Are graduates earning less compared to other workers?

The people who write Graduate Careers Australia’s starting salaries report must love their time series of graduate salaries as a percentage of average weekly earnings, because they keep highlighting it in their report and in their media release, even though they are coming close to admitting is is meaningless statistical junk.

I can see why they want to keep it – it goes back nearly 30 years, to 1977 (the data in the report released yesterday is for people employed in early 2006). On surprisingly few topics do we have consistent data going back that far. And for people considering the costs and benefits of university study, it is useful to know their likely earnings compared to the alternatives. But as the Graduate Salaries 2006 report says:

…it is important to note that average weekly earnings may be positively affected over time as more and more graduates enter the workforce. As their careers progress their salaries grow, overall average weekly earnings are pushed up.

The only thing wrong with that is the ‘may’. They have a table showing full-time workers with a diploma and above going from 19.7% in 1998 to 27.8% in 2006. Using only bachelor and above and all workers, ABS Education and Work shows an increase from 14.5% in 1994 to 23.9% in 2006. I’m not sure what proportion of workers had degrees in 1977, but we’ve gone from graduates having a small impact on male average weekly earnings to a large impact – nearly a quarter of all earners. As bachelor degree graduates typically earn half as much again as people with Year 12 qualifications only, the statistical effect is not trivial.

This isn’t the only problem. Continue reading “Are graduates earning less compared to other workers?”