Is a university degree still a worthwhile financial investment in Australia?

Abstract

Since 2006 there have been significant changes in the labour market for university graduates, most notably the Global Financial Crisis of 2007 and the subsequent downturn in gross domestic product growth, and a huge expansion in university places. This article presents estimates of the monetary returns in Australia associated with the completion of bachelor degrees in 2016 for a range of fields of study and compares them to the estimates for 2006. The results show that for the median person, there are still good monetary incentives to complete these degrees and the private rate of return compares favourably with the long-term real bond rate. However, the article also concludes that the return to an individual investing in bachelor education had mostly declined in the period 2006–2016. There is, again, considerable variation between disciplines and for some, completion of a bachelor degree does not yield positive returns. The key factors determining the monetary rate of return are the discipline of the degree and the graduates’ subsequent labour force status. Graduates in full-time employment in most disciplines avoided being among those with low (or negative) rates of return. In addition, there is some evidence of skills mismatch and over skilling among the lowest paid university graduates.

Determining factors in graduate recruitment and preparing students for success

“…The demands of the "knowledge economy" apply renewed pressure on those entering the workforce (Watt and Costea, 2020), while COVID-19 is severely impacting on graduate recruitment levels worldwide (Institute of Student Employers, 2020). Earlier recessions have meant high levels of unemployment (Corsetti et al, 2019;Kilic and Wachter, 2018), aggravating already rising trends among graduates, particularly those aged under 25 years (Corliss et al, 2020) and of generalist programmes (Ghignoni et al, 2019). While those holding tertiary qualifications are better positioned in their job applications (Boyadjieva et al, 2020), they progressively compete with non-university graduates (Vendolska and Ka cerov a, 2016), leading to concerns about the net financial gain of degree education (Donald et al, 2018).…”

“…Earlier recessions have meant high levels of unemployment (Corsetti et al. , 2019; Kilic and Wachter, 2018), aggravating already rising trends among graduates, particularly those aged under 25 years (Corliss et al. , 2020) and of generalist programmes (Ghignoni et al.…”

The Evolving Wage Structure of Young Adults in Australia: 2001 to 2019

“…Changes in methods of pay determination within Australia coincided with significant changes in the Australian labour market and a rapid expansion of the higher education sector. Between 2001 and 2016, for example, undergraduate degree completions increased by 43 per cent, with nearly a third of this increase occurring between 2006 and 2016 (Corliss et al ., 2020; Daly & Lewis, 2020). Parallel labour market developments included: a significant increase in employment participation by women of all ages (Birch & Preston, 2020); a change in the composition of skills (Coelli & Borland, 2016); a change in the distribution of working time; and, a growth in part‐time, casual and non‐standard forms of employment (Wilkins & Wooden, 2014; Laß & Wooden, 2020).…”

“…The rapid expansion in the higher education sector and the supply of graduates has generated particular interest in the returns to education. Recent Australian studies of this genre include Barrett (2012), Birch et al ., (2009), Borland and Coelli (2016), Coelli (2015), Coelli and Borland (2016), Coelli and Wilkins (2009), Carroll et al ., (2019), Corliss et al ., (2013, 2020), Daly and Lewis (2010), Kalb and Meekes (2019), Koshy et al ., (2016), Leigh and Ryan (2008), Lee (2014), Sinning (2017), and Wei (2010). Some have had a particular interest in understanding how the quality or rank of the tertiary institution attended affects education premiums (e.g.…”

“…Wei (2010) similarly observed a decline in the education premiums for these groups (males and females employed full‐time) between 2001 and 2006. Corliss et al ., (2013, 2020), on the other hand, focus on the private rate of return. Their estimates for males and females employed full‐time suggest that there was a slight increase in the rate of return between 2001 and 2006 (Corliss et al ., 2013) and a slight decrease between 2006 and 2016 (Corliss et al ., 2020).…”