Labor’s “Graduate Tax” – Will It Make the Rich Pay?

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The National Conference of the Australian Labor Party held in Hobart during June removed the plank from the ALP’s platform, which stated that tertiary education will be free. This policy move is designed to make way for the introduction of some form of graduate tax, as proposed by the Wran Committee.

The decision of the ALP conference shattered the illusions of student leaders aligned with the ALP who spent their energies in pre-conference numbers-crunching rather than organising a much-needed trade union student alliance on the streets to stop the tax.

The proposal, really a deferred fee, will see all students, regardless of whether they actually graduate, paying back a fixed fee for each type of course at a rate of 2% per annum. The tax will start being collected once the ex-student is on the magnificent sum of $21,500 per year: not even the average wage!

The ALP is cynically trying to sell its proposal as a way to spare the working class from funding the education of “fat cat” students, who graduate and become incredibly rich on the basis of their degree. Some on the left have also accepted this argument.

The argument rests on the incorrect assumption that all students come from privileged backgrounds and that all students will get high-paid jobs if they graduate.

Since fees for tertiary education were abolished in 1974, there have been genuine changes in the composition of university students. Women’s enrolments reached 50% for the first time, although they are still concentrated in a narrow range of courses. The number of children of blue collar workers going to university rose by 9% in the same period, from 17% to 26%. On the other hand, the introduction in 1986 of an “administrative charge,” initially $250 but now $263, has led to a decrease in the number of part-time and external students. One heavy casualty has been mature-age women.

Are Graduates Rich?

The way the argument is being run at present, the word “graduate” conjures up a doctor, corporate lawyer or dentist. It usually doesn’t invoke a nurse, teacher, librarian or public servant. Yet only 1.9% of first year students are medical students, and the combined total of first-year students enrolled in medicine, law, dentistry and veterinary science — professionals with good income earning prospects — comprises a tiny 5%.

It is also proposed that the graduate tax apply to Associate Diploma Courses in TAFE Colleges — the “working class universities” — from 1990. The income earning prospects of those in childcare, social and community services, secretarial studies, youth work, welfare work and technical occupations are average at best. A trained welfare worker with a few years of experience earns only $23,000 per year.

Income for those with actual university degrees has declined over the last decade. In 1977 the average starting wage for a university graduate was the same as average weekly earnings. But by 1987, it had fallen to 89%.

Teachers and nurses — comparatively low-paid professions and ones that do attract students from a range of backgrounds, especially working class girls — will be heavily hit.

Teachers, nurses, public servants, welfare workers, youth workers, childcare workers and those in technical occupations are a key part of the working class and are often more poorly paid than occupations more traditionally thought of as working class, such as tradespeople. The class relationship is not changed because workers spend their day in offices, schools and hospitals rather than on the factory floor. These groups of workers have nothing to sell but their labour, for which they get a mediocre wage.

Clearly, the government’s plan is to try and make the working class pay its own education and training. All socialists, feminists, trade unionists and radicals must say no!

Poor Pay More

The proposed graduate tax will see students paying between $,500 and $18,000 for courses. But the graduate tax will hit ex-students on lower incomes much more heavily, because it is a regressive tax. All students, rich or poor, will have to pay back the same. The total debt is not linked in any way to income, but is based on a standard fee for the type of course undertaken.

The following example, comparing a corporate lawyer and a community lawyer, presented by trade unions and student unions in their Higher Education Round Table media release, makes the point clearly. A corporate lawyer earning $80,000 per annum can pay back the $6,000 debt in 3.75 years. On the other hand, a law graduate working for a community organisation and earning $25,000 per annum would take 12 years to pay back the same amount! The tax would represent a 7.5% proportion of the corporate lawyer’s income but a massive 24% of the community lawyer’s income! So those on modest incomes will pay a considerably greater relative amount for their education.

A graduate tax will impact particularly harshly on women. Despite winning equal pay on several occasions, women workers still earn 63¢ for every dollar earned by male workers. Despite small gains made by women in the workforce, subtle and not so subtle discrimination still runs rife. A women with equal qualifications to a man is much less likely to be promoted to more senior positions. These figures from teaching are not unusual. Women are more than three quarters of primary school teachers, yet women are only a tiny percent of primary school principals. This is with all the Equal Employment Opportunity policies!

While the graduate tax will hit workers hard, it still certainly pays to be wealthy. The Wran report has recommended a 40% discount for those who pay their tax up front! So those from wealthy backgrounds score a discount while the less well off are saddled with a huge debt early in their working life. This is on top of any other debts students from poorer backgrounds may have incurred just trying to survive while studying.

User Pays, or Do They?

There are two main ideas behind the graduate tax proposal. One is to encourage students into areas of study which will be more lucrative on graduation, such as engineering, computing, business studies and science. This, we are told, is what industry wants. What will be the impact on the social sciences, humanities, art, music and education fields? Will only the rich be able to afford the luxury of any kind of higher education that is not purely vocational? Education, which can be an enriching experience that encourages students to think, will be replaced by high-level training to meet the capitalist system’s labour needs. Education will become a commodity to be bought and sold. Already, universities and TAFE Colleges are making a bundle out of ripping off thousands of overseas students by enrolling them in fee-paying courses. Sale of education as an export commodity is an expanding business.

The second idea behind the graduate tax is this ever-recurring theme of “user pays.” Well, I’m not using the Bicentennial, or subsidies to big business or handouts to Bond for yacht races, so where’s my refund?

The real “user” of higher education is, in fact, business. It is telling government its needs, and the government is responding. Education Minister John Dawkins’ paper is about trying to meet the bosses’ demands.

Yet clearly, this user of education — business — is not being asked to pay. In fact, it has just been granted hefty tax concessions in the government’s May Economic Statement. Corporate tax has been slashed from 49% to 39%, lower than the highest personal taxation rate. Company tax as a proportion of total Commonwealth tax receipts has dropped from 15.4% in 1975 to a mere 9.7% in 1987.

What do we want?

Certainly, the demand of all on the left should be to make the rich pay. However the graduate tax is definitely not about taxing the rich. It is about figuring out a way to meet industry’s demands for more graduates, while continuing to decrease public spending on tertiary education. A few corporate lawyers and wealthy professionals may have to pay up $6,000, provided they don’t pay up front and get their discount. But what will be the costs of this massive turning back of the social clock? Will the ruling class be squeezed out of tertiary education? Not likely! It will be an increasingly privileged Anglo-saxon, male ruling class élite that will enjoy the benefits of higher education.

Our demands should be:

  • No introduction of a graduate tax!
  • A living wage for all students under AUSTUDY
  • End all state aid to private schools and massively increase funding for public education
  • Increase company taxes and make the personal tax system for all wealthy people more progressive — make the rich, not working people, pay!
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