August 7, 2015

For-profit education is a proven failure

By John Quiggin

There are few propositions on which agreement is more general than the proposition that education is crucial to the development of a prosperous community with a high standard of living. Beyond the obvious economic benefits of a skilled workforce, education and training should enable all members of the community to develop their talents and abilities and participate fully in the life of the community.


Yet education policy, in Australia and elsewhere, shows almost no recognition of this crucial fact. Rather, policy is dominated by ideas of microeconomic ‘reform’ which treat education as a consumer good. The core aims of policy are to promote competition and consumer choice, and to reduce or eliminate public subsidies and public provision, particularly in post-school education.

The underlying model is one that dismisses, as self-serving nonsense, any idea of teaching as a vocation. The ideal model of reform is one in which schools and teachers are rewarded on the basis of objective measures of performance. The model is reflected in a variety of managerialist initiatives, from high-stakes testing to voucher systems. The ultimate end of reform is for-profit schooling, based entirely on the market choices of consumers (aka students) and producers (aka teachers and schools).

Education reform has failed comprehensively. High-stakes testing has produced an epidemic of ‘teaching to the test’ and outright cheating, while ensuring that the broader goals of education are subordinates to uniform and easily measurable goals like the solution of math problems in standard formats. Even on these limited measures, institutional reforms like the introduction of ‘charter schools’ in the US have not shown any improvement on the public school models.

Among the many failures in the education 'reform' movement, the attempt to promote for-profit education has been the most complete. The Swedish experiment, for quite a few years seen as the exemplar of success, has turned out very badly.

In the US, the for-profit schools company Edison failed almost completely. Launched on the stock market with a bang in 1999, it rapidly gained contracts to manage hundreds of public schools in the US. But poor performance and excessive charges meant that Edison lost contracts almost as fast as it gained them. Worse still, from the viewpoint of investors, Edison consistently lost money, and was delisted from the NASDAQ exchange in 2003. It still exists as a shadow of its former self, offering a variety of school management services, but running hardly any on its own.

Far worse than mere failures like Edison are for-profit universities like Phoenix. These degree mills, or rather dropout mills, have prospered by recruiting poor students and enrolling them in degree programs they never finish. The trick is that the students are eligible for Federal government support, called Pell grants, and for loans that can be made to seem attractive. Phoenix collects the US government cash, while the students are lumbered with debts they can never repay and can't even discharge in bankruptcy.

In Australia, the for-profit model has been promoted in a number of forms. Now-disgraced childcare entrepreneur Eddy Groves attempted to establish for-profit schools, but this proposal was, thankfully, rejected by state and federal governments. Melbourne University, under the leadership of free-marketeer Alan Gilbert, set up a for-profit subsidiary, Melbourne University Private, which collapsed ignominiously. Along with other Australian universities, Melbourne also dissipated $50 million on a venture called U21Global, billed as the university of the future, but ultimately sold off to an Indian company.

The one area where the for-profit model has been pursued consistently is that of technical and vocational education. This is not because the for-profit model has performed well; far from it. Rather it reflects the fact that there has always been a role for the for-profit sector in providing training courses of various kinds; the ideologues of education ‘reform’ have sought to use this as a model for a competitive, profit-based technical education sector.

Unsurprisingly, the availability of public money has produced an epidemic of rorts along the lines of those observed elsewhere. In Victoria, which led the way in market-oriented reform, the problems were evident some time ago.

This did not, of course, lead to any change for the better. Instead, governments across Australia followed the Victorian model. For-profit providers responded by emulating the University of Phoenix, with recruiters offering free laptops to anyone will to sign up for a course and the associated debts: the targeted groups were low-income earners who would not have to repay the income contingent loan except in the unlikely event that the course propelled them into the middle class.

This isn't just a matter of fringe players: a recent report on A Current Affair identified some of the biggest for-profit firms, such as Evocca, Careers Australia and Aspire as using such practices. The Australian Skills Quality Authority is supposedly investigating these reports. However, as with the authorities that are supposed to regulate greyhound racing, the obvious question is why, when these rorts have been common knowledge for years, a current affairs show can find the evidence ASQA has apparently missed.

It's clear enough that privatising VET-TAFE has been a failure, as would be expected based on international experience. But the answer is not to go back to the past. In the 20th century, post-school university or TAFE education (or even completion of high school) was an optional extra, but now it is a necessity. We need a national framework for post-school education, with the goal of ensuring universal access and participation.

This entails an upgrading of the TAFE system to fill the gap left in the 1990s, when institutes of technology and colleges of education converted themselves into universities. Access to all forms of post-school education should be on the basis of a unitary HECS scheme, with fees being confined to postgraduate courses such as coursework Masters degrees.

This leaves us with the problem of how to wind down the for-profit system. We could start by converting the better for-profit systems into contract providers of TAFE courses, and then gradually absorbing them into a unified system. Those who don't like that deal could compete like good capitalists in the open market, charging upfront fees and serving whatever market they could find, subject to ordinary consumer protection laws.

For-profit education is a proven failure. The educated workforce and citizenry of the future need a universally accessible public (or non-profit) education system, extending beyond high school to encompass appropriate post-school education for all.

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