Did I make a ‘not well supported generally’ argument?

In the Graduate Pathways Survey report, authors Hamish Coates and Daniel Edwards say:

…some commentators on graduate supply and workforce projections argue that the solutions to filling the skills gaps are not in boosting the training effort in Australia, but instead making sure all those who have university qualifications are utilising their skills sufficiently. Research by Norton (2007) indicates that a large number of graduates in Australia are not currently employed in ‘graduate occupations’. Norton argues that if these people’s skills were utilised, there would be no shortfall in highly skilled workers in most occupations in Australia. While this argument relating to the ‘over-qualification’ of the Australian population is not well supported generally, it is an issue of relevance that is addressed in this research project. (emphasis added)

If by ‘not well supported’ they mean that not many other people argue this they are right, but this is mainly because there is little overlap between the labour market literature and the higher education policy literature. Unfortunately, I pretty much have the issue of how we allocate university places between disciplines to myself. The only two other positions in the debate are what happens politically – ad hoc allocations of new places if employers scream loudly enough – and the position adopted by Bob Birrell and the Bradley report, which is to flood the labour market with graduates and hope that the sheer numbers make skills shortages unlikely.

To be fair to this position, it has avoided skills shortages for most graduate-level occupations. Only in the health professions do we observe large-scale and persistent failure of workforce supply, though there are occasional and mostly cyclical shortages in other fields. But the implicit assumption is that the costs of skills mismatch should be paid by taxpayers and workers, who invest more money and time in education than is necessary from a labour force perspective (yes, I know that education is not just about jobs, but we are talking about jobs here), rather than by employers in suffering from boomtime labour shortages and/or having to pay higher salaries.

However, so far as I am aware there is no Western country labour market research which does not find that significant numbers of graduates are ‘over-qualified’ for their jobs (some of the literature is cited in this Melbourne Institute paper). From that point of view, my argument is very well-supported. The Graduate Pathways Survey itself is no exception to this. It finds that five years after completion more than a third of graduates are in occupations that do not typically require university-level qualifications.

Over-education undoubtedly exists, but there are real debates about why and to the extent to which anything can sensibly be done about it.

The Graduate Pathways Survey reports a number of findings relevant to the ‘why’ question. Positive factors for education and occupation matching include: having a degree in education, having higher grades, having a parent in a professional occupation, attending primary school in a metropolitan area, and having worked while studying. Having a degree in management or commerce was a significant negative. More analysis of these findings would be useful.

My position on this is, I think, a cautious and sensible one that is more in line with the overall labour market literature than Bob Birrell’s. It involves the following propositions:

1. Over-education/qualification/skilling is a normal aspect of the labour market, observed in all Western countries, and inevitable to some extent due to the dynamic nature of the labour market, the inherent complexities in skill forecasting, search problems in finding appropriate employer-employee matches, and the fact that employers value many other attributes other than qualifications and skills. If someone is unreliable, a poor communicator, or has a difficult personality they will experience labour market difficulties, regardless of their education or skill levels. Some individuals will also choose to work in lower-skill occupations. However, in the absence of any widespread shortages of graduates in the labour force there is no need for governments to encourage people to attend university.
2. The labour market shortages we observe – mainly in health professions – are due to government constraining supply of places in these fields, not to a shortage of graduates overall. A market system would have produced better results (we know that demand was there from applications data, and we know that supply capacity was at least to some extent there, because overseas students were offered places).
3. If we are to deal with shortages, direct policy measures aimed at specific in-demand occupations are cheaper and more reliable than across-the-board increases in student numbers. This is true whether you prefer central control or market mechanisms to allocate places.

What we need is more research to see if we can identify systematic factors behind poor labour market outcomes, and if these can be found to include them in the advice provided to prospective students. Perhaps this could be the next report to come out of the Graduate Pathways Survey?

4 thoughts on “Did I make a ‘not well supported generally’ argument?

  1. “The labour market shortages we observe – mainly in health professions – are due to government constraining supply of places in these fields, not to a shortage of graduates overall”
    .
    I would think that one is at least partially incorrect. The reason we have shortages in some health areas are that these are expensive and hard courses to run, especially those where you have to organize 1-on-1 clinical training with outside organizations (many of which don’t want you, since they don’t get paid for taking students). I know where I work, for example, we simply can’t deal with the demand (we probably get a ratio of 20-1 applicants to places for one course), and no-one is willing to raise prices to get more staff. Even Melbourne, which could potentially charge really high fees for a similar course, doesn’t do it, for reasons which I’m not sure of. I can also think of courses which simply don’t exist (despite obvious industry demand) because no-one wants to run them due to these types of costs (and that includes some non-health areas — you simply can’t get staff easily when they are in demand from competing industries).
    .
    It’s worthwhile noting that this isn’t just an Australian problem — it’s in most Western countries, including the US, where universities can potentially charge as much as they want (and no-one will complain), and where people are willing to pay far more. Apart from the expense of running courses, I would think there are also problems with government monopsonies forcing wages down (such as in nursing) in many countries, which detracts from demand in some professions.

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  2. Conrad – I acknowledged potential supply constraints in the latter part of that point, though as your discussion of clinical training suggests I have my doubts about the extent to which this is an inherent problem, and the extent to which it is a problem caused by poor practices such as relying on voluntary contributions from trainers and subsidies from hospitals. The hospitals get far more income from international students, and miraculously places are found for them. So again bad government policy – price control for Australian students – seems to be the source.

    We have been massively increasing health enrolments in recent years – it would have been far better to have a slower increase over a number of years, which would have put less strain on clinical training resources.

    Nursing has quite different problems. There are plenty of trained nurses, but the relatively low % (compared to other health professions) who are working full-time in nursing means that labour supply is constrained. As you suggest, wages are part of the issue, but I suspect also that nursing was chosen as a profession by many women precisely because it was relatively easy to do part-time, and that in the medium term this will be a significant constraint even if wages were increased.

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  3. “and the extent to which it is a problem caused by poor practices such as relying on voluntary contributions from trainers and subsidies from hospitals.”
    .
    You might think it’s poor practice, but if you look at the cost of medical degrees where it isn’t done, such as the US, then you are talking 200K+, and that seems to be unacceptable to the general public in Australia. It would also be interesting to see what the real demand is at those prices, especially if it is a real and not government loan given to students. I also don’t think OS students can be used for comparing whether spots are available. If there is a limited pool of places, of course hospitals will offer those places to those that pay the most, but that doesn’t mean the pool can simply be expanded ad infinitum, especially because OS students don’t create a loss but Aus students do.
    .
    Even for master’s degrees in allied health areas, if you want real training at real prices, then that would add huge amounts to the cost. The current costs of most allied health degrees in Australia is about 30K per year. If you added, say, 15K to pay for training, then that’s 50% more. That would certainly dampen demand a lot.

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  4. Over-qualification I think is often due to school (and aspirational middle class families) pressuring/encouraging students to do uni degrees even if they are not suited to that style of work.

    One way to balance would be for most people to get a job at 18, then have their employer to pay the HECs component for any further education/training. Companies that want educated employees would then contribute the amount they need. This happens to some extent with qualifications such as MBA’s and many of the Computing Certificates (Microsoft something often).

    The shortage of doctors is due to a few factors. High female enrollment (60%+) who then don’t work full-time until 65. High numbers of students who get pressured into studying Medicine due to good marks and family pressure to earn big $$$. High burn-out rate due to people not actually wanting to be doctors when it involves 60+ hours weeks with crappy shifts, stress, difficult decisions, patients dying constantly. Finally its just so damn expensive to run.

    It is necessary to combat the “aspirational” obsession of 3+ university education for every 18 year old. Bluntly most real skills are learnt after graduating, many people are not suited to abstract or academic learning and most jobs don’t require high education they need task specific training.

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