In full-fee markets, Group of Eight universities charge a large fee premium over their less prestigious competitors. But is this a good investment by students?
Using data from the 2003 starting salaries survey carried out by Graduate Careers Australia, UWA academics Elisa Rose Birch, Ian Li and Paul W. Miller found that while choice of industry (mining especially), occupation and having an honours degree all matter, once other factors are controlled for ‘university effects have only minimal impacts on graduates’ starting salaries’.
If this pattern persists as graduates’ careers continue, it would be remarkable: that the brand value of prestige institutions and the presumably higher average innate ability of Group of Eight graduates count for near-nothing in the labour market.
I suspect on personal ability grounds Group of Eight graduates do earn more over the medium to long term, and the starting salary data reflects the unwillingness of employers to pay high salaries to people without track records in relevant employment. For example, the census data I have shows that only 1% of male law graduates under 25 earned $100,000 a year or more in 2006, but in the 25-29 age group 10% earned that much, and in the 30-34 age group 40% had broken the $100,000 a year barrier. The labour market takes a while to sort out who the high earners are going to be.
Nevertheless, the unwillingness of employers to pay any initial premium for a Group of Eight degree is an important finding. It suggests that employers do not use institution attended as a proxy to help them predict which graduates are likely to turn out to be the best employees.
If the Group of Eight universities are to get away with charging premium fees, they may need to prove that their degrees are in fact better investments than degrees from other institutions.