Are there too few university students? (Again)

In the latest issue of People and Place, as reported in this morning’s papers, Monash University academic Bob Birrell and his colleagues Daniel Edwards and Ian Dobson argue that there is a widening gap between the demand for and supply of university graduates.

In doing so, they disagree in part with the analysis in my paper (pdf) on graduate mismatch. One explanation they offer for the number of graduates in non-graduate jobs I explored and decided was probably not major – the possibility that it is driven by women framing work around family. Female overqualification (20%) is only slightly higher than male (18%), and there are other possible explanations such as the over-representation of women in Arts courses.

They do however raise one point that I should have explored more, which is what role migration of graduates has played in boosting numbers of university-qualified people in jobs that don’t require degrees. There is, as they say, a history of migrants having trouble finding jobs matching their formal education.

Nevertheless, I don’t think they deal with central argument: that there is no evidence anywhere in the labour market data of an aggregate shortage of graduates. In 2006, there were more than 500,000 graduates in jobs that don’t require degrees or unemployed.

In 2006, my calculation from ABS Education and Work is that 95,000 graduates found professional, associate professional, and managerial jobs – those jobs normally classified as ‘graduate’ (though associate professional is a mixed category, which the ABS is discontinuing).

Yet DEST’s completions data showed that there were nearly 108,000 domestic bachelor degree graduations for the proceeding year. So even in an exceptionally strong labour market, and even before taking migration into account, we produced 13,000 more graduates than the labour market required.

Of course not all graduates go directly in the Australian labour force – some continue with their studies, some go overseas, etc. But Education and Work suggests that 148,000 graduates were added to the workforce, which would be a mix of recent graduates, people rejoining the labour force, migrants, and Australians returning from overseas.

The net result, as in most years, was that the pool of graduates in non-graduate jobs increased, though it is fairly stable as a percentage.

The key problem is not total numbers. It is that we don’t have an effective system for allocating students to courses for which there is strong labour market demand. That, as my paper argued, is primarily the fault of Commonwealth central control. In most of the areas of labour market shortage, there was plenty of demand for university places, but no capacity to respond to that demand.

10 thoughts on “Are there too few university students? (Again)

  1. As I’ve noted before, this assumes that the main purpose of tertiary education is vocational training. I don’t think that is the case for all degrees. While some people might wind up in a job directly related to their degree, is this because they took the degree to get the job or because they took the degree and the job because they are in an area that interests them? Many degrees provide generic skills that are relevant to many jobs even if the degree is not required for the job. I think students are better off choosing the subjects that interest them most, even if they are worried about the employment prospects. After all, would you really want to work in an area you despised?

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  2. Damien – The evidence suggests that for the overwhelming majority of students employment is a or the major consideration. That’s not inconsistent with the research showing that interests are the major driver of which course students choose.

    And for the purposes of my argument with Birrell, it would help my case rather than his if extra enrolments would simply be people taking courses out of interest.

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  3. Andrew,

    you’re still blaming the government for misallocation. My bet is that in a totally deregulated market there would still be misallocation (and I doubt the extent would differ too much — cf. the US situation), because it is caused in part by students either wanting an unrealistic career (e.g., there will always be a surplus of lawyers), the poor cultural view of some subjects (e.g. science), and the poor high school system where there simply are not enough decent students that have done the right subjects (e.g., shortage of engineers).
    You shoud check out universities apart from Melbourne U — many can’t get enough students in “high job demand” areas like engineering. So whilst this statement might be governement propaganda, it isn’t a problem caused 100% by government regulation.

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  4. Conrad – In general terms, I agree that no system can allocate perfectly, which I explain in my paper. But some can do better than others. I show that high-quality applicants (ENTERs 90+) are being rejected from courses leading to high-demand professions (ie demand exists) and that universities were offering places to full-fee students in those disciplines (ie there was willingness to supply more). A market would have done a better job than the system we in fact had.

    Actually, lawyers are appearing on shortage lists. It’s an interesting labour market – oversupply at the point of entry to the profession, but such high attrition that they end up with shortages of experienced solicitors. But that’s clearly a problem the profession has to deal with, and not something that is the responsibility of policymakers.

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  5. I think it is worthwhile looking at a breakdown of oversupply.
    What you say is true for some of the medical professions, but not neccesarily so of the broader picture. According to the immigration department, these are the following high demand professions:

    http://www.immi.gov.au/skilled/general-skilled-migration/skilled-occupations/occupations-in-demand.htm

    Excluding the medical ones, I think most of these professions are ones where universities probably want more students, not less. Even of the medical/allied health professionals, most of these are already full fee courses (like speech pathology), or a medical specializations needed that medical students don’t want to do (psychiatry, obsterics).

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  6. Conrad – Are you arguing for my position or your position? If as you say the universities want more students, doesn’t that support my case? For the medical specialities, there is anti-competitive conduct through the various colleges, though I am not on top of the detail. And in cases where there is too little demand, that is neutral between the arguments, since conscription of students (as opposed to institutions) into specialities is not a feature of either the centrally planned system (with the partial exception of the bonded rural places) or the market system.

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  7. It shows you that the main effect of a market solution would be to reduce oversupplied places in some areas, not increase places in ones where there is high job-market demand. That’s not neccesarily a bad thing in my books, although it is going to politically unpopular, especially given that the main fee paying place creation is going to be in places where the public oddly enough doesn’t want to see fees (i.e., medicine). In addition, whilst it is neutral in terms of market vs. current central planning mechanisms (i.e., funding per student), it is at odds with your claim (presumably to support a market-based solution) that there is a demand problem that couldn’t be met in the current system:
    “In most of the areas of labour market shortage, there was plenty of demand for university places, but no capacity to respond to that demand”

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  8. Enjoyed reading your paper on this issue. I also think the ‘50% or 60% participation rate’-objectives of many governments are very valuable in itself. Yet, I don’t think either that the number of graduates needs to be exactly adjusted to future labour market demands. As I wrote in my own blogpost on this issue, I think the labour market should not be seen as an exogenous variable in this problem. If you deliver enough highly qualified (!!) graduates, the demand for future graduates will rise as well. At least for many occupations. Raising the number of graduates can thus be a good policy, as long as the quality of the graduates is high.

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  9. Eric – I agree that labour market demand will in some respects be shaped by supply. The innovation survey the ABS did of business, for example, found that lack of suitable staff was one of the obstacles to it, and presumably in the areas of the labour market where we have shortages some projects have been postponed or cancelled – so the potential employment is greater than the vacancies in existing operations suggests.

    The caveat is of course in the ‘highly qualified’ – if expansion mostly draws in people with weak academic backgrounds I don’t think it will make much of a net positive difference, if any. That’s why we have to keep going back to the issue of allocation. Some of the people doing Science, for example, should be doing health courses instead.

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