Higher Education 5 (1976) 35 -47 (:_:llsevier Scientific Publishing Company, Amsterdam Printed in the Netherlands THE ECONOMICS OF BONDED SERVICE: THE CASE OF GRADUATE SECONDARY TEACHERS IN VICTORIA, AUSTRALIA* GERALD BURKE Monasl~ University, Clayton, I'ictoria, .-t ustralia 3168 ABSTRACT In the six Australian states the main form of recruitment of teachers for govern- ment schools has been through the award of teacher scholarships or"studentshil~s" to entrants to teacher training. The teacher trainees in return have "'bonded" themselves to t, ndertake a period of teaching. The object of this paper is to measure some of the costs and benefits of the scheme that has operated in the state of Victoria. A range of present values of the cost of training a "cohort" of male university entrants and the subsequent salary bill in teaching of the survivors have been estimated with the aid of a Markov chain model. The estimates arc based on dala on survival in training and in teaching, and salary and allowance data t,t the turn of the decade Alternative estimates were made of the salary bill at higher salary rates which mi'ght be offered in place of the studentship scheme and which could be considered likely to yield at least as large a quantity of teaching service. Even under the tight labour conditions at the end of the sixties the studentship scheme appeared to be a very expensive method of recruitment. When consideration is given to other costs and benefits in teaching and to society generally the case against the studentship appears even stronger. 1. Introduction In each ot" the 6 states of Australia the large majority of teacher trainees have received free tuition and relatively very generous allowances sometimes known as studentships. In return they have contracted or "bonded" themselves to remain in service with the state education department for a number of years. Such "'bonding" schemes are not now common in western developed societies, althottgh they have some similarity with the partial * An earlier and more detailed version of this paper was given at the Third Conference of Economists. Economic Sociely of Australia and New Zealand. Adelaide. May lt.~73: it is based oll Burke {1q72, ('h. 10). Tulqes of estimates and ~,ccompanymg methodological notes are available from the author, l am grateful to C. Selby Smith and Gary P. Sampson for comments on early drafts.