NATSEM research released yesterday confirmed that on average higher education pays off. Compared to someone with Year 12 education only, the average graduate will have lifetime earnings of $1.5 million more, after deducting forgone earnings while studying.
But the annual ABS Education and Work survey, released today, again suggests that this average may conceal large variations in actual graduate outcomes. Despite the good-as-it-is going-to-get economic conditions (the survey was carried out in May), 26.3% of graduates were working in jobs that the ABS occupational classifications system says require vocational or no post-secondary education rather than higher education. That’s only .2% lower than last year.
Work I have done on data from the 2006 census suggests that it is the generalist degrees, and particularly arts (with the exception of those with degrees in ‘philosophy and religious studies’), that drag down the average. About 40% of other Arts graduates are in jobs that don’t require higher education.
There are still big gaps in our knowledge about this group of seemingly over-qualified workers, particularly on the extent to which their employment outcomes are either wanted or, if not wanted, temporary.
Andrew Norton 
There is nothing wrong with widening your horizon. A bit of education is a lot more productive than trying to do it with drugs.
There is more to life than just economics.
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Any idea why philosophy and religious studies would be the odd one out?
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Probably because they are counting religious ministers with guaranteed employment, but I will seek to investigate further.
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Charles – You ar right, there is nothing wrong with widening your horizons. But the important question is – WHO should be paying for it!! With a $1.5 million lifetime benefit, why should taxpayers have to fork out for it. Shouldn’t they be allowed to use their money to widen their horizons as well? Or is there something special and magical about having other people pay for it?
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AN ASIDE ON THE BREADTH OF ECONOMICS
Johno has usefully provided the obvious response to charles’ first statement.
What about his assertion that “there is more to life than just economics”? That’s probably true is the same way that “there’s more to life than just sociology, or religion, or science” is also true. Yet, as an economist, and indeed one who used to present a course called “The Economics Of Everything”, I suspect that the things Charles has in mind as being outside economics are not outside it at all. “Widening one’s horizons”, for instance, clearly affects the utility of the people who do it, and perhaps to others who benefit from their enlightment, and one might rationally choose to expend time and intellectual effort, as well as financial resources, in such an enterprise. Which all looks like benefits and costs, and personal optimisation and externalities, to me.
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“The breadth of economics” now there’s a laugh! And the important question is NOT (almost ever) “who is paying for it”. The arts building at UWA has carved in its stone walls “Know Thyself” (Socrates, if I remember). I’m not that familiar with the Economics building but I hope it doesn’t have carved into it “Know who is paying for it”. This reminds me of something I read on Catallaxy recently:
“Food miles advocates fail to grasp the simple idea that food should be grown where it is most economically advantageous to do so. Relevant advantages consist of various combinations of soil, climate, labor, capital, and other factors … ”
Lord! Economists fail to grasp the simple idea that most food should be grown where and how it is ecologically sustainable to do so, and in ways which contribute to the flourishing of human communities.
Economics is such a weirdly de-contextualised way of looking at anything that it shouldn’t be available to undergraduates. Students should get a bit of education in history or philosophy or science or arts before they’re assaulted with the mind-warping folderol known as economics.
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“Which all looks like benefits and costs, and personal optimisation and externalities, to me.”
That might be true, but it might not be the best way to view the problem. Everything might look like atoms to me, which isn’t very useful to a person interested in, say, how the quarks behave. This reminds of economics vs. social and educational psychology. You often see the same problem handled in completely different ways.
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“seemingly over-qualified workers”
I have two different observations about this, which leads me to believe it less and less, or at least that this is necessarily a bad thing.
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1) Would the people who are not in a job that requires a degree have the job they have if they didn’t go to university? Lots of people who go to university these days have not been well taught at school. Going to university may bring them up to a much more employable standard. This may be an expensive way to bring them there, but it is still a useful albeit inefficient function. You may argue, that, say, community colleges or having people repeat Year 11 and 12 (or something similar) may provide this function more cheaply, but there may be no market for this since most students want a degree from a university. Any data on this (I can only provide anecdotal evidence)?
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2) There are certain areas where it is impossible to expect 100% of people who get a degree (or even anything close to 100%) to be able to work in that field, since there are massive difference in productivity between people. It is also almost impossible to tell apriori who will be able to do so before hand. This certainly includes most areas of “high” science as well as some areas of business. Let’s say the best we could ever hope for is that 50% of people with a degree end up being good enough for these jobs (it’s probably even lower in many areas of science that require PhDs). This means we only have the option of 1) training twice as many people so that we have enough that are good enough for these jobs or 2) giving up on the area altogether. It seems to me there is a trade-off here between the general good of the area (and quite possibly very important areas), and getting 100% of people to work in the area of their degree. There may be no possibility of having both.
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Conard
Two further observations on ‘seemingly overqualified workers’.
1) These workers have been deemed overqualified because their educational attainment exceeds what the ABS has deemed appropriate for their particular qualification. In the eyes of the worker or their employer, they may not be overqualified.
2) The ABS data provides a snap shot in time, not a worker’s journey through time. As HILDA’s longidutinal data shows on other issues like income distribution, there is likely to be a lot of churn and many of the workers who are currently in jobs they are overqualified (according to the ABS), will move on to jobs that better suit their training.
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Johno –
1) I think there is evidence to suggest that workers do believe that they don’t use their skills. In my original paper on this subject (table 4) I reported survey evidence that nearly 20% of graduates felt that they did not use their abilities or qualifications at work. A more recent paper by Ian Watson using HILDA data found that significant minorities of workers in the occupations with lower skill levels according to the ABS disagreed with the proposition that ‘my job lets me use my skills and abilities’
2) I agree that there is churn, which is why I have always added questions or qualifications when presenting this data. For example, the ABS labour mobility data shows that in the 12 months to February 2008 about 180,000 persons moved from low to high skill jobs. This compares to about 680,000 ‘over-qualified’ graduates at May 2008. I suspect that a significant proportion of the 180,000 would just be recent graduates quitting their casual uni job to take up their first real job, so the number of others making transitions may be below 1 in 6 of the pool of ‘over-qualified’ graduates.
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Conrad – As you probably know, the universities are extremely resistant to their value-added being measured. When the previous government tried to offer a skills assessment test most universities boycotted it and then declared it a failure for lack of take-up! While I can’t rule out the possibility that your proposition (1) is true to some extent, I don’t think universities are typically very good at remedial work.
On (2) I am not measuring mismatch between main field of study and current job – I have done a little work on that and it is much higher than the broader measures I am examining here, which is of matching skill *levels* rather than precise skills.
I absolutely agree that perfect matching is impossible. But I do think it is problematic that there are many people boosting the idea of more education – many of them with a vested interest in supplying it – and this proposition is being treated entirely uncritically, without even mentioning an apparent large surplus of graduates, equivalent to several years worth of completions
Universities claim to teach clear and critical thinking, but rarely apply it to their own activities.
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“Universities claim to teach clear and critical thinking, but rarely apply it to their own activities”
:). I’ll add “in almost all areas” to that, especially business departments, none of which run like businesses. At least Arts departments have an excuse.
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“I don’t think universities are typically very good at remedial work”
I don’t doubt this at all. But the problem is where students want to go (i.e., where demand is). For example, where I work, we know that if the really poor students go to TAFE for 2 years, and then to uni, they do as well as average, and it only takes them 1 year more. Now, I don’t have the figures, but it’s surely the case that TAFE is cheaper to run than uni, and they must be doing a reasonable job, since they boost really poor students to average, and from average, we know they can probably go to reasonable by the end of their degree if they try. Alternatively, if they come in really poor, they’ll still get their degree, but they won’t benefit nearly as much. They’ll probably also take as long after failing a subject or three, and employers won’t like them at the end since they’ll look like hopeless cases.
So you might ask why the TAFE route is not the normal route for the students who would benefit, or, for that matter, if they just need a few basic skills, why even go to university at all if they are literate enough after TAFE? The answer to that is (a) many students underestimate how bad they really are so don’t want to take this method (everyone thinks they are above average when they are not); and (b) there is always another university willing to take them (or even the same university when the TAFE is integrated), where they think they can save a year, which sounds good if you are 18 and don’t have a good understanding of your failings. This second possibility is also reinforced by the notion that many employers want people with degrees (which is true — it makes an easier first cut for job screening). Because of this, demand for the more logical alternative is rather poor, and mainly taken up by special cases (ESL speakers etc.), versus the myriads of Australian-born students that would probably benefit a huge amount from it. Thus the fact that universities are inefficient is essentially irrelevant since people arn’t willing to take the alternative..
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Conrad – whether economics is the best way of viewing the problem is something we could debate; my point was a response to charles’ was simply that these things are not outside economics.
Russell – actually, no, I can’t be bothered.
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johno
Now here is the rub, if the persons earns 1.5 million dollars extra he will pay more tax and if the taxation system is progressive he/she will pay a lot more.
The 1.5 million extra is only a problem for people that believe there should be no taxation, I know they do exist, but it isn’t how our economy works.
The issue is arts degrees, where the return is not measured in dollars and cents. Should society provide education for no other reason than the strengthening of our democracy. I think we should.
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All rather fancy theory. But remember the point of earning money is so you can marry someone with big tits. That will broaden your horizon.
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Andrew, Anything more on the religious studies anomolies? (Disclosure as to interest: That was my Arts major…!)
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Andrew
Given john cramer’s comments your clearly using the wrong metric, out with the tape measure, off with the bras.
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Joel – Unfortunately I would have to pay the ABS for more detailed information to fully answer this question, but I can say that the reason ‘philosophy and religious studies’ does well is that a very high proportion (more than 60% of all those with jobs classified as ‘professional’) hold jobs described as ‘social and welfare profesional’, of which a minister of religion is a sub-category.
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Another reason why philosophy grads might be an exception:
The Campus Review reports that they seem to be in demand by business.
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Brendan – I’m a little sceptical of this. There are about 1,350 people who give philosophy or religious studies as their main field of study in business occupations that are likely to require a high level of skill. This is out of about 20,000 people. If I rank the occupations of people with philosophy or religious studies, the first skilled business occupation is at number twelve, below clerical workers and sales people. But apart from ‘social and welfare professionals’ employment outcomes are very diverse, with none reaching 1,000 persons.
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Critical commentary on this topic from the US.
Suggests that the value of higher education tends to be over-rated.
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I completed my PhD in English 10 years ago and have worked in publishing and educational management ever since. It has gradually become harder to gain employment as I am increasingly judged to be ‘overqualified’ for all but the highest level positions, which usually go to older applicants. I am highly skilled yet almost unemployable (even in roles requiring tertiary qualifications) because of this. The potential employers who judge me overqualified seem to miss the fact that I am a bargain. I don’t want to rule the world and work 80 hours a week. I want a mid level job with mid level pay so I can have a reasonable work life balance. Apparently I am being punished for not striving to reach the top, which seems to be the only goal in life.
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Fitzroyalty – I have heard of problems like this before. On the other hand, the census finds that 82% of men with postgraduate qualifications in ‘language and literature’ who have a job are in managerial or professional occupations, which is better than for graduates as a whole.
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