity of their higher education structures over that time, Australia, England and Sweden are the only countries to have closed the binary divide in higher education. Sweden did so first, in 1977, but retained a range of more focussed institutions, such as agricultural colleges, fine arts institutes and teacher education colleges alongside universities. In England, a slacker approach has been adopted to university title than in Australia alongside a more extensive set of collaborations between universities and colleges of Further Education. Australia has continued to insist that “the use of university title should be limited to those institutions which have demonstrated their capacity to deliver and develop substantial and high quality research and postgraduate programs” ( NBEET, 1989). This charter is expensive, and not all can gain the necessary resources.
[Slide 17. ERA 2012: Field of Research (2 digit) rank of 4 or 5 by university]
There appears to be a close correlation between resource inputs and the quality of research outputs. As we have noted, research quality is a key factor in international rankings of universities.
[Slide 18. Postgraduate research students, 2002 & 2012]
There is not such an obvious correlation between research resources and quality, on the one hand, and growth in postgraduate research enrolments, on the other hand. With substantial undergraduate growth, efforts to raise the postgraduate to undergraduate ratio, especially in research degrees, can lead to a stronger emphasis on quantity than quality.
[Slide 19. FTE for Research Only staff with academic and non-academic classifications (including casuals), 2001 & 2011]
The term ‘research-only’ (RO) is a bit misleading. It’s not that they only do research; most of the academic RO also supervise doctoral students and many teach aspects of other degree programs. The RO classification includes casual appointments, such as research assistants working with a principal investigator on a research project and technicians working on research instrumentation. The growth in RO appointments is largely driven by growth in research funding. One can expect a higher quantity of high quality research output from a larger concentration of RO appointments, especially alongside larger groups of doctoral students and postdocs. An important feature of growth in RO and doctoral students is that it does not necessarily follow patterns of undergraduate enrolment by field.
Taking these various indicators of scale and cost into account, and noting that several universities are still fledgling in research after more than two decades, it is not self-evident that Australia should create more universities on the same model in the future. Two controversial observations may be made in this respect. The first, as Martin Trow identified in 2003, is that it is unreasonable, unfair and inefficient to place expectations on institutions to become what they are not set up to be:
“A central problem for higher education policy in every modern society is how to sustain the diversity of institutions, including many of which are primarily teaching institutions without a significant research capacity, against the pressure for institutional drift toward a common model of the research university – the effort alone shapes the character of an institution to be something other than what it is – a prescription for frustration and discontent (Trow, 2003).
The second observation is the flip side of that coin. The Australian universities with the greatest capacity for research – not least on the basis of sunk investment by their supporting communities over many years – are being driven to increase their teaching effort and direct more of their research effort to short-term instrumental interests of governments, at times socialising the costs of private industry R&D, and thereby limiting their capacity to remain research competitive with their international rival peers.
The future fiscal environment
In an arresting article last month, David Uren and Chris Richardson suggested that “winning the election may yet prove to be a curse”. They documented the overhang policy costs of the resources boom years 2003/4-2013/14, including higher recurrent expenditure lock-ins with a reduced taxation base. They noted that there is no proper provision in the out-years, especially post 2016, for large-scale and long-term commitments in such expensive areas as disability care, schools funding, superannuation, defence capability, transport infrastructure, and other proposals, such as the resettlement outside Australia of people coming on boats, or the touted conversion of northern Australia into a mega food bowl. Moreover, under current taxation arrangements, with deteriorating terms of trade, and rising social costs associated with population ageing among other things, there is a widening gap between the claims being made for additional government outlays and the fiscal capacity to pay for them.
The incoming government will also face serious challenges in relation to higher education and university research. There will simply not be enough money from government to attend to pressing needs that will not go away, especially regarding research infrastructure, and will become more expensive the longer they are not addressed. The problem is that the damage may well be done before it is evident to the public and policy makers, because performance in higher education and research is tracked mostly through lagging rather than leading indicators.
A protracted period of parsimony, if not austerity, ahead also has implications for productivity improvement at the institutional level (back office administration, shared teaching and research resources) and at the national level (reduced wastage, relevant skills formation, quality as well as quantity). In building the supply capacity to serve future growth in student demand, cost-effectiveness will be a major factor. We have not only seen the peaking of public funding per student in real terms for established universities but also a limited capacity for governments to fund the establishment of new universities. There will necessarily be greater reliance on private provision, and any expansion of public provision will need to be at a much lower cost than that involved with the established universities.
The changing higher education landscape
The challenge of diversifying the structure of supply has global as well as local dimensions. The future massive growth in learner demand around the world, an increasing share of it emanating from poor segments of the youth bulge in developing countries, as well as from the rising middle class households, will give rise necessarily to new forms of higher education supply. This may involve both segmentation of existing institutional provider functions alongside new combinations of institutional types, and the emergence of completely new players.
Some see greater competition in mass and post-mass higher contexts creating opportunities for new institutions to enter the market with new products and services, and for established institutions to take up niche positions or be overtaken or taken over. The growth of various private providers and new consortia around the world gives this view support. The UK’s Department for Business Innovation & Skills suggests that supply will not be determined by any government policy but will be an outcome of response to learner demand:
“What will influence the size and shape of UK higher education in the years to come? The institutional map for the sector will likely emerge from decisions taken in response to user demand and the changing environment of the 21st century” (http://www.bis.gov.uk/he).
In like vein, the Asian Development Bank, noting major changes in learner demand and supply technologies, sees the future configuration of supply being shaped via markets serving consumer needs:
“Whereas the state or its institutions often drove earlier supply, now it is the clients of education who are driving the growth. Such customer-driven demand is beginning to have its impact on the modes of supply, the operating costs of institutions, the range and diversity of products and services, the nature and profile of students, as well as the cost to the user. Provisions for postsecondary learning at the workplace, as a lifelong requirement available flexibly and at affordable cost, have become part and parcel of the new supply arrangement” (Asian Development Bank, 2012).
The capacity for market-driven supply arises from the scale and diversity of emergent learner demand, inadequate responsiveness and high-cost lock-ins on the part of traditional suppliers, and unbundling on the supply and demand sides. UniversitiesUK (UUK, 2012) has outlined dimensions of ‘unbundling’ (compartmentalising and disaggregating) education delivery and support processes, and education consumption:
Supply side unbundling – compartmentalising and disaggregating delivery processes
Infrastructure: e.g. use of third parties for delivery of essential infrastructure and back office functions such as IT network management
Teaching: e.g. use of externally contracted staff to teach, draft curricula or develop resources
Teaching & awards: e.g. portability of the higher education ‘product’ in the form of degree award validation and the external delivery of curricula through franchising and partnership provision
Demand side unbundling – compartmentalising and disaggregating outputs or consumption
Personally tailored learning: e.g. quicker or multiple routes to qualification, pay-as-you-go credit accumulation, optional purchasing of resources, learning support and facilities
Educational resources: e.g. formal and informal access to on-line resources
Additionally, the rising costs of research mean it will be difficult for all the research-intensive universities to retain their current disciplinary span if they wish to be world class players in research – some might specialise and use collaboration to allow disciplinary diversity to continue (Thrift, 2009).
Some see the multiple-mission universities of the US becoming unbundled too:
“We should expect to see even more segmentation of US higher education in the years to come. Indeed, the “multiversity” itself may be disaggregated. Given the size, scope and complexity of many universities, it is plausible that some will “unbundle” their research, undergraduate teaching, athletic and outreach programs, and medical centers into separate enterprises – a “divide and conquer” strategy that would further segment US higher education” (Staley & Trinkle, 2011).
Of course, these trends offer market opportunities to the consulting firms as well as to the real players. Some are presenting future options as terrifying inevitabilities that will be not only ‘transformative’ but also ‘disruptive’ as established universities ensconced in costly campuses will be overwhelmed by paradigm shifting avalanches. Two weeks ago, Mike Boxall of PA Consulting warned of “zombie universities that are trapped in a cycle of decline but unwilling or unable to abandon out-of-date models” (The Australian, 22/8/2013).
In his foreword to Pearson’s 2013 report, An Avalanche is Coming, former Harvard President Larry Summers, wrote:
“Just as we’ve seen the forces of technology and globalisation transform sectors such as media and communications or banking and ﬁnance over the last two decades, these forces may now transform higher education. The solid classical buildings of great universities may look permanent but the storms of change now threaten them. Of course, competition between universities around the world has been intensifying for decades, and now they ﬁght for talent and research funding. In An Avalanche, the authors argue that a new phase of competitive intensity is emerging as the concept of the traditional university itself comes under pressure and the various functions it serves are unbundled and increasingly supplied, perhaps better, by providers that are not universities at all. Thinktanks conduct research, private providers offer degrees, Thiel Fellowships have more prestige than top university qualiﬁcations, and Massive Open Online Courses (MOOCs) can take the best instructors global. Choosing among these resources and combining them as appropriate, many of those served by traditional universities may be able to better serve their objectives.”
One of the Avalanche authors, Michael Barber, suggested that “traditional, middle-ranking universities face extinction within the next decade (and) even elite universities could struggle to survive in the face of competition from online courses and giant for-profit colleges” (The Guardian, 11 March 2013). This prediction derives in part from observed falls in rates of return to graduates alongside rising costs of getting a degree. A recent editorial in Britain’s Observer commented:
“The flaw at the heart of social mobility by expansion is its assumption that all degrees are equal. The reality is far from the truth. On the one hand, a degree from a top university is almost a prerequisite for a job in professions such as medicine, the law, the civil service and the media. On the other, there is huge variation in the employment prospects of graduates of newer institutions. Too many young people find themselves in a “graduate” job that would have recruited school leavers 20 years ago; and four in 10 recent graduates are in jobs not even requiring a degree. Is it a responsible message to young people that it is always worth taking on debt of at least £35k to go to university, regardless of the quality of the institution?” 
Does diversification of supply pose a threat to established higher education institutions? In some ways yes, but not necessarily, depending on how established institutions respond. The potential competitive advantages of global corporates like Apollo are in combining affordability (course costs are typically set just below campus-based courses in public universities), convenience of study places and times, and relevance of learning to jobs (with teachers having to be practicing professionals rather than academics). Greater competition may be no bad thing from a student perspective to the extent that it widens choice and spurs improvement, innovation and greater responsiveness to student needs in established institutions. Of course, established institutions will need to be clear about their business value proposition, not only for students but also for employers. Expressions of employer dissatisfaction with graduates persist, and in some professional fields, including at the top end, there is capacity for professional service firms and other bodies to arrange their own education and training and gain accreditation to award their own degrees. In the BCE fields, such a development could have implications for university revenues from both domestic and international students if universities are insufficiently responsive.
Nevertheless, alternative forms of higher education provision, which may compete or cooperate with established institutions, are more likely to complement rather than replace them. This is because diversification of supply is largely a function of rapid large-scale growth and diversification of demand. On the one hand, it is a response to demand for re-skilling and up-skilling – or at least for keeping up with credential inflation in the labour markets of advanced economies. Here we have seen for-profit providers setting up to serve adult and second-chance learners. Interestingly, in Australia and elsewhere, these new providers have not taken market share away from established institutions. To the contrary, many universities have moved into the markets that the new providers have generated, as well as into markets previously served by non-university providers, such as TAFE colleges and private VET providers, albeit with advantages of public subsidy and brand equity that stretch understanding of competitive neutrality.
On the other hand, supply diversity is a necessary response to demand for higher qualifications (sometimes substituting for higher skills) in developing economies with youth bulges but insufficient fiscal capacity to meet the demand from public resources and in conventional ways. In India, for instance, the scale of demand is totally beyond the capacity of the governments there at the national and provincial levels to accommodate – not only young people from the growing number of middle income households but, more significantly, poor youth who also need education and training. The options for providing advanced education to India’s poor or the poor of Africa, Latin America and the Pacific must include cheaper alternatives than the traditional campus-based model. That is not at all to suggest that campuses will close but rather that other avenues will open, probably via cyber-education in one form or another.
[Slide 20. Possible future configuration]
With regard to MOOCs, which are in an experimental phase, and range from lectures on-line to highly interactive group learning sessions, they appear to be doing five main things. First, they are exploring the possibilities of new information and communications technologies for learning: the demand for high-quality on-line learning, including understanding better what learners want; the effectiveness of virtual learning, including simulations, games-based learning and automatic marking; the scope for interactivity in large groups; the scalability of interactive on-line learning, including distributed delivery across multiple nations and with multiple partners; the cost-effectiveness of different methods, including time of teachers and instructional technologists in design, preparation, support, assessment and feedback to students; and the nature of any viable business model.
Second, MOOC consortia are building up profiles of student learning behaviours, including preferences in ways of working, areas of strength and weakness, persistence, communication skills, capacity for problem solving, creativity, and team work. The learner diagnostics element itself has various potential business applications, not least for people presenting for employment, who may want to demonstrate what they have done, how they work, and where they have particular strengths.
Third, MOOCs may help to raise the status of on-line learning and qualifications obtained virtually. This would be a major benefit for the poor of Asia, Africa and elsewhere where on-line higher education is provided as a second-chance fallback, and qualifications are regarded as inferior to campus-based qualifications. However, it is not yet clear to what extent different employers and public policy makers will accept MOOC-based qualifications.
Fourth, they are enabling individuals, in diverse places and times, to access a smorgasbord of learning modules, and potentially to customise their own educational packages, whether to see how they fare, or to satisfy a particular need, or to go on to further learning. Many participants in MOOCS are already degree-qualified. Current participation by people from developing countries is low. If MOOCs flush out more people interested in and able to succeed in credentialed learning they will add to rather than subtract from demand for formal higher education. Some for-profit global assessment houses may emerge to take up some of the emerging market, but that does not mean they would come to monopolise degree credentialing. If they were to piggyback on the brand equity of the university providers of MOOCs the assessment standards of the credentialing houses would have to be very high. That would not make for a viable business model on the part of the assessing houses, and any effort to dilute standards and damage brand would be rejected by the MOOC providers.
Fifth, MOOCs enable established and new higher education providers to combine in new ways, such as by sharing courseware, and entering into new partnerships, thereby strengthening rather than weakening their capacity. More basically they allow institutions to expand the learning available for their students, whether, in the model of the so-called ‘flipped-classroom’, by providing a knowledge source prior to tutorials which can then become richer learning opportunities, or by adding subject areas in a broad curriculum, without necessarily adding to an institution’s direct delivery costs. They may also enable accelerated learning if students can present for assessment when they are ready. Importantly however, most of the MOOCs presently on offer emanate from prestigious universities and are intellectually demanding. Indeed they can be more rigorous than the on-campus courses of some universities. It is not self-evident that all students in all universities will be able to benefit from the MOOC options. Current levels of completion are low. What may well emerge, given the array of participants in current ventures with Coursera (for-profit), edX (not-for-profit) and UDACITY (for-profit and for-credit), for instance, is the sharing of MOOCs among higher education institutions of equivalent quality. If that is an outcome, we may see divisions of MOOC-like options emerging, designed for different markets.
What is structure?
Structure can be understood as a factor of supply. In general terms, structure refers to the distribution of institutions that provide higher education by their size, mission and type, and location (Skolnik, 2004), and, importantly, to the balance between different provider types and the relationships among them, including avenues for student access, mobility and recognition of prior learning. Structure has been seen as “a specification of sectoral or institutional missions by enabling or limiting their time and resources for research and teaching” (Enders, 2006). These definitions, however, focus on how governments orient and fund institutions, and do not account for demand-side factors and competitive forces.
Does structure matter?
Structure, as formal shape, can matter for three broad reasons: (i) for the purposes of rational planning and efficient allocation of resources within the higher education system; (ii) for the strategic purposes of enhancing the contributions of the higher education system to national innovation, productivity and competitiveness; and (iii) because a rigid structure can impede change and adaptation and protect provider privilege. A structure that is disorganised or poorly designed or malfunctioning can lead to sub-optimal performance and adverse consequences for a nation and particular groups within it.
With regard to planning and resource allocation, structure may function as:
- A distributional mechanism in respect of student access. The supply of higher education opportunities may be structured purposefully to provide reasonably equitable access across geographic regions and socio-economic groups.
- A rationing mechanism with regard to graduate output. Specific providers may be designated with responsibilities for preparing graduates for particular occupations (e.g. medicine, nursing, teaching, engineering) in order to control the balance of graduate supply to labour market demand.
- A cost containment mechanism. Structure may be employed as a means of absorbing enrolment growth cost-effectively, and containing mission drift and inefficient duplication of offerings.
With regard to strategic purposes, structure may function as:
- A focusing mechanism. Each higher education institution has a clear and distinctive charter, mandate or mission, not only for its own development but also for its contribution to societal goals.
- A cultural organising mechanism. Each higher education institution can develop its internal values and incentives, both for staff and students, and build complementary relationships with other institutions and business and community organisations.
Structure may also obstruct change and diminish dynamism. An inflexible structure can be a barrier to adaptation. It can also act to shelter some institutions from competitive pressures and limit opportunities for new entrants. In these circumstances the barriers of the formal shape may become contested.
Institutional diversification within national higher education systems is widely believed necessary to achieve two important goals: more equity in terms of access to a wider variety of students, and more excellence through institutional specialisation. The need for greater diversity arises from the need to accommodate a more diverse learner population, segmentation of graduate output to meet varying labour market requirements, focus on strengths as a basis for upholding quality, and the need for greater cost-effectiveness through expansion of non-public and non-university providers, and universities that do not carry high research cost overheads.
The range of models around the world
[SLIDE 21. Alberta’s postsecondary system]
North American models are diverse, with often different strata of universities, both public and private, and teaching-focussed liberal arts colleges and community colleges. The US models vary across states. The Canadian models also vary by province but, unlike the US, are dominated by public institutions.
[Slide 22. Korea’s higher education structure]
South Korea has a stratified university sector, alongside horizontal diversity, with access to different universities and universities of technology being determined by end of school exam scores, and access to vocational colleges and cyber-universities available for those who cannot enter directly into universities.
[Slide 23. Higher Education in Israel]
Higher education participation in Israel has expanded from 88,800 students in 1989/90 to 306,600 students in 2011/12. Most of the growth has been in academic colleges, many of which articulate to university studies.
[Slide 24. Singapore’s postsecondary education structure]
Singapore has both publicly funded (autonomous) universities and private universities, some of which are highly specialised, focused on narrow discipline areas or areas of business need and some of which cater specifically for people already in the workforce. The polytechnics train the middle level professionals needed to support the nation’s technological and economic development, while the Singapore Institute of Technology provides industry-focused university education for polytechnic graduates. Polytechnics perform research, including research aiming to convert inventions resulting from intellectual breakthroughs in universities to practical propositions for industry. The clearly defined and differentiated missions of the various higher education institutes result from and promote further innovation, specialisation and responsiveness to business and community needs.
[Slide 25. Germany’s higher education structure]
The German tradition of the unity of teaching and research provides professional training to students in a way that directly involves scientific and academic research and artistic development. University and Technical University education is closely linked to basic and theoretical research. Teaching and research in Universities of Applied Sciences is practically oriented, usually integrated with a semester of practical training (internship), and teaching is by professors who have professional experience as well as academic qualifications.
What structural developments have been occurring in the higher education systems of other countries?
[Slide 26. Structural changes in higher education]
Several countries appear to have attempted a re-designation of institutional types following a period of ‘drift’ on the part of some, whether ‘academic drift’ or ‘research drift’ on the part of non-university types or ‘vocational drift’ on the part of universities, and an underlying concern with the inadequate international competiveness of higher education and research (Reichert, 2009).
The Slovak Republic has re-designated its higher education institutions into three classes: ‘university’, which offers bachelor, master and doctor degrees and conducts basic research; ‘professional higher education institution’, focused on bachelor degrees and applied research; and ‘higher education institution’, which offers bachelor and master degrees and basic research in limited fields. Finland and Norway have promoted institutional mergers.
The Netherlands has moved to a ternary model. The results appear to be mixed but one can infer that a return to a simple binary divide is neither possible nor sensible in many countries, not least because existing institutions are themselves considerably diversified internally and have external collaborations with others. That is to reinforce the understanding that the most useful focus of structural reform in higher education is on function rather than form.
Attention has also been given, across OECD member nations and elsewhere, to the regional complementarities of higher education institutions and their interactions with enterprises. Tightened fiscal circumstances have also spurred structural reviews. In Wales, for instance, in 2001, a policy review commissioned by the National Assembly for Wales proposed “a revised structure of higher education based on a ‘cluster model’, essentially geographical in nature but with a functional dimension, through which issues of regional delivery, reduction of duplication and critical mass could be addressed” (HEFCW, 2011). Subsequently the Welsh authorities have envisaged sector restructuring as a key means to the end of escaping the ‘spiral of decline’ and “positioning higher education to be the best it can be for the funds available” (HEFCW, 2011).
Across Europe and Scandinavia there is growing diversity within designated types of higher education institutions as well as greater collaboration between them:
“While the description of higher education systems as evolving from elite to mass higher education through a process of increasing differentiation can be verified cross-nationally in Europe, the notion that differentiation proceeds towards growing maturity by first introducing and then abandoning binary systems, to make way for systems in which autonomous institutions will differentiate around diverse market niches, is grossly oversimplified and therefore misleading. Rather, different mixes of regulatory, financial and reward instruments, as well as the norms which underpin or undermine them, make binary systems appear less rigid and ‘post-binary’ integrated systems less integrated and flexible than they are often portrayed” (Reichert, 2009).
In Finland, the number of universities has decreased from 20 to 15 in just a few years. In Denmark, since 2007, 25 universities and research institutions have been reduced to 8 universities and 3 research institutions. These universities will be among the biggest in Europe in terms of resources, which will enhance their ability to attract and retain skilled students and researchers.
Across Europe, the long-held conceit that all of a country’s universities are essentially equal has also given way to an acceptance of institutional hierarchies. Germany’s Excellence Initiative, which singles out select institutions for billions of dollars in extra financing, has been the clearest example of this shift.
The French government has helped spur the merger trend with increased financing for 17 clusters of universities and research bodies that have been formed since 2007. The University of Strasbourg—the country’s largest institution—was formed in 2009 through the merger of three universities that had been loosely linked before being broken up in the early 1970s in a national trend at that time.
The debates others are having
The apparent trade-offs between structural specialisation and comprehensiveness have been perceived differently in those countries that opt for distinctive institutional types and those opting for unitary or more permeable binary and ternary systems. It is not clear to what extent higher education systems are becoming more integrated or dispersed, convergent or divergent, homogeneous or heterogeneous. The policy debate can be seen to involve four main strands: a concern about isomorphism; a concern for differentiation; a desire for greater porosity; and a need for experimentation and evaluation.
The phenomenon of ‘academic drift’ or ‘mission creep’ or ‘isomorphism’ is generally seen to lead to higher administrative costs, inefficient program duplication, elimination of vocational programs, and a reduction in higher education accessibility (Longanecker, 2008). Isomorphism takes two forms: mimetic (emulative behavior, mimicking successful competitors as a strategy for survival in competitive environments) and normative (that develops through increasing professionalism and adoption of ‘good practices’ based on shared standards) – (File & Goedegebuure, 2000).
Population ecology theorists suggest that institutional diversity in higher education is a natural result of institutions seeking out distinctive niches (Birnbaum, 1983). Others, emphasising the role of isomorphic forces (Dimaggio & Powell, 1983) suggest that institutional differentiation is “largely the product of political competition and state sponsorship” (Rhoades, 1990). The implication of the later view is that if institutional diversification is a desirable feature of a national higher education system it will need to be directed to that end by deliberate public policy (Codling & Meek, 2006).
Frans van Vught and others have pointed to the range of drivers of sameness and difference in higher education systems (van Vught, 2008).The strong drivers of homogenisation include the power of academic norms that place most value on research-based prestige, reinforced by rewards in the academic labour market. Additionally, sameness can result from normative policy settings, financial incentives and regulations set by governments, and ‘market mechanisms’ encouraging competition for similar rewards. The inference is that while policy needs to allow the play of market forces in shaping a higher education system, reliance on market mechanisms alone will not be sufficient to achieve balance. Whereas normative policy and financing models can impede diversification, market forces can induce copying and reduce diversity, and the more so when permeated by homogenising academic norms.
The earlier functional specialisation of higher education systems, involving a diversity of institutional types, can be seen to reflect the needs of occupationally segmented labour markets, particularly when skilled workers were required for clearly specialised roles (Bleiklie, 2007). Demand for specialised graduates continues in traditional professional fields (e.g. medicine, engineering), in new graduate occupations (e.g. paramedical, marketing), and in niche areas of specialisation within parts of the services sector (e.g. sports, hospitality), (De Weert, 2009). Changing conditions encourage much finer-grained and flexible differentiations of institutions than in the industrial economy age of functionally-specialised higher education “types”, and these forces may well lead to a growing volatility and fuzziness within and across ‘systems’ (if not fragmentation).
At the same time, the imperative to concentrate investment in research capacity and linkages with enterprises and other centres of research is driving the kind of differentiation we see in Denmark, Finland, France and Germany, and similarly in Singapore and South Korea, through mergers and clusters. These approaches involve strong incentives for cross-institutional collaboration in research and graduate education particularly, and in close connection with enterprises. In the Danish model, Aarhus University has a cluster within its organisational span.
In the context of the new requirements for labour in the ‘knowledge economy’, some have suggested a reduced need for functional specialisation and the concurrent development of “more hierarchical and horizontally permeable systems” (Scott, 2009). Some contend that we are witnessing “more and more vertical and horizontal specialisation, far beyond the classical divide between teaching only and research universities” (Laredo, 2007). This porosity in mass higher education makes a structured national ‘system’ and solid hierarchies out of place, requiring “soft diversity” – more fluid structures, more flexible and adaptable institutional missions – rather than “hard differentiation” in which institutions at different levels have separate and fixed missions.
Experimentation and Evaluation
The German Science Council, noting increasing differentiation via the development of new types of higher education institutions as well as internal diversification within larger higher education institutions, driven mainly by an emphasis on research achievements (including the impact of the German Excellence Initiative), has provided considered advice on ways of diversifying German higher education “as a whole and with respect to all core functions” (Wissenschaftsrat, 2010). Its approach aims to improve the performance of the higher education system as a whole “without increasing the performance required of each higher education institution to an unrealistic degree”. With the need for strong internationally competitive universities taken as given, the focus is on action to “counteract the one-sidedness of the excellence discourse and put an end to the delegitimisation of a large part of the quality spectrum”. Particular attention is given to avoiding regional asymmetries by encouraging institutions to adapt their strategies to changing conditions by “giving them a stronger international focus where appropriate, promoting cooperation with regional partners (companies, non-university research facilities) and offering programmes that meet the profile of the students they actually recruit” (Wissenschaftsrat, 2010).
Importantly, the Science Council puts its emphasis not on the external form of institutional type but on the internal diversity of institutions, and encourages governments to “try out new forms of higher education institutions within the scope of experimental clauses and strive to further develop established types of higher education institutions”:
“A restrictive understanding of the type classification is now out of date and prevents the further development of individual higher education institutions, entire types of higher education institutions and the higher education system as a whole. For a period of transition, the risk of greater complexity can be accepted in the process. The Council advocates therefore an expansion of the opportunities for universities of applied sciences to develop, and the development of new types of higher education institutions which do not fall in the binary typology. Organised cooperation and linking of established types of higher education institutions can be an appropriate step to encourage the new formation of distinct types of higher education institutions” (Wissenschaftsrat, 2010).
The Council encourages a period of experimentation and development after which “the diversity of the higher education system then achieved will be assessed and, if necessary, will have to be reorganized typologically” (Wissenschaftsrat, 2010). Its specific recommendations include promoting internal differentiation by establishing some colleges and professional schools offering doctorates, by reducing duplication of offerings and strengthening differences in disciplinary offerings, , without over-specialising Bachelor programmes but structuring them to allow transitions to Master programmes of other institutions and related subjects, and having some institutions focus on cooperation with vocational continuing further education.
[Slide 27. ]
Intimations of greater diversification in Australia
There are various indications of structural change in parts of Australia’s tertiary sector, initiated by institutions and endorsed and funded by governments, state & territory and federal. Some involve institutions seeking to widen their market reach and improve their viability in collaboration with others also wanting to expand (e.g. APN) or reduce their scope (e.g. Federation University). Some are moving beyond dual-structure institutions of the Victorian model (e.g. RMIT, Swinburne) where the TAFE and university offerings are adjacent but not blended, to a more integrated model.
“We are about to blur that line between TAFE and university to the point where our students don’t even realise they are drifting back and forth between the two. Our students will get to experience the best elements of each institution – from award-winning teachers to state-of-the-art facilities to real, tangible industry links – with the goal of producing the most holistically skilled, well-rounded and employable graduates in the country. I’m talking about electrical engineers with practical TAFE competencies built into their degree; TAFE-trained enrolled nurses who don’t think twice about returning to their alma mater to train further to be a registered nurse; and sports science students with a personal trainer qualification built into the first year of their degree so they can work in the industry while they study, rather than at a pub or cafe.” CQU Vice-Chancellor, Scott Bowman, on the merger of CQUniversity and CQ TAFE (7.12.2012).
Legislation has been introduced into the Victorian Parliament to amend the University of Ballarat Act 2010, to change the name of the university to Federation University Australia from 1 January 2014. In addition to three campuses in Ballarat, the University has campuses in Horsham, Stawell and Ararat and leads a partnership with regional TAFEs delivering a suite of degrees across the breadth of Victoria. The University will be further strengthened if the Federal Government approves the proposal for Monash University’s Gippsland Campus to become part of the university and provide a further major higher education campus,”
Australian Polytechnic Network
The Australian Polytechnic Network (APN) is being founded by the University of Canberra, Melbourne’s Holmesglen Institute, Northern Sydney Institute, South Western Sydney Institute and Brisbane’s Metropolitan South Institute of TAFE. The announcement follows the decision of the Government to approve Commonwealth Supported Places for delivery of University of Canberra degrees at the network member campuses from 2014. “Our network of TAFE students will now have seamless pathways into UC degrees, which will open up a whole new world of opportunities, particularly for those from lower socio-economic backgrounds.”
The APN model involves paying the university funding rate to TAFE providers, and may not be competitive with an expansion of private provision. Otherwise it is an interesting development which appears to include a mix of academic drift and vocational drift, which could play out in an isomorphic way over time or in a new fusion that is responsive to varying needs.
More broadly, these developments are occurring within public institutions only. Without some levelling of the playing field as between public and private providers, we are unlikely to see the much more innovative offerings that could emerge through a stronger private sector and more inter-dependent public-private-partnerships.
[Slide 28. Australia’s higher education structure]
- Growth and diversification of student demand requires greater variety and choice in higher education supply.
- Lack of horizontal diversity in Australian higher education restricts student choice and is costly for taxpayers.
- Higher education systems with a monotype structure become less permeable and more unequal the bigger they get. As a consequence, there is increasing vertical stratification, with qualitative as well as other barriers for student pathways, dilution of the national investment in capability (infrastructure and talent), and undifferentiated pressures on all universities to play instrumental roles.
- It is not fit to contemporary and changing times to go back to 1960’s tight types of institutional demarcation.
- A diverse higher education system appropriate for mass participation necessarily has properties of both horizontal and vertical differentiation, with porous borders in all directions.
- A more open and contestable market for higher education services, rather than continuation of a dominating set of public sector institutions, is necessary for encouraging the entry of new providers and growth of diversity in national higher education systems.
- Initially private providers of preparatory education and pathway programmes for international students could be encouraged to expand their capacity to service domestic markets, consistent with the principles of competitive neutrality for providers and horizontal equity for students.
- It may be necessary to add new categories of higher education provider to the currently limited list of permitted categories. One option is a category of ‘community university’ which is attractive to students and staff, puts a strong emphasis on quality and relevance in education, and does not carry research cost burdens. Other options include ‘institute of applied studies’ and ‘cyber-university’.
- Australia should be open to foreign co-investment in higher education delivery capacity, including cyber-delivery, and global corporate supply, as a supplementary means of underpinning Australia’s participation in international higher education.
- Fiscal constraint will not permit future demand to be financed mainly in public general universities.
- Further expansion of public provision on the established university model will draw resources away from the imperative for sustaining the concentrated research power needed for international competitiveness.
- At least, along the lines of mature discussion in Germany, we should allow a process of experimentation and evaluation, which allows new structural options to emerge and be tested.
It is inevitable that the structure of higher education supply in the future will be shaped predominantly by the responsiveness of providers to the diversity of learner demand and that governments will play a residual but important counter-balancing role aimed at ensuring that all needs are met. Thought needs to be given to the structure of incentives for university research in that context, given that it is unwise and counter-productive to limit research capacity and orientation, especially for long-term research requiring substantial investment, only to fields of immediate interest to students.
The six pillars of Australia’s higher education policy architecture – (i) student-based funding for providers; (ii) income-contingent student loans; (iii) competitive funding for research; (iv) mission-related funding compacts; (v) student visas with work rights for international students and graduates, and (vi) a risk-proportionate national regulator – provide the essential framework for expanding participation and diversifying provision while safeguarding threshold standards. This Australian framework is distinctive and offers comparative advantages in the context of rising demand for higher education on a massive scale in developing economies with large youth populations, as well as catering more appropriately and cost-effectively to growth and diversification of domestic learner needs and circumstances. It is a framework, however, whose potential is not yet fully realised.
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 The views expressed in this paper do not necessarily reflect the views of Go8 Vice-Chancellors.
 (2) The University has the following principal functions for the promotion of its object:
(a) the provision of facilities for education and research of university standard,
(b) the encouragement of the dissemination, advancement, development and application of knowledge informed by free inquiry,
(c) the provision of courses of study or instruction across a range of fields, and the carrying out of research, to meet the needs of the community,
(d) the participation in public discourse,
(e) the conferring of degrees, including those of Bachelor, Master and Doctor, and the awarding of diplomas, certificates and other awards,
(f) the provision of teaching and learning that engage with advanced knowledge and inquiry,
(g) the development of governance, procedural rules, admission policies, financial arrangements and quality assurance processes that are underpinned by the values and goals referred to in the functions set out in this subsection, and that are sufficient to ensure the integrity of the University’s academic programs.
(3) The University has other functions as follows:
(a) the University may exercise commercial functions comprising the commercial exploitation or development, for the University’s benefit, of any facility, resource or property of the University or in which the University has a right or interest (including, for example, study, research, knowledge and intellectual property and the practical application of study, research, knowledge and intellectual property), whether alone or with others,
(b) the University may develop and provide cultural, sporting, professional, technical and vocational services to the community,
(c) the University has such general and ancillary functions as may be necessary or convenient for enabling or assisting the University to promote the object and interests of the University, or as may complement or be incidental to the promotion of the object and interests of the University,
(d) the University has such other functions as are conferred or imposed on it by or under this or any other Act.
(4) The functions of the University may be exercised within or outside the State, including outside Australia.
 Osborne and Gaebler suggest that governments should: 1) steer, not row (or as Mario Cuomo put it, “it is not government’s obligation to provide services, but to see that they’re provided”); 2) empower communities to solve their own problems rather than simply deliver services; 3) encourage competition rather than monopolies; 4) be driven by missions, rather than rules; 5) be results-oriented by funding outcomes rather than inputs; 6) meet the needs of the customer, not the bureaucracy; 7) concentrate on earning money rather than spending it; 8) invest in preventing problems rather than curing crises; 9) decentralize authority; and 10) solve problems by influencing market forces rather than creating public programs.
 Catherine Burnheim & Sue Willis, “Competing tensions of 40 Vs 20”, The Australian, 10 August 2013.
 “Temporary Boom, Permanent Waste”, The Australian 10-11 August, 2013.
 Observer Editorial, The Observer, 11 August 2013.