Australia’s increasingly worthless university degrees

By Leith van Onselen

The Australian’s Judith Sloan has joined the conga line hitting out at Australia’s demand-driven university system:

It’s called degree inflation in the US but we tend to use the term credentialism. It refers to the phenomenon in which jobs once filled by non-graduates increasingly are filled by graduates.

In the case of the US, it has been estimated by academics at Harvard University that more than six million jobs are at risk of degree inflation. By way of example, in 2015 two-thirds of production supervisor vacancies specified a college degree as a requirement even though only 16 per cent of production supervisors had a degree.

For Australia, Andrew Norton of the Grattan Institute has suggested almost a third of employed graduates are filling jobs not needing degrees.

The core issue is the extent to which university education has become just a sorting mechanism, giving graduates a headstart over non-graduates in securing jobs rather than actually raising the productivity of workers with degrees…

Is the government allowing too many young people to enrol in higher education only for them to secure jobs that don’t require those years of study as well as lumbering them with debts to be repaid?…

Note that the number of Australians with bachelor degrees increased by 57 per cent between 2006 and last year, whereas the overall labour force grew by 19 per cent across the same period.

If we look at the proportion of graduates in full-time employment four months after graduation, the deterioration in their job prospects has been stark: from close to 85 per cent 10 years ago to about 70 per cent.

In terms of graduate salaries, it is clear that starting salaries as a proportion of male average weekly earnings have been falling for some time. From a peak in 2009 of 83 per cent, the most recent figure (for 2015) records a proportion of 76 per cent.

More detailed analysis conducted by Norton points to a longer-term decline in graduate salaries, with graduates from the 2001 to 2005 classes earning more five years after graduation than more recent graduates.

In other words, it’s not just a case of relatively declining starting salaries but a trend that also persists after graduation…

The government-induced increase in graduate numbers has damaged the prospects of those without university qualifications.

It has also come at the cost of driving down relative graduate salaries and damaging the job prospects of graduates, particularly in terms of securing full-time employment…

The US calls it “degree inflation”, whereas MB has called it “university quantitative easing”. Either way, a university degree has lost its value as graduate numbers have exploded, despite the significant cost to both students and the Budget.

Thanks to the uncapping of university places, allowing universities to recruit as many students as they can fit in order to accumulate HELP/HECS funding, actual tertiary entrance scores have plummeted, meaning every person and their dog can now get a degree, devaluing their worth in the process.

In turn, higher education in Australia is no longer about boosting the nation’s productivity, but rather teaching as many students as possible to accumulate fees through the Commonwealth government’s HELP/HECS scheme, as well as from overseas students.

Indeed, the Productivity Commission’s latest report showed that employment outcomes for full-time graduates “have been getting worse”:

For those who do complete their degrees, post graduation outcomes have been getting worse. Full-time employment rates for recent graduates have been declining, even as the Australian economy has continued to grow (figure 3.3). Many of those who do not work full-time are not in that position by choice, with the underemployment ratio among graduates at 20.5 per cent in 2016, compared with about 9 per cent in 2008. Graduate starting salaries have also been growing slower than wages across the broader economy (declining from nearly 90 per cent of average weekly earnings in 1989 to about 75 per cent in 2015)…

Further, over a quarter of recent graduates believed they were employed full-time in roles unrelated to their studies, to which their degree added no value. To the extent that someone without a costly university education could have undertaken these roles, this can then have cascading employment and income effects down the skills ladder.

Many employers are also not satisfied with the quality of recent graduates, with about one in six supervisors saying that they were unlikely to consider or would be indifferent to graduates from the same university…

University students are also not satisfied with the teaching in their courses…

Degrees will continue to lose their value as long as the universities continue to lower education standards and ‘print’ degrees en masse, flooding the labour market.

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