The willingness to pay for higher education: does the type of fee matter?
Over the years, South Australia has been attracting student from different parts of the world because of its globally reputed and quality educational institutions coupled with a good lifestyle. Education is South Australia’s largest service export and fourth largest export. This report critically analyses Deloitte’s report, “International Education in South Australia”. The report has adopted various quantitative and qualitative means to understand the working of the education industry in South Australia and the trends in the demand and supply of international education and training facilities in the country. The following sections of the report answers questions in reference to the Deloitte report.
The report discusses about the international training and education sector of the Australian economy. In a study by Chang, et al. (2015), tuition fees, availability of majors, funding availability, distance from home country and the presence of friends and family connections have high impact on the decision to opt for higher studies. However, the demand for education in Australia is more affected by cost changes than changes in the growth of income at the source market.
The demand for international education has been rising consistently over the years and is expected to expand more in the near future. This increasing trend is expected to reach 7 million be 2025 but the factors which drove growth in the past may slowdown and new avenues might need to be discovered (Chen, 2016). The supply side is characterized with stiff competition from old competitors like UK and Canada and new competition from China and Malaysia, which is attracting a lot of the student flow. As domestic infrastructure improves and the supply of education services increases, the demand dampens.
International education faces several substitutes or competitions. These substitutes are courses provided by universities in other countries like the European countries. These substitutes keep the market competitive as students may decide to opt for colleges in other countries and not Australia. For a given course or degree the course structure might be the same in two countries and in that case international student will opt for a country which will offer the course at a lower course fee. Moreover, within a country, public and private education are substitutes to each other. Complements to international education includes research papers. As more students enrol into a university, more publications would come out of the universities in that country. Similarly, more institutions imply that there would be more faculty members who would make publications as a means to compete with each other. Even if they are not competing by working together they would still produce more publications (Valek, 2014).
A positive economics are statements that are based on facts and are purely objective so it describes an issue without judging them. Normative economics are statements that are based on values and are subjective in nature and along with describing issues, it judges them as well. The report has no normative statements but it has the positive statements mentioned (Elliott and Soo, 2013).
When there are availability of desired majors, funding availability or the presence of friends and family connections, it results in a shift in the student’s demand for international education, due to changes in these factors. This has been reflected in the graph with a shift in the demand function from D0 to D1. Similarly, supply side changes take place due to changes in the country’s available infrastructure. Moreover, existing competition also plays a role on the supply of education services. These changes affect the supply side of the education services and has been represented by the shift in the supply curve from S0 to S1. Shifts in demand or supply take place for reasons apart from price changes. A shift in the demand or supply will not take place due to changes in course fees; it would lead to a movement along the curve. A shift will occurs due to changes in other factors affecting demand and supply apart from price.To promote education enrolments, tax deductions are given to both domestic and international students. International student enrolled in a course for more than 6 months are treated like an Australian resident for tax purposes and is not charged at a higher rate which foreign residents are charged. Moreover, they are eligible to get tax reductions and returns for education because the country wants to promote the upgradation of skills (Epstein and Menis, 2013).
The migration and enrolment trend shows an increase and this signifies that the international sector in South Australia shows a surplus (Bruckmeier, Fischer, and Wigger, 2013)
Educational services are attracting many international students to South Australia because of which it can be assumed that it has a surplus of education services to be able to accommodate the influx of foreign students.
To conclude, the demand for the education sector in South Australia has shown significant growth over the years. However, international education is a service characterized by high elasticity in price and demand. This is because a student’s decision to choose international education is dependent on several attributes especially cost of pursuing the course. This sector faces several substitutes and compliments like competition from other universities and publications respectively. Finally, the education sector shows high probabilities of high and continued future growth in South Australia.
Bruckmeier, K., Fischer, G. B., & Wigger, B. U. (2013). The willingness to pay for higher education: does the type of fee matter?. Applied Economics Letters, 20(13), 1279-1282.
Chen, S. J. (2016). College costs, freshman enrollment, and student quality: Evidence from an urban state university. International Journal of Information and Education Technology, 6(9), 664.
Economics, D. A. (2016). International education in South Australia. report prepared for the South Australian Department of State Development.
Elliott, C., & Soo, K. T. (2013). The international market for MBA qualifications: The relationship between tuition fees and applications. Economics of Education Review, 34, 162-174.
Epstein, G., & Menis, J. (2013). Research and Teaching in Higher Education: Complements or Substitutes?.
Langelett, G., Chang, K. L., Ola’Akinfenwa, S., Jorgensen, N., & Bhattarai, K. (2015). Elasticity of demand for tuition fees at an institution of higher education. Journal of higher education policy and management, 37(1), 111-119.
Valek, L. (2014). Economic alternatives and complements in education of future economists. Procedia-Social and Behavioral Sciences, 149, 979-983.
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