THE single issue that underpins the entire debate about of university fee freedom revolves around just one issue — price elasticity.
Just how much are mums, dads and their kids willing to pay to get into their chosen university degree?
It’s somewhat surprising that just a year after the soaring popularity of zero-fee MOOCs sent most of the higher education sector into a flat spin, the debate has now swung to just how much universities could charge in an unfettered regulatory environment. This policy revolution does not yet appear to bear a solution for the oft-foretold collapse of the traditional university funding model in the face of MOOCs — which offer a low cost degree pathway when free courses are paired with low-cost exams and assessment.
Rather, the presumption appears to be that the market will continue to seek traditional degrees (at least from the high-end universities) and therefore it’s time to charge a little extra where the market will bear it in order to save the sector.
There is a fundamental flaw in university rhetoric here — again. We could have been presented with price rises justified because of the introduction of new teaching technology (which is happening, albeit patchily) and the rising costs of providing a whole of university experience — inclusive of being taught by a researcher with hands-on knowledge of the subject.
We could have also been told that a university brand is intrinsically linked to research performance and therefore price increases are necessary to uphold the value of a university’s degree to its graduates. This again is defensible and appeals to student interest, influencing how they are willing to pay to get their chosen university’s crest on their testamur.
But price elasticity has a lot of downside for lower-status universities and introduces a second key price variable to university selection. Undergraduates — who have been used to ‘buying’ the best course possible with their ATAR — would need to consider what they can afford not just with their ATAR, and their wallet.
There is an urgent need to now examine how much individuals are willing to pay for a degree from any given university and understand the effects of that price decision on demand and revenue. This work needs to urgently occur, not in order to enable price gauging, but rather to understand the impact of fee deregulation and subsequent price variation on the sector itself, in what is universally agreed to be a very imperfect higher education market.
Higher education institutions are businesses that will survive or die in coming years based on their ability to attract revenue and control costs. Given the clear signals of a declining fixed pool of government support in real terms for the last decade or so, it is essential to understand the primacy of financial drivers in determining the future composition of our higher education system.
Further insights into thresholds of price elasticity are also required. Of late, there has been a trend for Australian parents to be far more involved in the purchase decisions of higher education — following an international trend. How high would prices of an Australian degree need to be before they decide to send their child to New Zealand or to a no-name private college or to a plumbing apprenticeship?
There is little doubt that if prices increase, so too will expectations of service, quality and value — expectations which are both expensive and difficult to satisfy as the sacred cows of learning pedagogy are up-ended or repositioned by technological change.
The time for crystal balls and earnest pleas for budget lenience are over. All universities should be asking to look at the price elasticity charts during their next budget meeting.
Tim Winkler is Director of Twig Marketing.