Reflections on Different Pricing Strategies for Engineering Degrees and Potential Impacts on Employability of Graduates

Abstract

BACKGROUND The Australian Government subsidises the education fees for domestic undergraduate students in Australian universities. Students pay a contribution of their fees which are currently capped, depending on the program they are studying. Nevertheless, fee deregulation is being debated with strong sentiments on both sides of the argument. Opponents fear that fee deregulation may drive the cost of university degrees beyond the reach of the average Australian student. As a result, it may deter students from attending university. A study in the US, where university fees are deregulated, concluded that price is not a deciding factor for "bright youngsters" but more so for those who are weakly motivated or with limited resources (Cartter, 1967). PURPOSE This paper aims to raise awareness of the potential implications of adopting different pricing models on the employability of engineering students. DESIGN/METHOD Literature related to different pricing strategies for university education was reviewed. Advantages, disadvantages and potential implications of applying these strategies to price engineering degrees are discussed. RESULTS Tuition fees are not a major factor for students who decide to enrol at higher education. However, they are more of an issue for students on the margin. Most Australian universities are close substitutes. As a result they have limited market power. Most universities are likely to adopt a pricing policy based on the marginal cost of educating their students. Universities may face more competition on first year enrolment as private operators and other non-degree offering institutes may offer articulation programs at lower cost. CONCLUSIONS If universities pursue a path to lower the marginal cost of educating students via reduction of instructional expenditure, graduate attributes such as communication skills and critical thinking may be negatively affected. As a result, a mismatch between employers demanded skills and graduates outcomes.