Demand Driven Tertiary Education in Australia

The Productivity Commission's The Demand Driven University System: A mixed report card discussion paper offers the following key points

• University education can be transformative. It is also costly in terms of forgone earnings, student debt and Commonwealth outlays, so it is important that students, taxpayers and the broader community benefit from the investment. 

• The ‘demand driven system’ in place between 2010 and 2017 was intended to increase domestic student numbers and give under represented groups greater access. The results were mixed. 

• It was certainly effective in increasing numbers: the share of young people that attended university by age 22 years increased from 53 per cent in 2010 to an estimated 60 per cent in 2016, based on data from the Longitudinal Surveys of Australian Youth. 

• Multivariate regression analysis shows that the ‘additional students’ — those whose attendance can be ascribed to the expansion of the system — were drawn from many backgrounds. However, compared with other students, they typically had lower literacy and numeracy and a lower Australian Tertiary Admission Rank (most had an ATAR less than 70). 

• Many of the additional students succeeded. About half of the additional students graduated by age 23 years (with many still studying). About half of those graduates entered managerial or professional occupations, outcomes that are similar to those of other graduates. 

• However, people that enter university with lower literacy and numeracy and a lower ATAR drop out at higher rates. By age 23 years, 21 per cent of the additional students had left university without receiving a qualification compared with 12 per cent of other students. 

• University participation increased within some under represented ‘equity groups’, but not others. – School students from a low socioeconomic background and ‘first in family’ students were more likely to participate in higher education following the expansion in university places. – However, the participation ‘gaps’ (compared to those not in the equity group) remain for Indigenous people and for people from regional or remote areas, and may have widened. 

• Despite the expansion, the level of participation among all these groups remains far lower than for people who do not come from disadvantaged backgrounds — a reflection of poorer average school performance and a range of cultural and environmental factors. In the latter respect, an equity group student with a given level of academic ability is still significantly less likely to attend university than their non equity equivalents. 

• Overall, the demand driven system succeeded in increasing the number of students and made progress in improving equity of access. However, many are entering university ill prepared and struggling academically. 

This study suggests some areas for further policy consideration: 

– The school system has arguably not adapted to the role needed of it to prepare more young people to succeed at university, or more broadly to meet the growing demand in the Australian economy for complex and adaptable skills. Average literacy and numeracy of school children needs to rise to fill this role, reversing the sharp falls since 2003. 

– Children growing up in regional or remote areas with the same academic ability as their metropolitan peers continue to be much less likely to attend university. 

– The growing risk of students dropping out of university requires attention. On average, the additional students need greater academic support to succeed. While universities had strong incentives to expand student numbers, the incentives for remedial support are weak. 

– University will not be the best option for many. Viable alternatives in employment and vocational education and training will ensure more young people succeed.

The Commission argues

University can be transformative. Most university students succeed academically and go on to rewarding careers. On average, they earn higher wages and are less likely to be unemployed — which means higher taxes and lower social security benefits — and they make the economy more innovative and adaptive. 

A well functioning higher education system should provide students with opportunities and empower them to make the choice of whether or not to study. It should match students with suitable study opportunities and meet the needs of the labour market. It should be open to people regardless of their background. It should also encourage those who will benefit most from the many years spent acquiring a qualification and support students to succeed while at university, recognising that university education is costly to students and the public more generally. The Australian university system has evolved to meet these goals. Funding, pricing and institutional changes have slowly shifted the university system from the province of a small group of universities servicing a small, mainly male, share of the population in the 1950s and 1960s, to a key pillar of the skills formation system. It now involves a large share of school graduates and, after Dawkins’ reforms, dozens of universities. 

The most recent significant expansion of university participation was due to the implementation of the ‘demand driven system’ from 2010 to 2017 (the result of recommendations made by the Bradley Review of Higher Education). Fiscal constraints were no longer part of the rationing mechanism. The Australian Government removed caps on its support for most domestic undergraduate students. Everyone could attend university, limited only by the students’ willingness to invest their time and incur (concessional) debt, and universities’ admission requirements. The policy aimed to expand undergraduate education for domestic students and improve the equity of access for disadvantaged groups. The policy was underpinned by the view that investment in higher education was falling behind the growing need for university educated workers in the Australian economy.

An uncapped system has the virtue of letting students — who generally know their capabilities and lifetime aspirations better than government or universities — make choices about whether investing in university makes sense for them. It recognises that universities and governments are unable to accurately predict students’ future university outcomes. The most prominent basis for entry — the Australian Tertiary Admission Rank (ATAR) — is an imprecise indicator. A system that conservatively screens out students who would benefit from university attendance means that many with good prospects will be denied access under capped systems. The demand driven system also gave students a greater chance to try some university study and learn whether it suited their skills and aspirations. 

On the other hand, students only bear a share of the costs of university attendance and may have imperfect information about their likely success. So uncapped systems — where universities are funded based on how many students they enrol, rather than a fixed sum of money — face the risk of encouraging attendance by people who will not ultimately benefit, accompanied by student debt, diversion from superior educational options, forgone earnings from jobs that do not need a university qualification, and costs to taxpayers. 

This study explores some of the costs and benefits of moving to a demand driven system by comparing access and student outcomes before and after the policy change. 

The Commission’s approach 

This is a descriptive study. The study explores what happened to young Australians during the demand driven system using administrative, population and longitudinal data. The study addresses two research questions:

1. Who are the ‘additional students’ who enrolled in university under the demand driven system who would not have had the opportunity in earlier periods, and what are the academic and labour market outcomes they achieved? 

2. To what extent was the demand driven system more accessible to people from under represented ‘equity groups’ (figure 1)? And what factors predict the under representation of these groups?

The study draws on a range of data, such as the Census of Population and Housing, administrative data sourced from the Department of Education and Training, and the Quality Indicators of Learning and Teaching dataset. The centrepiece of this study is an analysis of the Longitudinal Surveys of Australian Youth (LSAY). The LSAY provides remarkably rich data on adolescents’ lives as they grow and enter adulthood, beginning at around age 15 years and tracking through to age 25 years. This includes objective measures of school achievement. Since 2003, the LSAY participants have sat the OECD Program of International Student Assessment (PISA) in literacy and numeracy. While the previously mentioned data sets provide population benchmarks, the detail in the LSAY provides the best estimates available about young Australians’ education decisions and the barriers they face to university access and success. Unlike many previous studies using the LSAY, this study draws comparisons across cohorts. The focus is on the cohorts that enter the surveys at age 15 years in 2003, 2006 and 2009. The study considers determinants of their university participation by age 22 years — at the commencement of the demand driven system in 2010, and then in 2013 and 2016 respectively. It then follows students over time to assess their graduation rates and labour market transitions. 

The relatively abrupt change in the mechanism for determining university access provides a natural experiment. In some ways, this study is a simple before and after analysis. The mechanism for determining university access before 2010 allowed fewer people access; beginning in 2010, more people were given access to a university education. This study uses statistical analysis to identify, in a probabilistic way, the additional students and considers their academic and labour market outcomes. 

This study is not a policy evaluation of the demand driven system. It has made no attempt to weigh the benefits in terms of greater opportunity against the resource costs of expanding the system. Moreover, while the demand driven system contributed to a large change in the supply of domestic university places, other factors such as the youth labour market, technological change, problems in the vocational education and training system, skilled migration, and many other social and economic factors also affect who took up these places and the outcomes they achieved. Nevertheless, this study seeks to make a contribution by identifying who the additional students were under the demand driven system, without which it would be difficult (if not impossible) to make a rigorous assessment of the policy. It also highlights the connection between university success and school achievement (measured by literacy and numeracy at age 15 years) and the role that this achievement plays in explaining the persistent under representation of equity groups. 

New opportunities for many, though some ‘additional students’ fared poorly 

The demand driven system had pronounced effects on Australians’ access to higher education. The transition to a demand driven system saw a progressive increase in the cap on Australian Government supported domestic undergraduate places by 5 per cent in each of 2010 and 2011, followed by uncapped funding from 2012 for almost all fields of study. Overall, between 2009 and 2017, the number of domestic bachelor degree students increased by one third (figure 2). The proportion of young people who enrolled in university has increased and a clear majority of Australians now attend university at some point by the age of 22 years. In step with the increase in enrolments, Australian Government expenditure (including deferred student contributions) increased in real terms from $6.4 billion in 2009 to $9.3 billion in 2017. 

The expansion in the number of Australian Government supported university places meant additional students had an opportunity to attend university during the demand driven system that they would not have had in earlier periods. These additional students come from a wide range of backgrounds, but are more likely to have certain traits than ‘other students’ (i.e. those that were not additional students). For example, the additional students are more likely to come from low socioeconomic families, study at public schools and grow up in metropolitan areas (figure 3). 

The most distinct feature of this group of additional students, compared with other university students, is that their school achievement was weaker. Prior to the demand driven system, ATAR scores were a primary mechanism for rationing places. While they remain important for entry by year 12 students and for many courses offered by Group of Eight universities, the most rapid growth in the system came from enrolments by students who had been out of school for a period into courses at non Group of Eight universities. Around two thirds of additional students have an ATAR below 70 or received no ATAR at all. These students also have poorer foundational skills of literacy and numeracy, as measured by PISA scores at age 15 years, which weakens their capacity to engage and succeed at university (figure 4). 

Additional students are less likely than other students to succeed academically. About 21 per cent of additional students drop out by age 23 years compared with about 12 per cent of other students, rates that for other students have been trending down over time (figure 5). While most students that drop out do so within two years of enrolment, there is a tail of students who attend for longer prior to dropping out. Additional students that dropped out had an opportunity to experience university that would not have previously been available to them, and to take an informed decision on whether they are well suited to benefit from the experience. Nevertheless, it is an opportunity that came with costs, not least to the student. Students who drop out incur fee costs of $12 000 on average (Norton and Cherastidtham 2018), with the costs in terms of forgone earnings likely to be much greater. 

For those who succeed academically, a university education remains a good investment. Around half of the additional students are in managerial or professional occupations by age 25 years, roles that generally would have been unavailable to them prior to the demand driven system. Nevertheless, additional students who graduate face slightly less smooth labour market transitions. They are less likely to be in full time employment and have lower average weekly pay than other graduates or those who never attended university at age 23 years. However, the outcomes for graduates converge over time as they grow older and spend more time in the labour market. By age 25 years the remaining differences between these two groups are small. While average wages are similar for all groups in their early twenties, Census data show average earnings of graduates through their late twenties and thirties grows faster than those with trade qualifications or without post school qualifications, implying a significant lifetime earnings premium (albeit lower than during earlier decades). 

FINDING 1 

The demand driven system significantly expanded access to university. The ‘additional students’ — those whose attendance can be ascribed to the expansion of the system — entered university with weaker literacy and numeracy than other students and were more likely to drop out. However, additional students that did graduate transitioned fairly well into the labour market. 

There was some progress in improving equity 

Improving access is valuable in its own right. Few would argue for excluding young people from opportunities based on disadvantage or hardship due to circumstances beyond their control. That said, policy should aim to ensure access also leads to success. A goal in providing access to under represented groups is to set young people onto a career path they could not otherwise have pursued, thereby helping to overcome the disadvantage they were exposed to during their youth. A useful heuristic is to consider three hurdles: gaining access; degree completion; and labour market transitions. 

Access 

Young Australians from disadvantaged backgrounds have long been under represented at university. In the two decades prior to the demand driven system, progress on lifting enrolments of students from equity groups had been modest at best. 

The demand driven system lifted enrolments of some equity groups more than others. In comparison with the general student population, additional students were more likely to come from low socioeconomic backgrounds and from families where the parents had not attended university. For example, in 2016, around one third of additional students were from a low socioeconomic background compared with around 15 per cent of other students. This inflow of additional students changed the overall composition of the student body, but only to a limited degree because the additional students comprised a modest share of all university students. 

In contrast, the demand driven system did not stimulate increased participation rates for young people from regional or remote areas or for Indigenous people, though the latter finding does not take into account that Indigenous people often undertake university study at ages that are outside the scope of the dataset used in this study. For example, more than one third of Indigenous university students are aged over 30 years, compared with one quarter of non Indigenous students. 

Some of these trends may have been expected, while others need to be unpacked. For example, the different outcomes for those growing up in regional or remote areas may reflect the substantial relocation costs they face and the relative ease of access for young people growing up in metropolitan areas near large university campuses (figure 6). The demand driven system, of itself, did not address these underlying barriers. 

FINDING 2 

University enrolment and participation rates of people whose parents did not attend university and those from low SES backgrounds increased strongly under the demand driven system. In contrast, while there has been some increase in enrolments for people from Indigenous or regional or remote backgrounds, overall participation rates for these groups do not appear to have improved, at least until age 22 years. 

Despite the increase in enrolments by some equity groups, all remain significantly under represented at university. This study maps the effects of people’s various characteristics at age 15 years on university attendance by age 22 years and how that affects equity group participation. It shows that there are two different reasons that explain why gaps in attendance persist: school achievement; and a range of cultural and environmental factors effects that are difficult to identify individually. 

Proficiency in literacy and numeracy at age 15 years is the strongest predictor of whether an individual will attend university and a major explanation for the under representation of children from low socioeconomic backgrounds or from families with parents who did not attend university (figure 7). Literacy and numeracy are also relevant factors in explaining why Indigenous and regional or remote children are less likely to attend university. As such, recent large declines in literacy and numeracy scores among regional or remote school children are of particular concern. 

Put differently, strong foundational skills in literacy and numeracy are a powerful protective factor for children growing up in equity groups or from disadvantaged backgrounds. Those children that succeed in school and attain literacy and numeracy in the top quartile attend university at fairly similar rates regardless of their background. By contrast, children from equity groups with literacy and numeracy in the bottom quartile are about half as likely to attend university as equivalently capable children from more privileged backgrounds. 

FINDING 3 

All equity groups remain heavily under represented at universities. Poorer average literacy and numeracy within these groups, when compared with the broader population, is one important source of this under representation. Conversely, for people growing up in disadvantage, strong development of these foundational skills greatly increases their likelihood of university attendance. 

Outcomes 

Students from equity groups also face challenges when they attend university, as they: • enter university with poorer literacy and numeracy on average than students from more advantaged backgrounds • commence university at an older age on average (having spent some time working after completing school) • are more likely to study part time and work while they study. 

All of these factors are correlated with higher non completion rates, which explains why equity groups tend to have higher drop-out and lower completion rates than students from non-equity groups. 

Moreover, students from equity groups whose participation can be ascribed to the demand driven system have fared more poorly in terms of drop out rates and completions than students from equity groups who would have gone to university in the absence of the demand driven system. For example, in 2017, drop out rates for an additional student who was a member of at least one equity group were around 21 per cent compared with around 15 per cent for their equity group peers who would have gone to university in the absence of the demand driven system. Relative completion rates were even more starkly different — at 42 and 60 per cent respectively — reflecting that additional students from equity groups had entered university when older and had not yet completed their studies by age 23 years. Accordingly while the demand driven system increased access to students from some equity groups, it has so far led to relatively modest increases in the number of completions by such students.

There is insufficient information to gauge the labour market outcomes of additional students from equity groups, but the evidence for all students from equity groups is that those that graduate tend to have outcomes that are on par with graduates from non equity groups. For example, nearly 60 per cent of low SES students who complete university are employed in managerial and professional occupations. 

FINDING 4 

While university access for people from low SES backgrounds improved during the demand driven system, some of the gains were given up due to higher drop out rates and lower completion rates. 

Implications for policy 

Governments have many policy levers that affect higher education access and outcomes. They can: • use their substantial control over the school sector to attempt to improve school achievement, particularly literacy and numeracy, noting this has proved difficult to achieve in the past • try to address the range of environmental and cultural factors that cultivate a learning environment at school and affect aspiration to attend university • expand (or reduce) access by relaxing (or tightening) caps on government-supported places • require, or provide incentives for universities to provide greater support to students while at university.

The move to a demand driven system focussed on the third of these. This was supplemented by additional funding through the Higher Education Participation and Partnerships Program (HEPPP) for universities to raise the aspiration of disadvantaged children and to provide additional support services.

The demand driven system had several advantages over previous policies that severely rationed access. A series of reviews prior to its introduction indicated that pre-determining the number of university places allowed insufficient flexibility to meet the changing needs of the economy.

Overall, this study shows the demand driven system delivered substantial benefits in improving equity of access to some groups. It made higher education accessible to some students from disadvantaged backgrounds and it allowed the number of places to flex in response to changes in demand. More than 40 per cent of additional students attracted through the demand driven system had graduated by age 23 years, and these graduates eventually transitioned into managerial and professional careers at rates similar to other students. This assessment of the success of the system needs to be tempered, though, by noting that many of the additional students did not succeed academically. And despite growth in the system, equity groups remain substantially under represented.

Designing tertiary entrance arrangements is a vexed policy problem given the difficulties in identifying those most likely to benefit from a university education. Government can open the net wide for entry by allowing demand to lead the system. This approach maximises access, but increases fiscal costs and, for students ill suited to higher education, can waste their time, build up debt and cause them to forgo alternative job or education options. Alternatively, government can make the net narrow by constraining the supply of places. However, the most readily available filtering techniques for universities to use are imprecise (school achievement measured by ATAR) and this study shows that in the past that approach has denied a higher education to people who would have benefited greatly from it (particularly disadvantaged groups, who may have fewer university educated role models in their family or neighbourhood). The current freeze on university funding may provide the Australian Government some fiscal breathing room. However, the long run pressure will be to continue to increase the size of the sector given that the historical shift towards jobs requiring complex cognitive skills is unlikely to abate. Australian Government policy foreshadows, from 2020, a return to growth in the number of university students, with funding levels subject to universities meeting performance targets. In a system that continues to expand, some of the lessons from eight years under the demand driven system may be of value to future policy design. This study points to a range of areas in which policy settings should be considered. 

Improving foundational skills of students 

Many of the additional students at university are arriving academically ill prepared. This suggests that the Australian school system has insufficiently adapted to the role needed of it to prepare larger numbers of young people to succeed at university. While the entire distribution of achievement on literacy and numeracy at school is declining, an overall trend that should be of concern, this study suggests that the university prospects of children from equity groups may be particularly affected.

Improving the preparation of university students requires raising the skills of school students. While governments have some capacity to influence the factors outside the school environment that affect literacy and numeracy, they have multiple levers affecting the functioning of schools. For example, teacher quality is a key driver of student outcomes and is influenced by policy decisions about accreditation of university teaching courses, recruitment practices for teachers, professional standards, teacher support, performance assessment, requirements to teach in field and for professional development, and teacher salary structures among other factors. The evidence base for policy decisions to improve schools is still piecemeal, as is its use for making such decisions (PC 2016), and experts often have divergent views about the best approaches. Nevertheless, some answers to the problems look promising (PC 2017). Along with the benefits that would arise from having better prepared university students, improved schooling outcomes would have wider benefits. There is widespread acknowledgement that acquiring sound foundational skills in literacy and numeracy is essential to developing the skilled workforce the Australian economy will need. 

The continuing access issues for regional or remote students 

Children growing up in regional or remote areas with the same academic ability as their metropolitan peers continue to be much less likely to attend university. While the current study has not investigated the reasons in detail, it seems likely the high cost (both monetary and non monetary) of moving to the cities where major university campuses are located is a significant, and perhaps increasing, barrier. The Commission (PC 2017) has previously noted that cost effective and flexible ways of delivering education may bring benefits, such as massive open online courses (MOOCs) if accompanied with appropriate accreditation. 

Retention rates for additional students 

Declining retention rates require attention. There are two elements of this: admissions processes and remedial support. Admitting a larger group of students inevitably makes it more difficult to assess ahead of time which students will flourish academically. During the demand led period, this challenge became more acute for some universities than for others. For example, the Group of Eight universities expanded domestic enrolments less than other universities and, to the extent they did, were able to do so in part by enrolling students that otherwise would have attended and succeeded at other universities. Higher drop out rates outside the Group of Eight, and some variation across the sector, should have been expected. Nevertheless, the Higher Education Standards Panel (2016b) noted that particularly severe problems emerged for three universities (Swinburne, Federation and Tasmania), while conversely the University of Notre Dame used effective admissions processes that led to low subsequent drop out rates.

The other challenge is remedial support for students that enter with weak or incomplete foundational skills. The current structure of the HEPPP provides additional funding to universities in proportion to the number of students they enrol from equity groups, in part to meet the cost of additional support needed to allow some students to succeed. The policy most likely further encourages enrolments, though whether it delivers higher quality and more appropriate support services for these students is difficult to know with the limited evidence base available on the scheme.

The incentives for universities to manage drop out risks are weak. By and large, universities’ incentives are to enrol more students. In many courses (particularly those without a laboratory component), the incremental costs of enrolling an additional student are low compared with the per student revenue. The surplus is typically used to cross subsidise research, which is often seen within universities as their preeminent and high status purpose. This imperative for growth has not necessarily aligned with the needs of the student, nor the needs of Australian society and the economy.

There are many ways in which universities could be required to have more ‘skin in the game’ (PC 2017). The Australian Government (2018) is currently consulting on performance metrics to be tied to university funding, which may include measures of student outcomes (such as student satisfaction, full time employment four months after graduation, and employer satisfaction), course completion, equity, and student repayment of higher education loans. Any performance metrics tied to funding would need to be designed carefully to reward universities for ‘adding value’ to their students. They would need to avoid unintended incentives in favour of passing students regardless of their performance or against accepting students from disadvantaged backgrounds (who this study shows may be less likely to complete despite having similar capability).

Another way to improve university incentives would be to help students make well informed choices and ‘vote with their feet’. The Commission (PC 2017) previously recommended establishing a single portal for students to access comprehensive and up to date information about the areas of skills needed, educational requirements of careers, the range of education institutions providing relevant qualifications, and measures of their performance including student experiences and outcomes. Well informed consumers who can vote with their feet would contribute to aligning better university incentives with the needs of the Australian economy.

Consideration should also be given to strengthening course counselling for students that encourages them to ‘fail fast, fail cheap’. While a benefit of the demand driven system was that more students could try university and see whether they were well suited for it, early exit of those that prove ill suited, despite remedial support, will mitigate the ‘debt and regret’ problem (Norton and Cherastidtham 2018).

Providing young people a range of options

Finally, university education is never going to be the best option for everyone. An economy that presents young people with a range of viable alternative options is likely to produce more consistently good outcomes. The other major alternatives to university — a job or vocational training — have been undermined by relative weakness in the youth labour market and deep seated challenges in the vocational education and training sector (VET). In a different environment, more of those for whom university may not have been the best option may have pursued these alternatives. The policy imperative is to ensure a well functioning youth labour market and VET sector.

The above remarks do not only apply to the additional students attracted by the demand driven system. Foundational skills have been falling across the board. Even prior to the demand driven system, full time employment rates were falling for graduates and unemployment rates were rising. Policy initiatives to remedy the deficiencies in the education system — school, VET and university — have benefits that flow well beyond those that were the target of the demand driven system. This study points to a range of areas in which, regardless of the university funding model, policy settings may be able to improve the effectiveness of the system. 

POLICY CHALLENGES 

There are many policy challenges that emerge from the experiences during the demand driven system.

• Governments need to address the generally declining levels of proficiency of students, and particularly the growing share of school students who perform poorly. However, beyond some obvious initiatives, the question is what detailed package of policy measures would be most likely to be effective in reversing the decline. 

• University enrolment practices and student support can help student retention without relinquishing standards, but universities have relatively weak incentives to change their practices. Prescriptive government requirements for entry and student support would discourage innovation and ignore the variations in the groups going to different universities. On the other hand, while rewards for universities to increase their retention rates overcome the problems of prescription, they may inadvertently lower standards or discriminate against groups with higher average likelihoods of dropping out. Devising a workable incentive regime entails difficult design issues, and better measures of outcomes for students beyond retention alone. 

• Improving access to university by remote or regional students has proved resistant to policy, and may require more innovative models for their involvement. 

• The university system is not a desirable destination for all people, but weaknesses in the youth labour market and the vocational education and training system have made the alternatives less attractive.

In the US 'Busting the College- Industrial Complex' by Frederick M. Hess and J. Grant Addison in (2019) 40 Nartional Affairs comments 

 Obstacles to employment are a problem. They impede social mobility, disproportionately harm society's most vulnerable citizens, and hinder the larger economy. That is why efforts to remove such barriers have become a bipartisan cause. It's why more than two dozen states now ban public employers (and sometimes even private ones) from inquiring about applicants' criminal history, due to concerns that capable job candidates will be turned away or otherwise deterred. A number of states and locales are going further: New York City, for example, prohibits public employers from asking about applicants' prior-earnings history; in 2016, Massachusetts became the first state to prohibit the practice for all employers. 

Occupational-licensing reform has similarly seen growing, bipartisan support. Reformers on the left and right have surveyed the staggering costs and barriers to entry for quotidian positions such as masseuse, nail technician, exterminator, and florist, and concluded that these need to be reduced or eliminated. In doing so, they are embracing the understanding Milton Friedman propounded most fluently in his 1962 book, Capitalism and Freedom: "The most obvious social cost," Friedman wrote of occupational registration, certification, and licensure, "is that any one of these measures...almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public." 

Yet even as reformers have pushed to remove a variety of barriers to employment, the biggest and most significant barrier to employment in American life — the use of the college degree as a default hiring device — has gone blithely unremarked. Indeed, even as reformers target employment obstacles for felons and florists, the pervasive use of college-degree requirements, despite its dubious legality and profound costs, has bizarrely escaped serious consideration. 

At its best, higher education can be a powerful engine of opportunity and socioeconomic advancement. And that's the way it's almost universally described — at least in college brochures, think-tank reports, campaign stump speeches, and legacy media. Nevertheless, for too many Americans, the truth is that post-secondary education is principally a toll: an ever-more-expensive, increasingly mandatory, two-, four-, or, more accurately, six-year pit stop on the way to remuneration. 

Constitutional doctrine holds that employment practices that disproportionately affect members of a protected group are prohibited, unless the practice can be shown to be directly related to job performance and consistent with business need. Nonetheless, thousands of employers now casually flout this standard by screening applicants based on post-secondary credentials and by factoring degrees into hiring decisions, even where degree requirements have a disproportionate effect and bear no obvious relation to job duties or performance. 

In a comprehensive October 2017 report, researchers from Harvard Business School documented extensive evidence of increasing "degree inflation," with employers demanding baccalaureate degrees for middle-skill jobs that previously did not require one and for which the work duties have not changed. In fact, 61% of employers surveyed admitted to rejecting applicants with the requisite skills and experience simply because they lacked a college degree. Researchers calculated that this affected an estimated 6.2 million jobs across dozens of industries. 

This all raises an obvious yet oft-overlooked question: Why are college-degree requirements treated differently from other employment tests? 

The burdens of degree inflation, of course, fall most heavily on those of modest means: low-income and working-class individuals who are less likely to attend college or to complete a degree. Degree requirements summarily disqualify non-credentialed workers with relevant skills and experience from desirable jobs. They impede young workers who could otherwise take entry-level jobs and build the skills and expertise needed to pursue new opportunities. And they hold students and families hostage, forcing them to spend substantial time and money on collecting degrees, regardless of whether students wish to attend college and whether the degree in question actually conveys relevant skills or knowledge. The privileged status of the degree, meanwhile, has insulated colleges from non-degree competition. As the de facto gatekeepers to "good" jobs, colleges have increasingly operated as an employer-sanctioned cartel. 

As we consider the kinds of changes to work implied by artificial intelligence, automation, new technologies, and demographic shifts, it's long past time to ask whether the privileged legal treatment of college degrees is defensible — especially when it may be serving to impede opportunity, burden struggling families, aggravate systemic inequities, and stifle economic dynamism.