The changing value of a university degree

Researchers from Victoria University’s Mitchell Institute have analysed 40 years of Australian census data to determine the changing value of a university degree and have recommended replacing the Job Ready Graduates funding regime and diversifying post-secondary school pathways.

Published today, the Mitchell Institute’s policy brief 'The changing value of a degree: Rebalancing Australia’s tertiary pathways' says that while it’s a big task, policy reform should aim to deliver a tertiary landscape where multiple pathways deliver strong returns for young Australians.

Key findings:

• The value of a degree has fallen – The full-time wage premium is shrinking as more Australians graduate, meaning a degree no longer delivers the same financial advantage it once did.
• Student debt is growing and sticking for longer – Repayment times have blown out from about seven years to more than 10 years on average, with more people carrying debt into their 30s and 40s.
• A Federal Government one-off 20 per cent debt cut only rewinds the clock – The relief is welcome, but it simply takes average debt back to pre-COVID levels and does not solve the structural drivers of rising debt.
• University is the dominant pathway, but the system is out of balance – Participation in higher education has been steadily rising, while vocational education and training (VET) has stagnated or gone backwards.

Mitchell Institute Director, Professor Peter Hurley said the wages people can expect to earn with a university degree relative to those without, has fallen.

“In 1981, a full-time worker aged 30 to 39 years with a bachelor's degree could expect to earn 59 per cent more than everyone else, now it is about 20 percent,” he said.

The targets proposed by the Australian Universities Accord could further change the equation. As more Australians graduate, the differentiating value of a degree diminishes.

Tertiary education policies in Australia continue to treat higher education and VET as separate systems, rather than parts of a cohesive whole. Policy reform should aim to deliver a tertiary landscape where multiple pathways deliver strong labour market returns for young Australians.