University degrees are often touted as a gateway to high paying jobs and a way to future-proof one’s careers. While cheaper alternatives to campus-based university education have existed for over a decade, these have not been successful at disrupting traditional university education.
Enrollment at Australian universities has continued to grow due to high demand for traditional university education. By 2018, international education had become the third biggest export for Australia and was worth more than A$32 billion to the economy. International students pay higher tuition fees therefore contribute more to the education economy in Australia than local students.
The lockdown and travel restrictions due to COVID-19 have made campus education inaccessible to international students. Overseas students are forced to either defer their education or study by streaming their courses online.
For overseas students, their university education experience seems a lot like online learning via sites like Coursera. Since these online learning platforms offer programs that are far cheaper than traditional university education, higher education looks ripe for disruption.
Patterns emerging in other developed countries like US and UK also show that higher lifetime earnings due to university education does not hold true for many students – many students would have been better-off without a degree.
Moreover, the “wage premium” due to a university degree has shown a declining trend in the last five years (see diagram below). This may be partly explained by the changing dynamics of many modern economies – the number of jobs created in “traditional” industrial sectors of the economy have decreased while job creation has increased in disruptive sectors like technology.
Many technology companies, including giants like Facebook, Amazon, Google and Apple often do not require an undergraduate degree for high paying jobs. Students can learn the essential skills using online learning platforms like Coursera, edX and Udacity at a fraction of the cost of an undergraduate degree. What is even more appealing about these online platforms is that students do not need to take time off from work to upskill anymore – they can learn while working full-time.
Consequently, student enrollment in university degree programs in US has declined by 8% in 2010-18. Other developed countries like Australia may soon follow suit.
Changing socio-political dynamics in developed economies may also disrupt the demand for university degrees. Conservative political parties in many Anglophone countries are increasingly skeptical of the socio-economic value of university degrees. This is partly because university graduates often tend to vote for more progressive candidates, but it could result in a decline in government funding for public universities. In Australia, the Liberal government has decided to double the fee for arts degrees to discourage students from pursuing fields not deemed valuable in the job market.
The rise of China as an economic power has been behind the increasing demand for higher education in Australia. In 2020, there were more than 160,000 Chinese students (about 26% of all foreign students) pursuing higher education in Australia. Rising geopolitical tensions between China and Western democracies is another important risk factor for the education sector in Australia.
Traditional universities have been slow to respond to changes in demands for new skills by employees and flexibility from students. They have been shielded from competition posed by online education sector due to increasing demand for traditional degrees, much of it emanating from emerging countries like China and India. COVID-19 can act as a catalyst for technological disruption of the university education system. The gulf in quality and experience between MOOCs (massive open online courses) and traditional university experience has shrunk due to the COVID crisis and other geo-political developments.
Historically, recessions tend to increase the attractiveness of higher-education due to lack of job opportunities – people spend time and money on upskilling. During this crisis, many students may choose to upskill using MOOC platforms which may disrupt the way the value of universities is perceived. Disruption in this sector may be a boon for the students, but it would be to the detriment of the A$32 billion higher education industry in Australia.
You May Also Like…
Glass Half Full or Empty? – How working from home is costing Sydney CBD $10bn and if that is a bad thing
Buy Now Pay Later – Is there a bubble in the making? – Unsecured debt amid coronacession doesn’t look too promising