Overview of Associate Degree or Advanced Diploma
In response to structural changes in the economy, the Australian Government has initiated policies that emphasize the importance of higher-level skills, the aim being to achieve greater productivity. The government has set targets for higher-level qualifications and greater representation of students from lower socioeconomic backgrounds at university. Following the Bradley Review of the Australian higher education system, the Australian Government aims by 2020 to have increased to 40% the proportion of the Australian population aged 25 to 34 years who have attained at least a bachelor qualification. Also by 2020, the government aims to achieve the target of students from low socioeconomic backgrounds making up 20% of undergraduate enrolments. Associate degree or advanced diploma.
Part of the strategy to achieve these targets is to encourage the creation of education and training markets in both the vocational education and training (VET) and higher education sectors. In 2012, the higher education sector shifts from a traditional, supply-led approach, in which governments promote education through certain funding allocations, to a more responsive system. A student demand-driven system now allows public universities to compete for Commonwealth funding on the basis of student demand. A student entitlement model is also an innovation in the VET sector. Victoria is the first state allowing VET funding to follow the choices of individuals to competing providers, irrespective of ownership structure. This is having major implications for the way higher education providers and VET institutions operate, collaborate or compete. The reform push has led to different funding and fees arrangements that influence student choice of which VET or higher education qualification they should invest.
This paper uses a case study to examine how both education and training providers and students are likely to respond to these arrangements. The focus is a comparison between advanced diplomas and associate degrees, which are categorized at the Australian Qualifications Framework (AQF) level 6 and are offered as a pathway to degrees. We first provide some historical background on funding arrangements for the higher education and VET sectors. We then present a case study that looks at the provision of the advanced diploma and the associate degree in the field of engineering and related technologies under the entitlement system in Victoria.
We show that, while higher-level VET qualifications may come at a cheaper up-front cost, they are increasingly being seen as a poorer investment than a university course of study. Especially, the fee of late entry to the labor market, curriculum mismatch, and the greater ease of getting a loan for a university qualification will influence a student’s decision to undertake higher-level VET qualifications.
Until 2012 the Commonwealth Government determined the total number of Commonwealth-supported places to be provided in higher education and classified them into different funding cluster categories (see Appendix A). Institutions gained access to Commonwealth-supported places on an ad hoc basis after lobbying the federal government (Norton 2009). Approved higher education providers, mainly public universities and a small number of other institutions providing national priority courses of study, received grants from the Commonwealth Government. Students were eligible to undertake their studies in Commonwealth-supported places if they met the citizenship and residency requirements and had enough student learning entitlement to cover each unit of study in which they were enrolled. Under this model, qualified students were entitled to have 7 years of equivalent full-time study as Commonwealth-supported students over their lifetime.
This type of central planning allocation has also applied in the VET sector but with more complex arrangements between the federal government, state governments and public and private VET providers. The Commonwealth Government has funded state governments to set out the plans for VET, including the number of contact hours and types of training programs to be delivered. This planning has taken into account the perceived local industry and community needs. State governments have allocated their funds directly to VET providers, mainly public TAFE (technical and further education) institutes, and then ensured that these providers supplied the training according to the plans.
This approach has seen governments directing money to areas identified as in the public good, including by directing funds towards areas of perceived skill shortages and to specific groups of disadvantaged students. This approach has drawbacks. The model relies on forecasts of future labor force needs, which can be problematic since labor demand is subject to factors such as technological innovation and economic cycles, which are outside the ambit of skills planning (Richardson & Tan 2007). Moreover, governments have to juggle the demands of an array of special interest groups. Typically, institutions with a history of gaining access to government funds can negotiate to change the funding arrangements at the margin only; most allocations are fixed. Student demand does affect institutions’ supply of education and training programs — albeit slowly — except in the provision of expensive courses such as medicine. This is because institutions are reluctant to offer expensive courses without knowing whether they will be receiving adequate government funding. The inflexibility of the model also makes it difficult for providers to innovate. For instance, since publicly funded institutes have to aim primarily to deliver the agreed load of training, they are less able to devote resources to the introduction of new courses or to an improvement in their quality. Finally, individual preferences for courses of study are not necessarily taken into account in the planning process.
Both the higher education and VET sectors are heading towards a model in which market forces will determine the flows of funding from the government. Markets are associated with contestability and competition. Contestability refers to the situation where governments competitively tender out the provision of education and training programs. Public funding will flow to the provider who is successful in competing for the right to deliver the services. The amount of government funding for an educational provider depends on how many students demand access to funded places. Unlike the central planning approach, in which students have to choose some specific courses of study to receive government funding, under the market model students can undertake study programs in government subsidized places that align with their personal interests. Although market distribution withdraws the NCVER 9 central role of governments in planning fixed resource allocation, governments can still intervene in the education and training markets if necessary. For example, they can use funding as the price signal to influence the decisions of educational and training providers and students or place some restrictions on student eligibility.
From 2012 there will be an additional $1.2 billion over four years to make more university places available for Australian students. Public universities will be allowed to decide how many Commonwealth-supported places they offer and in which disciplines. Students who meet the citizenship and residency requirements are entitled to choose the provider with whom they want to undertake their higher education programs as a Commonwealth-supported student. The Commonwealth Government will then provide funding to that provider on the students’ behalf. Under this arrangement, with the exception of postgraduate and medical courses of study, the Commonwealth Government no longer places any limits on how much study higher education students can undertake as Commonwealth-supported students.
In the VET sector, governments have used contestable funding for over a decade to ensure the effective delivery of training. A newer trend is towards funding based on entitlement. In other words, the dollars are attached to eligible students and follow the choices of individuals to competing providers. Under the establishment of the Victorian Training Guarantee, the Victorian Government was the first to provide Victorian students under the age of 20 with an entitlement to a government subsidized training place in an accredited course on offer, and those from the age of 20 and over in an accredited course at a level higher than that which they already hold. A variety of Victorian providers are able to compete for VET funding on the basis of how many students they can attract. These include TAFE institutes, private providers, and universities that offer VET qualifications. South Australia will adopt a similar entitlement model in July 2012. Other jurisdictions, including New South Wales, Western Australia, and Queensland, are also considering market-like solutions to increase training participation.
Education and training providers respond to the market according to the price by which they are willing to deliver courses of study, while students choose a course of study according to the price at which they are willing to purchase. Tuition fees in this context play a role as the price signal that affects the decisions of students and institutes. On the demand side, students respond to the price signal by considering the provider with whom they should make the investment in their education, given their financial circumstances. In addition, financial assistance such as income-contingent loans is another signal that students have to take into consideration when responding to the market, and they need to understand the true cost of their education. On the supply side, the amount of money flowing to a provider is subject to student demand. As a result, a provider will respond to the market by deciding how many places should be provided and in which discipline, to meet its student demand.
Under market systems, educational providers have greater flexibility to respond to student demand, while students have greater freedom to exercise their choices. From students’ applications and information provided by employers and industries, institutions build up their knowledge about students’ preferences and adjust their supply of programs to meet the individual and diverse needs of students. Market systems rely not only on the input of information but also on the provision of good information to potential customers. The absence of such information can lead to poor allocation of resources.
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