What do returns to education say about graduate mismatch?

Andrew Leigh agrees that some people have more qualifications than they need for their jobs. But he’s not convinced that over-education is a problem:

The returns to education have stayed very stable over the past 20 years. If anything, there’s a bigger economic benefit to going to university today than in the past.

It is true that there is no evidence that average returns to higher education have gone down over the past twenty years. But I would not expect the statistics I have been citing to affect average returns as there have always been similar proportions of over-qualified workers, who would have consistently dragged down the averages over time. Though the statistics in my graduate mismatch paper (pdf) only go back to 1991, the time of the last enrolment boom, I also checked some earlier data.

It gets a little complicated because the job categories used by the ABS have changed over the years, but matching as much as I can we get very similar over-education statistics through the years. The earliest data I could find was from 1979, and at that time the proportion of graduates in non-graduate jobs (with the caveat in the first sentence) was 18.7%, remarkably similarly to the 19.2% I calculate for 2006. For 1986 I arrive at a figure of 19.8%. In 1996 it was 22%, but that was a temporary aberration, the unfortunate consequence of the Dawkins enrolment boom graduating into the Keating recession. It was back down to 18.9% in 1998.
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Why do people go to university?

One theory as to why over-education can be bad for you is that people form expectations of life after study that are not subsequently met. But this assumes that people do in fact expect higher education to pay off in the labour market. We can investigate this by looking at surveys on reasons for wanting to go to university.

In 1994, a survey of year 10 to 12 school children planning to go to university found, in a open-ended question, that 86% gave answers relating to their career prospects. Some gave answers consistent with careers not being paramount (‘to be better educated’, 15%; ‘interesting courses’, 3%), but as they could give multiple responses some may also have had vocational rationales for study.

A 1997 ABS survey of people actually enrolled in higher education found that 96% gave a vocational reason. Broken down by field of study, the proportions ranged from 90% in ‘society and culture’ (an annoying ABS category that includes the humanities, social sciences, fine arts and, for some unknown reason, law) to 100% in architecture and education.

A 1999 survey of first-year students, which asked about how important various reasons for enrolling were, found the following ‘important’ ratings: ‘studying in a field that really interests me’, 96%; ‘to improve my job prospects’, 86%; ‘developing talents and creative abilities’, 73%; ‘to get training for a specific job’, 74%; ‘expectations of my parents and family’, 23%; ‘few other opportunities because of the poor job market’, 18%; ‘being with my friends’, 14%.

In 2005, the ABS Education and Training Experience Survey found that 75% gave as their ‘main’ reason for their current study something related to work, and 19% nominated ‘interest or personal reasons’.
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Can too much education be bad for you?

In my post on graduates in the labour market, commenter Russell was keen to defend his thesis that education is valuable, even when it is hard to point to any advantage gained. But could over-education be worse than not actually producing any benefits? Could it be making life worse for the over-educated?

I took a look at the 2003 Australian Survey of Social Attitudes to see how use of abilities/qualifications at work was linked to various other questions in the survey (I would have used the 2005 survey, except the site was playing up). I was looking at all workers, not just university graduates.

There were clear differences on job satisfaction. Among those who thought they were using their abilities/qualifications at work, only 4% were clearly dissatisfied with their jobs (which I defined as rating themselves between 0 and 5 on a 0 to 10 job satisfaction scale). But among those who thought they were not using their abilities/qualifications, 28% were dissatisfied.

This seemed to spillover into financial dissatisfaction. Of those not using their abilities/qualifications, 29% said they were finding it difficult or very difficult to manage on their current household income, compared to 13% of the appropriately qualified group. Optimism about the future was also affected, with 40% of the over-educated believing that people like themselves had a good chance of improving their standard of living, compared to 55% of the appropriately educated group.

The over-educated were more prone to unhappiness as well, with 22% below 6 on the 0-10 happiness scale, compared to 10% among those who thought they were using their abilities/qualifications at work.

I found only one indicator on which the over-educated appeared to be better off – they were less likely to report their work interfering with their family/personal life (31% compared to 40%).
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Campaigns versus personal experience

Another poll on WorkChoices today, confirming that opinion on this is extraordinarily stable. In this latest ACNielsen poll, 59% oppose WorkChoices. This is the sixth poll they have conducted on the issue since July 2005, and opposition has ranged from a low of 57% (October 2005) to a high of 60% (July 2005). As I noted in January, Newspoll is also showing little movement on this support/oppose question.

What is changing is opinon on WorkChoices’ personal effects. In the first poll, 31% of respondents thought that they would be worse off. In June last year, a few months after WorkChoices came into effect, 27% of respondents thought that they would be worse off. In early March this year when the poll was taken, 21% thought that they would be worse off.

Given the massive effort that has gone into convincing people that they would be worse off, this seems to support the theory that in matters people can decide for themselves from their general experience neither propaganda nor expert opinion are likely to have a large impact.

The unions and the ALP instantly won the battle over whether or not WorkChoices was a good idea; with a strong economy most people didn’t see a need for change. But on the issue of personal impact, consistent campaigning against WorkChoices hasn’t been enough to overcome the realisation that for most workers nothing has changed.

Unhealthy central planning

My new CIS paper (pdf) on mismatches in the graduate labour market is getting off to a rather slow media start (only the Courier-Mail so far, though a couple of other papers requested opinion pieces as well). The Australian and The Age are however running different stories on foreign doctor recruitment – and there is no better illustration than these of the problem I am talking about.

In fact, doctors provide a double tale in what goes wrong when governments intervene. This story starts in 1984, when the then Hawke government introduced the Medicare system, and in so doing ensured that the government picked up most of the tab for visits to the doctor. This in turn led to concern about escalating costs, on the (plausible) theory that if you charge people nothing or very little to go to doctor they will be more likely to do so.

In the early 1990s, the government formed the view that an over-supply of doctors was part of the problem. According to one report (no. 12 in the link)
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Can the mentally distressed also be happy?

In the comments on my marriage and happiness post last week Andrew Leigh and I differed on the link between mental distress and well-being. It started when Andrew pointed to this paper (pdf) to argue that, as he put it, ‘divorce makes you happier’ (compared to a bad marriage, that is).

On average, I am pretty sure that’s right. But the paper he cited did not use the standard tests for well-being, which ask people to rate themselves on a scale according to how happy they feel, or how satisfied they are with their lives. Instead, it used the General Health Questionnaire (GHQ), which

is used to detect psychiatric disorder in the general population and within community or non-psychiatric clinical settings such as primary care or general medical out-patients. It assesses the respondent’s current state and asks if that differs from his or her usual state. It is therefore sensitive to short-term psychiatric disorders but not to long-standing attributes of the respondent.

When I replied that I did not think the GHQ’s measures of distress could be easily extrapolated to a measure of happiness, Andrew’s response was that

I think of them as measuring the same underlying stuff. See for example Blanchflower & Oswald’s recent paper that ‘validates’ cross-country happiness measures by showing that they correlate negatively with hypertension.

Though it seems intuitively plausible that the GHQ and subjective well-being indicators measure the same ‘underlying stuff’, as with happiness and marriage this is an area of disagreement among happiness researchers. In Understanding Happiness: A Theory of Subjective Well-being, now quite old (1992) but still one of the most interesting books on the subject, Bruce Headey and Alex Wearing note that:

a large minority give themselves scores which are surprising either because they rate high on both well-being and psychological distress, or low on both.

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In the week or so leading up to the latest Newspoll, reported in The Australian today, the good economic news kept flowing. First there was better than expected economic growth (also, as some of the more upmarket media outlets noted, calling into question some of Kevin Rudd’s claims about productivity). Then another record number of jobs was announced. Then the industrial disputes figures were released – not quite a record low, but still much better than just a few years ago.

Yet according to Newspoll while this time last year 67% of voters thought John Howard was best to handle the economy over Kim Beazley, now only 45% think the same about Howard compared to Rudd.

This is looking like a bandwagon effect, where the most important fact is not what is happening in the economy or what Kevin Rudd or (spare us) Wayne Swan is saying, but what the polls tell us. As Timur Kuran’s very interesting Private Truths, Public Lies: The Social Consequences of Preference Falsification shows in many examples, people’s political views are often informed by perceptions of the general mood. Everyone who follows politics even slightly knows Rudd is in fashion, and he is now enjoying the after-effects of his initial boost in the polls. He needed some substance to begin with, even if it was just that he wasn’t Kim Beazley, and after that all Rudd had to do was ride the wave without falling off. His two-party preferred poll results suggest that he is taking almost all but the most rusted-on Liberal supporters, the people who would not vote for him even if he started turning water into wine (or wine into water, which might be more useful).

Interestingly, though, in the questions on attributes of the two leaders (‘decisive and strong’, ‘has a vision for Australia’, ‘understands the major issues’, ‘likeable’, ‘in touch with the voters’ and ‘trustworthy’), where poll respondents did not have to choose between the two leaders, Howard’s readings are much as they have been over the last eighteen months. What we are seeing is Rudd rising more than Howard falling.

Unfortunately, the question on whether the leader is ‘arrogant’ is rarely asked, but Howard on 68% is well above the 43% he recorded way back in March 1998 (though well below the 87% arrogant rating of Paul Keating in November 1995). Though he has been running around the country as if he were already Prime Minister, Rudd is thought arrogant by only 29% of voters. Perhaps it is because he is more capable than the PM of admitting that he made a mistake.

What should liberals think about marriage?

Andrew is right, classical liberalism does not immediately supply a compelling reason to reject ‘gay marriage’, … except in necessarily narrow and unconvincing terms. This is because it is a political theory, not a moral philosophy.

Thus, while classical liberals can gesture toward love, as Andrew does, they cannot speak to what most couples, certainly all religious couples, and most societies know about marriage: the biological, emotional and sacramental realities merely secular critiques too often ignore. Classical liberals say ‘marriage’ but they mean something else. What they really describe is more precisely a registry office event – one where the witnesses, and indeed the law, are blind to the genitals, hearts and (too often) children (including in potentia) of the parties involved.

John Heard in responding to my critique of his objections to gay marriage.

Indeed, from the liberal state’s perspective a church wedding is just a registry office with stained glass windows, and the priest just a celebrant wearing strange clothes. That’s how it has to be in a society in which religion has lost its hold over the population, with 60% of marriages now performed by celebrants – and with many of the people who do get married in a church making a rare appearance there to do so. Marriage can have ‘sacramental realities’, but like children and even sex these are optional extras. The law does not require any of them, even though children ‘in potentia’ (or these days, watching mum and dad get married) are used as a reason for distinguishing gay from straight relationships.

But why in a liberal society should the law have anything to do with this aspect of people’s private lives? Why isn’t ‘marriage’ just a particularly intense form of friendship, in which the parties get to make up their own rules without any outside interference or involvement? Or why, as David Boaz from Cato has suggested, shouldn’t marriage just be another private contract, enforceable by the state, but according to terms decided by the parties rather than by the template provided in the law of marriage and (more importantly, in practice) divorce?
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The utilitarian conservative case against gay marriage

Earlier this month, The Australian published an article advocating more equal treatment of gay Australians. There’s nothing particularly unusual about that, as many such articles have been published over the years. This one attracted attention, however, because it was written by Tim Wilson, a Research Fellow at the Institute of Public Affairs.

This has put the IPA in the unusual position of receiving praise from the left and criticism from the right, in the form of an op-ed in today’s Australian by my friend John Heard. He’s taking a more conciliatory line toward the IPA on his blog today, but in the article he wonders why a ‘conservative’ think-tank is promoting gay marriage.

As I have pointed out before, there is some confusion in the IPA between liberalism and conservatism, but I think like much of the right we could say that they are economically liberal but have more diverse views on social issues, ranging from libertarianism to conservatism. I don’t think the liberal tradition provides any intellectual resources for discrimination against gay people, but clearly the conservative tradition does, and that’s what John is appealing to in his article – though on the gay marriage issue, not on superannuation laws and other ‘minor injustices’, as he calls them.

As John’s blog post clarifies but the op-ed does not, Wilson did not actually support gay marriage in his article. But John’s arguments against are still worth considering. His most general statement of principle is:

A “homo-con” like me would likely look at how many people are being affected by the apparent injustice and which wider goals are served by the same.

If the net result is a gain for the common good, then the discrimination is, far from an injustice, rather a boon for families and an exercise in good government.

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When do voters make their decision?

In a post at his very useful Oz Politics Blog during the week Bryan Palmer said:

We know from past election studies that roughly half the electorate reports that it decided how to vote during the election campaign.

The source of this statistic is probably the Newspoll conducted after each election that asks voters which party they voted for and then follows up with ‘when did you yourself finally decide to vote for …. party?’ In 2004, 30% of voters gave various times in the last week, and another 19% in the last month (ie, during the campaign). That makes 49%. Similar numbers were recorded in the 2001 election (46%), the 1998 election (50%) and even the 1996 election in which the baseball bats had supposedly been out for Paul Keating since the ‘recession we had to have’ (43%).

The Australian Election Study comes up with generally lower, but still significant, proportions of late deciders. They ask ‘when did you decide how you would definitely vote in this election?’, and adding up the answers from ‘about the time the election was announced’ to ‘election day’ we get 38% in 2004, 41% in 2001, 51% in 1998, and 38% in 1996.

But does this exaggerate the impact of the campaign? There are a couple of reasons for thinking that we should put a lot of emphasis on the ‘finally decide’ in Newspoll and the ‘definitely vote’ in the AES.
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