Supporting the pipeline of job-ready law graduates?

29 September 2020

The Government’s Job-Ready Graduates package (the package) is touted to deliver graduates in the disciplines where they are needed most.  While it includes many things, at its centre is a recalibration of the contributions of Government and students to meet the costs of studying towards qualifications in students’ chosen fields.

 

The Higher Education Support Amendment (Job-Ready Graduates and Supporting Regional and Remote Students) Bill 2020 (the Bill) passed through the Lower House in early September 2020 and was referred by the Senate to the Education and Employment Legislation Committee (the Committee) for inquiry.  The Committee’s report, delivered just a matter of days ago (on 25 September 2020), acknowledges concerns raised about changed funding arrangements by stakeholders during hearings and in the 280 submissions received.  The majority of members reported that they are satisfied that the Bill will achieve its intended ends and recommended passing the legislation and reviewing it after two years.

 

“The committee acknowledges stakeholder concerns regarding the changes to funding clusters, in particular the focus on ‘job-relevant’ skills, the effectiveness of price signals in incentivising student choice, the impact on disadvantaged groups, and the impact on university research and STEM teaching. But based on the information presented, the committee is satisfied that the proposed changes are appropriate and would help to equip students with the skills and experience needed to succeed in a difficult labour market.”

 

Dissenting reports from Labor Senators, the Australian Greens, and Senator Rex Patrick variously focus on the limited opportunity for stakeholder consultation, the rushed Parliamentary process, the Committee’s selective reporting of stakeholder views, and the negative funding implications.

 

This article challenges the logic of the proposed reforms on five grounds using law as a case study.  It picks up on many of the concerns either acknowledged by the majority of Committee members or elaborated on in the reports of dissenting members, and introduces a few more.  Specifically, I argue that:

 

  1.  a focus on ‘job-ready’ is both misleading and inappropriate;

  2.  high student contributions risk exacerbating social inequities;

  3.  student contributions are poorly aligned to private benefits;

  4.  the evidence does not support the implied public benefits; and

  5.  sometimes contradictory price signals could have unintended consequences.

 

1.  A focus on ‘job-ready’ is both misleading and inappropriate

 

The Government has sought to ‘pick winners’ and entice students to study disciplines it judges are aligned to future job growth or are in national areas of priority.  It has done this by lowering the contribution that prospective students in those disciplines are to pay towards their studies.  ‘Winners’ include medicine and health, education, information technology, engineering and science.

 

Law does not make the cut.  Nor do other fields, such as economics, management and commerce, and humanities.  Prospective students in these disciplines are being asked to contribute more towards their studies. 

 

Law is already in the ‘band’ of disciplines that attract the highest student contribution of $11,355.  The reforms would see law students contribute an additional $3,145 towards their studies - a total student contribution of $14,500.

 

The first point argued here is that, to the extent that it is sensible for the Government to pick winners, law should rank amongst them.  The second is that it makes no sense to pick winners.

 

Official statistics and forecasts of occupational job growth portray the legal profession as a growth profession.  The annual average rate of growth in employment in the profession over the whole period shown in the chart below is four percent.  The forecast rate is five percent.  This compares against an expected rate of less than half this (two percent) for all occupations.

Employment of legal professionals

Sources:  Australian Bureau of Statistics, Labour Force, Australia, Detailed, Quarterly, May 2020, catalogue number 6291.0.55.003 and Australian Government, 2019 Employment Projections - for the five years to May 2024, Labour Market Information Portal.

 

Having argued that the legal profession is a ‘winner’ my, perhaps paradoxical, second point is that it makes little sense to pick winners.  This is because the Government is arguably not better informed than the market in picking winners and, more significantly, because the jobs that come out on top today, will differ from those that top the list tomorrow.  Jobs are being created, becoming redundant, and are transforming at accelerating rates.  Meaning that ‘job-ready’ makes little sense.  More important is to support ‘work-readiness’ - readiness for multiple jobs and careers.  This suggests that the focus should be on skills that add value across many current and future jobs, such as critical thinking and communication. 

 

In its submission, the Law Council of Australia (the Law Council) made this point by drawing on Professor Pip Nicholson’s explanation of Why Law Degrees Matter:

 

“A law degree ought to teach graduates to: think analytically, including how to evaluate empirical and logical claims; to marshal arguments; and to succinctly communicate. These are generic skills, imparted through the study of law, which are of as much value in a government policy unit, a business strategy team or a board room, as they are inside a law firm, an in-house counsel office or a barrister or judge’s chambers.”

 

2.  High student contributions risk exacerbating social inequities

 

The risk of high student contributions exacerbating social inequities was a point well made in the submissions of the Law Council and the Australian Law Students’ Association (ALSA).  In ALSA’s submission, it argued that:

 

“The prospect of paying or accruing this amount of debt can serve as a real barrier of entry to some individuals who wish to undertake legal education.  Financial incentives and disincentives naturally have a greater influence over more vulnerable members of our community.  Specifically, our concern is that those from socio-economically disadvantaged backgrounds will be discouraged from studying law.  This may deter already under-represented communities, including individuals from culturally and linguistically diverse, and Aboriginal and Torres Strait Islander backgrounds, from pursuing legal education.  It may also prevent mature-aged students from making a career change.”

The arguments of the Law Council echoed those above and pointed out that prospective students from rural, regional and remote areas (RRR) - a particular focus of the Government’s package - will likely feature amongst those discouraged:

“Many prospective students from economically disadvantaged RRR backgrounds are already cost-prevented from studying law as a result of significant expenses which cannot be covered by a HECS-HELP loan (in particular the cost of accommodation).  Moreover, increasing HECS-HELP debt is likely to encourage graduates to attempt to optimise their income in order to ensure that their debt burden is under control.  This is likely to drive many graduates toward higher income opportunities generally available in major cities, rather than regional areas.”

The Law Council goes on to note current recruitment difficulties in RRR areas, which it argues will worsen if the Bill passes into law.

The points made by the Law Council and ALSA are particularly concerning from the perspective that justice is better served by a legal profession that reflects the make-up of those it is representing.  Not by one that continues to be the preserve of privileged or exclusive groups.

3.  Student contributions are poorly aligned to private benefits

The claimed basis for adjusting the contributions sought from students is the private benefits to graduates, as measured by expectations of salaries earned.  The Government has relied upon average salaries earned by occupation class from the 2016 Census.

 

There are two issues with this methodology.  The first is that not all law students go on to practice law.  As argued by Professor Pip Nicolson, that is not a bad thing.  In her previously referenced piece on Why Law Degrees Matter, she points out that, in addition to the transferrable skills gained, a law degree supports an understanding of governments; sustained insight in the ways in which states regulate society; and a deep knowledge of the law and how it is developed.  These can be of great utility whether working as a lawyer or not.  She shares Melbourne Law School’s employment outcome data which finds over two thirds of law graduates surveyed had taken on graduate legal positions, a further 10 percent were employed in graduate programs with government, business and management consultancies, and another 17 percent in legal and general roles that are not part of a formal program.  In other words, a background in law equips graduates with skills valued by a myriad industries and professions.

 

The second methodological issue is that Census data takes no account of when employees graduated.  A better, albeit still imperfect, starting point is graduate salaries.  Here we find that the median salary for law graduates is only slightly higher than that for all fields of education.  In other words, insufficient grounds to place law in the top band for student contributions.

Salary outcomes for undergraduates in 2019

Source:  Social Research Centre, Graduate Outcome Survey 2019.

However, as foreshadowed, graduate outcomes do not tell the full story.  To become a lawyer, graduates first need to apply to their local law society for a Practising Certificate.  Study towards a Practising Certificate can be completed within a year and costs around $10,000.  This means that the effective salary of a law graduate in their first year is well below the average for all study areas. 

 

4.  The evidence does not support the implied public benefits

 

Student contributions tell only half the story.  As just discussed, for law students these are set to increase.  The other half is the Government’s contribution.  For law students these are earmarked to decrease.  Law is already situated in the lowest funded ‘cluster’ of disciplines, attracting Government support of only $2,237.  The proposed reforms would see this more than halved to $1,100.

 

The assessed public benefit is the claimed basis for determining the level of Government support.  That is, the greater the public benefit, the more largesse the Government’s contribution.  Public benefit is assumed to be greater the higher the rate of employment participation, the larger the proportion of graduates employed as managers and professionals, and the better the rate for completing courses of studies.

 

None of the grounds justify the low rate of subsidy proposed for students of law.

 

Looking first at employment participation, the table below compares the labour market outcomes for law graduates with those for all study areas over the short and medium term.  Graduates of law and paralegal studies have higher rates of full time employment and labour market participation over both the short and medium term.  The only measure where it is lower is overall employment, suggesting that relatively more graduates in other study areas are participating in part time roles.  The slight difference is insufficient grounds to support a conclusion of lower public benefit.

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Short and medium term labour market outcomes for undergraduates (%)

Source:  Social Research Centre, Graduate Outcome Survey - Longitudinal 2020.
Notes:  Measures are based on a cohort analysis of graduates who responded to the 2017 Graduate Outcomes Survey.  The Short Term outcomes are achieved within four months of course completion.  The Medium Term outcomes are approximately three years after graduation.

 

Moving on to consider the proportion of law graduates employed as managers or professionals.  While in the short term the proportion of law graduates employed at these occupational levels sat below that for all study areas, after just three years an almost 15 percentage point gap has narrowed to less than one.  If the time horizon was even longer, it is reasonable to expect that they will have raced ahead.  This is because gaining a Practising Certificate post-graduation is only the first step along the pathway to becoming a practicing lawyer.  It typically takes a combined five to six years of education and supervised practice.

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Full-time employed undergraduates working in occupational groups (%)

Source:  Refer source for previous table.
Notes:  Refer notes to previous table.


Finally, turning to completion rates.  Looking narrowly at completion rates over a short period can be misleading.  As the first column of the table below suggests, in just four years proportionally fewer law students completed their studies relative to all study areas.  However, now take a closer look at the other columns.  Few drop out or not come back after their first year.  They keep on studying.

Cohort analysis of domestic bachelor students over four years 2016-19 (%)

Source:  Department of Education, Skills and Employment, Completion Rates of Higher Education Students- Cohort Analysis, 2005-2019.

If we now examine and compare completion rates over progressively longer periods, as is done in the charts below, we find that that over a six year period they are comparable, and over a nine year period law students outperform all study areas combined.  This is because it can take a long time to complete a law degree.  Particularly if studied part time, which is increasingly the preference of many.

Completion rates of domestic bachelor students

Source:  Refer previous table.

5.  Sometimes contradictory price signals could have unintended consequences

 

The fifth and final grounds for challenging the Bill is that sometimes contradictory price signals could have unintended consequences.  The Government’s intent in lowering the student contribution in selected disciplines is to lure more students into those disciplines.  By analogy, increasing the student contribution for others is to discourage studies in those areas.  This assumes one thing and forgets another.

 

It assumes all students are price sensitive.  Some will be, such as students from vulnerable backgrounds (as discussed above).  Others will not, as they take comfort from the knowledge that they do not need to start paying off their student loan until they start earning.

 

It forgets that providers also face price signals.  Their incentive is to provide more places for disciplines where the combined student plus Government contribution increases.

 

In more than a few cases price signals are moving in conflicting directions.  Law is a case in point.  While price sensitive prospective law students may be encouraged to change their study plans due to the proposed fee hike, providers will have an incentive to offer more places.  This is because student contributions are proposed to increase by more than the drop in the Government’s contribution, with the net effect being that the funding received per law students will increase.  Just what the net effect will be is simply too hard to say.

Proposed changes to the Government’s and students’ contributions

Source:  Derived based on proposals in Department of Education, Skills and Employment, Job-ready Graduates Package.

Verdict

 

The Bill should be shelved in its current form and replaced by one that has been drafted after a proper consultation process open to all key stakeholders, as the provision and accessibility of higher education is vital to Australia’s economic and social future.

Mary Clarke

Principal

DXP Consulting

M: +61 401 088 571

E:  mary.clarke@dxpconsulting.com.au