Researchers Question Degree Payoff

Amid worldwide debate about value of bachelor's degrees and other credentials in labor market come some new data from Australia.

December 11, 2012

The proportion of employed graduates has risen since Australian universities embarked on their latest phase of expansion. But the proportion of graduates in professional and managerial positions has declined, data from the Australian Bureau of Statistics reveal.

The figures lend weight to speculation that degrees are becoming entry tickets into the work force rather than marks of distinction.

Andrew Norton, a higher education specialist at the Grattan Institute, an independent think tank, said there was anecdotal evidence that postgraduate qualifications were replacing bachelor's degrees as essential criteria for many jobs. "It's a chicken and egg problem -- are people getting postgraduate qualifications because employers are demanding them or because they think it [result in] a higher salary?

"I would rate a few years' industry experience way above a postgraduate degree for a lot of jobs."

Government figures show the proportion of graduates with jobs, which had hovered about 85 percent for the previous 15 years, suddenly increased more than two percentage points last year and this year.

At the same time the proportion with top-end jobs, which had been climbing steadily since 2003, declined almost four percentage points. The change coincided with a surge in student numbers.

Universities expanded aggressively from 2010 in line with a federal government drive to boost graduate numbers. Like most Western countries, Australia wants a more qualified population for the "knowledge economy" of the future. However, some researchers question the individual payoff of university degrees.

A University of Warwick study found the difference between British graduates' salaries and average earnings had fallen 22 per cent between 2003 and last year.

This followed claims by another British academic, Bath University's Hugh Lauder, that degrees don't set people apart as much as they used to. Professor Lauder blamed the sheer numbers of graduates, the capacity of computers to do "knowledge work" and new low-cost production techniques.

Norton cautioned against reading too much into the latest Australian statistics because of "cyclical" economic impacts and changes in the way the ABS classifies occupations.

But he said Australia risked "clogging up the labor market so that it's harder for a person to start out in the mailroom and work up to CEO."

"Individually, it is rational to get that degree because it reduces your risk of being unemployed," he said. "(But) for society as a whole it may be inefficient because people who don't have degrees find it harder to find jobs matching their underlying skills."

However, the Australian Workforce and Productivity Agency's latest modeling suggests demand is likely to grow 60 percent more quickly for people with degrees than for those without.

"Jobs are not static (and) they increasingly require higher-level skills. I don't think we've got an issue of graduate oversupply," said the agency's chief executive, Robin Shreeve.

The director of the National Center for Vocational Education Research, Tom Karmel, said the relative wage rates for people with degrees had declined in the 1970s. Before then, people with degrees were "pretty elite," he said.

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