One of Australia’s major economic ironies is that, despite having more people graduating from university than ever before, productivity growth is approaching an all-time low, and there are persistent “skills shortages”.
I have never understood the infatuation with university, nor the efficacy of having roughly 40% of Australians aged 25 to 44 acquire a bachelor’s degree or above.
In most situations, a university degree has become a requirement for obtaining a job, not because of any specific necessity or skill developed, but because employers use it as a ‘signalling’ tool to filter job applications.
That is, university has become a sifting tool for employers, similar to racial profiling employed by police, and one that they do not pay for.
This “credential inflation” has resulted in an increase in university enrolment for no real benefit to the economy or society.
Unfortunately, all advanced countries drank the Kool Aid that a university degree was essential to undertake occupations that could previously be performed just fine without a degree.
As a result, persons without degrees were no longer qualified for many high-paying occupations.
Yes, a university education is required for specialised skilled professions such as doctors, nurses, teachers, engineers, and the like.
However, it is problematic for many generalist jobs that did not require a degree in previous generations.
The outcomes of this “credential inflation” were predictable.
Because practically everyone now gets a degree, the huge number of individuals attending university has devalued it.
Nowadays, even the most basic entry-level positions require a university degree, despite the fact that these jobs were previously performed very well by persons with merely a high school education.
In turn, public funding was redirected away from vocational training and TAFE, which became unfashionable.
As a consequence, we now suffer from chronic skills shortages in these areas.
With this background in mind, a new CIS Paper by Steven Schwartz, who headed Macquarie and Murdoch universities, argues that universities have evolved into self-serving behemoths motivated by greed, churning out far too many graduates who would have been better off pursuing a vocational course:
“The past 20 years have seen explosive growth in universities. At the same time, vocational education and training (VET) faced a tsunami of financial challenges and poorly-implemented policies”.
“As a result, VET is now stigmatised as a second-class education option, and employers demand university credentials for jobs that formerly did not require them”.
“Instead of increasing social mobility, the vast growth in degrees has had precisely the opposite effect”.
“As the number of graduates increased, the economic value of their degrees withered”.
“Yet, universities continue to churn out more degrees, each worth less than the previous one”.
“Endlessly increasing international and domestic student numbers is the business model of every Australian university”.
“They justify their behaviour with fatuous ‘economic impact’ studies designed to claim that universities are engines of economic growth”.
“Even a cursory look at these studies reveals a shaky foundation of assumptions. Because they ignore opportunity costs”.
“As degrees proliferate, many graduates find themselves working in fields other than the ones they studied at university”.
“An end to degree inflation would bring many social and economic benefits”.
“Employers would have access to a larger and more diverse pool of potential employees whose experience and skills render them equally — or even better — qualified than applicants with degrees”.
“Degree inflation and the perverse incentives of the funding system have combined to blight the life chances of many members of the young generation”.
“Without any change, student debt will continue to mount, large amounts of capital will be misallocated, and social mobility will remain stalled. It is time for a policy reset”.
The policy focus must be reversed.
To start with, admittance requirements for both domestic and international students to universities should be raised.
Governments should also redirect funding to VET and Tafe.
It has never made sense to prioritise a university education over trade school or vocational training.
