Education matters

The publication in Australia of The Household, Income and Labour Dynamics in Australia (HILDA) Survey by Roger Wilkins of the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne has attracted much attention for its evidence that graduates of Australia’s older universities earn less than graduates of many other universities.

This has caused commentary challenging the value of the survey, neglecting its full import.

The HILDA Survey confirms the earning value from higher levels of education, particularly for women. It also shows that, for women, having a higher education degree is important for the likelihood of employment. That is not so for men who tend to be employed but with lower earnings if they are not a graduate.

Those outcomes are not necessarily new, but since they are based on a cohort covering multiple generations they underpin the value from expanding the take-up of higher education, a core mission of Innovative Research Universities, or IRU, members.

The new aspect coming from the survey is the hint that school results, let alone intelligence, are not over the long term strongly correlated with income. Rather it is the fact of education that matters.

The report’s tables of graduate earnings include two versions, adjusted and not adjusted for cognitive ability. The results do not alter much when adjusted. My reading is that the report supports arguments that students’ ranking at the end of school does not carry through in the long term, if measured by income.

In short, while some like to argue it is not where you study but what you study, HILDA shows that what matters is that you do study.

Graduates in the labour market

It is further confirmation of the drive since World War II to expand take-up of higher education, in particular the wisdom of the 1990s Australian expansion in access, whose graduates make up much of the HILDA cohort. It is too early to test whether the more recent expansion in the Australian system since 2009 will show the same outcome, but nothing in the results suggests the contrary.

An important element is its focus on graduates aged 25 to 64. HILDA emphasises what happens once a graduate is established in the labour market. The 25-year age point means that school leaver entrants have had the chance to complete more than one degree if needed and that those who do not immediately seek university entry have been captured when they return in their early 20s.

The critical point in commentary has been to explain away that graduates of the older universities have on average lower earnings than students of IRU members and like institutions founded in the 1960s and 1970s or through the technology universities and their predecessor institutions.

The older universities through the Group of Eight have argued that the survey did not adjust for the different disciplines of graduates. However, all Australian universities have a considerable stock of generalist degrees that tend to produce a lower future income on average. That includes IRU members, which have a long-standing commitment to humanities and social sciences.

The important point is that Group of Eight students are selected for being from the top of the school leaver cohort only. It is interesting that if they choose a generalist degree only, they earn less than graduates from elsewhere.

Presumably those students are aware of the likely outcome and are happy with it. To the extent they are not aware, then the release of this data and others that may follow may improve understanding. The Australian government may choose to ask whether it is best value for those students to follow that path.

Latecomers to higher education

IRU members do not lack for high-achieving school leavers, but they take many other school leavers and a large set of those who come to higher education later in life. The data on earnings suggest that group does comparatively well. The greater focus on use of knowledge and greater experience in application during the degree appears to pay off.

The discipline argument is also unsteady against the evidence that people do not stick with professions over time, but have varying careers building off their general capabilities more than the precise skill set initially acquired.

A potential weakness is that HILDA includes only those participants who have full-time employment. The exclusion of self-employed graduates is likely to leave out an important subset of practising professionals. How much of a difference that makes is less evident. It would leave out some high flyers with average distorting incomes, but as a group we need to bear in mind the suburban lawyers and health professionals as much as the corporate lawyers and medical specialists.

Overall, it is a valuable report, not (just) because IRU comes up well, but because it reveals with more depth the nature of employment and income as connected with education. By following a set of real people it adds perspective.

Conor King is executive director of Innovative Research Universities, or IRU, in Australia.