THE Federal Government should massively increase university places rather than offer 450,000 new training places if it wants to equip young Australians with the skills needed in future, a Monash University study has argued.
The basic argument goes like this: there is strong employment growth in managerial, professional and associate professional occupations. However, growth in university commencements has been much lower, and even fell in a few disciplines between 2002 and 2006. Employers have had to use migrants to fill vacancies. Therefore we need more graduates.
However, on closer examination of the evidence the argument falls apart. Of these three broad occupational groups, only professionals are truly dominated by graduates. As I noted in my paper on this issue last year (pdf), only about 20% of associate professionals have degrees. Indeed, the category has now been abolished by the ABS and the occupations that it used to cover distributed to other broad groups. Some of them have gone to ‘professionals’ and ‘managers’, but most went to occupations that do not normally require degrees.
Similarly, ABS Education and Work 2007 shows that less than a third of managers have degrees. Presumably many of them are in small businesses. Perhaps they would be better managers if they had degrees. But we cannot assume that a growth in managerial positions will require an equivalent number of graduates. Even among professionals, 30% don’t have degrees.
According to Birrell’s numbers, between 1996 and 2006 managerial jobs increased by 131,882, professional jobs increased by 438,840, and associate professional jobs increased by 228,811. So if we assumed that all drew on the graduate population we would need 799,533 more graduates. But if we discounted growth by the non-graduate proportion of the workforce in those occupations we would need 393,841 more graduates. The real need is somewhere in between those numbers.
For reasons I have never understood, Birrell’s work in this area always focuses on commencing students as a guide to graduate supply. First years are shop assistants and waiters, not managers and professionals. It is the completions data that is of most interest, because it can be more easily compared with the jobs data Birrell has taken from the census.
According to DEEWR, there were 1,083,835 Australian bachelor degree completions between 1996 and 2006. Of course we need to produce more graduates than the workforce expansion of ‘graduate’ jobs, since they have to replace people leaving the Australian workforce as well as fill new jobs. And some of those completions will be the same person completing twice. Nevertheless, we have a buffer of more than a quarter of a million completions above the highest possible estimate of demand for graduate labour. But the cumulative effect of supply of graduates (including migration) outstripping demand over long periods of time is that more than 640,000 graduates are in jobs that are not classified as managerial or professional.
What we have here is not an overall shortage of graduates, but shortages in particular occupations. Those shortages can be met by improving our system of allocating places between disciplines. I prefer a market system, but even our clunky old centrally controlled system has woken up to how badly they handled the health professions in particular, the areas of most serious shortages. As Birrell’s numbers show, commencements in health disciplines shot up 27% between 2002 and 2006. Completions are of course a lagging indicator, but they too are increasing. Given the inherent unpredictability of the labour market, graduate supply and demand will never match perfectly. But simply churning out more graduates is not the way to match them more effectively than we have in the past.