The more formal education you enjoyed, the more money you make. That makes advice to young people pretty simple: Get as educated as possible and get paid accordingly.
Time for a quick statistical interlude. Median income describes the middle income. We line up all people according to their income and point to the person smack bang in the centre of that line. The income of the person in the middle is called the median income. We now repeat this exercise to see how education impacts our data.
While some people with a trade certificate will certainly earn much more than many people with postgraduate degrees, education still tends to result in higher incomes. This analysis throws part-time and full-time workers into one bucket. This is obviously silly for some pieces of analysis. Lower-skilled jobs lend themselves more to part-time employment – hospitality and retail jobs, for example.
For today we just want to remember that jobs with a higher barrier of entry (university degrees) pay better than jobs with lower barriers of entry.
The ABS classifies all jobs by skill level – that’s a number from 1 to 5 that indicates how much formal training is required in order for you to be allowed to work in that job. Skill level 1 jobs require a university-level education. Skill level 3 jobs require a TAFE education while skill level 5 jobs don’t require any formal qualification.
Good news, Australia continues its transition into a knowledge economy. In 1986 only 23 per cent of jobs were classified as skill level 1. Today 34 per cent of all jobs require university level education – you can’t work in skill level 1 jobs without going to uni. There are a few exceptions, but they don’t even tip the scale. Employers don’t tend to care about qualifications for certain types of niche programming skills. These jobs (think cyber security, SEO, or crypto) are so new that employers test for programming skills rather than relying on degrees. Overall, knowledge workers tend to hold university degrees.
Workers with more formal educations earn more money, put more dollars into their super accounts, and don’t need to be subsidised through the pension system during their retirement years. An Australia with a large proportion of workers in skill level 1, 2, and 3 jobs needn’t rely as much on the pension system to subsidise people’s retirement. More tax dollars are then left to throw at other things.
Looking at our national workforce by age and education, we notice that almost half (46 per cent) of the workers aged 25 to 40 hold at least a bachelor’s degree.
Has Australia become overeducated? Are we sending too many young workers to university? Looking at the job pipeline we probably will need even more university-trained workers in the next five years.
The National Skills Commission projects that 53 per cent of all the new jobs that will come online in the next five years need academic training (skill level 1 jobs). Advising young people to get as educated as they possibly can remains good general advice.
What does this mean for the university system? First and foremost, this means growth. Expect new buildings on campuses, higher enrolments, additional purpose-built international student accommodation, more transparent pathways to citizenship for holders of certain degrees (healthcare in particular), and new university degrees.
Should university be free? You could argue that university should be free for young people to ensure the rising costs of living (especially housing) will not hurt them as much in the long run. From a simplistic perspective that only considers wages, university fees are socially acceptable. Remember that the pay premium for university-trained workers is significant.
The real madness is charging students for TAFE level education. These degrees should be universally free (but means-tested to ensure we don’t pay for finance-bros who want to take up carpentry as a hobby) since the pay-premium is less impressive than for university training.
