Higher education inequality: do graduate outcomes differ by socioeconomic status?

In earlier posts in this series on inequality and higher education, I have suggested that the SES participation differences are largely driven by prior academic performance and that different SES groups seem to experience higher education in much the same way, but low SES students are less likely to complete their degrees. In this post, I will look at outcomes for the students who do complete their degrees.

First, are there differences in rates of getting a job? The 2017 Graduate Outcomes Survey finds that there are small differences. About four months after completing their bachelor degree, 73.6 per cent of high SES graduates who were looking for full-time work had found it, compared to 70.3 per cent of low SES graduates. However, of those who were working full time low SES students were slightly less likely to report not fully using their skills at work than high SES graduates (27.1 per cent compared to 28.9 per cent). It is difficult to say whether there is any direct SES effect in these results, as employment outcomes differ substantially by field of education, and SES differences in discipline choices could explain the results.

The Graduate Outcomes Survey also looks at starting salaries in the first full-time job after completing an undergraduate degree. Again, we find a small SES difference: the median starting salary for high-SES graduates in 2017 was $61,000, and for low SES graduates it was $60,000. This does not tell us whether there is any direct SES effect (such as not being able to access social networks to find professional jobs) or whether other factors such as discipline explain the result. A study using an earlier first year out survey had a limited control for discipline, as well as controls for weighted average marks, gender, and various other factors. It found no negative salary effect for low SES students, using a geographic measure of SES.

One possible cause of SES differences is that low SES students tend to attend the less prestigious universities, reflecting the school results issues reported in an earlier post. For example, 7.5 per cent of the University of Sydney’s students are low SES on a geographic measure, compared to 26.2 per cent of Western Sydney University students.

In theory, university attended should affect starting salaries. There are well-known differences in entry requirements between universities, which employers may take as a more reliable measure of ability than university marks, and employers may assume that the more prestigious universities have better teaching (can attract better staff, have more to spend – although student satisfaction surveys don’t support this conclusion). The first full-time job is when employers have to make greatest use of proxy indicators of potential, since most new graduates lack a track record in full-time skilled employment. Consistent with this, nearly 40 per cent of graduate employers say they have preferred institutions, mostly Group of Eight universities.

In practice, however, many studies have found no or small starting salary differences by university or university grouping (eg here, here, here, here and here). What course you take matters much more to your income than what university you attend. Read More »

Is the graduate labour market recovering?

Last week’s Graduate Outcome Survey, which looks at employment rates about four months after course completion, showed that full-time employment rates continue to improve. However, the proportion of new graduates looking for full-time work at this time is still high by historical standards, as the chart below shows (many of them have part-time jobs; this is not necessarily unemployment).

At the margins, there are things universities can do to make their graduates more employable. They can offer courses in fields likely to be in labour market demand, and they can offer work-integrated learning to improve graduate employability. Both were happening under the demand driven system.

But unless there is overall job growth graduate employment is unlikely to improve. When the labour market is tight the first thing to go is new entry-level positions, and so this disproportionately affects recent graduates. The effects of downturns are visible in the chart on annual growth in professional occupations and the labour market overall.

The good news is that growth in the professional labour market has fully recovered from the post-GFC crash and the second crash that started in mid-2012.

Read More »

Over-qualification: hard to measure, harder to avoid

This morning The Australian very much delivered in the government’s attempts to use annual data releases to support its case for not paying universities the full funding rate unless they meet various performance indicators. “More than a quarter of the ­nation’s graduates say their ­degrees are close to useless for their jobs” read the opening line of its page one lead story.

Concern about graduates taking jobs that don’t require degrees is very long-standing. The other day I was reading a report from 1972 – when hardly anybody had a degree compared to now – that mentioned the issue. In the past, using the approximate method of looking at what jobs graduates are doing, I estimated that in 1979 about 20 per cent of graduates were in jobs unlikely to require degrees. The equivalent figure now is about 30 per cent.

But the survey that triggered today’s story shows how complex these judgments can be. As the chart below shows, the supervisors of graduates are more likely than the graduates themselves to think that the graduate’s qualification is important.

The other interesting aspect of the chart is the very imperfect match between ABS classifications of occupational skill levels and the views of graduates and their supervisors. Read More »

Graduate early career earnings are trending down

The latest HILDA Statistical Report has some interesting cohort data on graduate earnings in the early years after graduation.

It shows that later cohorts of graduates are, on average, earning less at the same point in their careers than earlier cohorts. Five years after completing a bachelor degree, people who graduated between 2001 and 2005 earned on average $140 more than people who graduated between 2006 and 2009. In turn, the 2006-2009 graduates earned more five years after completion than 2010-11 graduates, by $75 per week.*

In the HILDA data presented, at least two trends contribute to these results. In all years except the year immediately after graduation, the 2006-2009 and 2010-2011 cohorts are more likely to be studying full-time than the 2001-2005 cohort, which means that their employment income is lower and they will have less work experience five years out.

Second, the younger cohorts are more likely to be working part-time even if they are not studying full-time.
Read More »

18 year olds or politicians: who makes the better course choices?

Former Greens higher education adviser Osman Faruqi thinks that it is time to reconsider the demand driven system, in light of the annual ATAR controversy and mediocre employment outcomes. It is the usual story of good intentions turning to not-so-good outcomes:

There was an opportunity for universities to work with policymakers and industry, identify economic trends and skills gaps and use their new-found flexibility to provide students with a rigorous learning environment.

While university managers might have convinced themselves this is what has occurred, the numbers tell a different story. Enrolments shot up across the board — but particularly in relatively profitable courses such as business, commerce and media. As more students with lower ATARs gained entry into university, attrition rates increased alongside them. One in seven students currently drop out by the end of their first year, the highest level in a decade. Graduate unemployment is at its highest level since records began in 1982.

The demand driven review I did with David Kemp is the main analysis of how the system is going, but it is now two years old. It’s worth looking at a few statistics to update trends.

The actual enrolment increases for domestic bachelor degree students are a little different to Osman’s take, and can be used for and against in the debate about different systems. The chart below shows the disciplines with at least 2,000 EFTSL enrolment increases between 2008 and 2014. Law and business are on the list, but not at the top, and below the average in percentage terms.

enrolment increases

Consistent with what Kemp and I generally found two years ago, disciplines related to occupations with skills shortages generally responded with increased places under the demand driven system. Two of the top three growth areas were disciplines in skills shortages at the time (although not now except for some specialised areas). This we saw as one of the system’s strengths compared to the previous system, which had no established process for identifying or responding to skills shortages. Before the demand driven system, it was very ad hoc: if employers screamed loudly enough and there was money in the Budget for extra places then the system responded; otherwise not.

Of course, in theory it would be possible for the government to more actively steer the system. But should we trust them to make good judgments? The several science-related disciplines in the top half of the fast-growing discipline list suggests not. That was a response to cutting science and maths student contributions in 2009 and campaigning for STEM, with the former Chief Scientist being a major advocate for study in these fields. It was bad analysis all along, and has predictably led to very poor employment outcomes.

Have our political leaders learned their lesson from this? Labor’s plan to pour even more money down the STEM drain suggests not, and the STEM evangelism of the current government (fortunately without any extra student spending), also suggests not.

While student course choices are structured by their interests and aptitudes, precisely which courses they choose is influenced by what they hear and observe. We can see publicised ups and downs of the labour market flowing through into applications and enrolments ups and downs. But government campaigns also make a difference, and not always for the better.

Yes, demand driven funding is leading to more growth in some disciplines than the labour market warrants. But on the historical evidence, I am not convinced that it is worse than the realistic alternatives. Our much-maligned 18 year olds spot and respond quickly to real skills shortages; the old system did neither in a reliable way. Some young people’s course choices look to be misjudgments, as least if they are looking for work. But on that they have been misled by the actions and words of politicians and officials, the very people who would have to run a non-market system of distributing student places.

Graduate employment improves a little – but still the second worst outcome ever

The latest graduate employment data supports what ABS data suggested a few weeks ago: that the worst of the graduate employment downturn might be behind us. Early this year, the proportion of new graduates seeking full-time work but without work or only working part-time was fractionally lower than it had been at the same time in 2014. As the chart below shows, though, it is still at historically high levels.

GDS major trend

The discipline-level data shows, unsurprisingly, a less tidy picture. There has been a rebound in construction related occupations, and small improvements in outcomes for big fields such as education and commerce. Mining engineering employment, unsurprisingly, is still heading down and there was an on-going decline in nursing and law. All of these declining fields still have above average levels of graduate employment, but negative trends.

I have been pointing out for many years that, contrary to continuing pro-STEM rhetoric, science is not a good employment option. For the second year running, life science graduates are only narrowly avoiding having the worst employment outcomes of any discipline (visual and performing arts graduates reliably come last in looking for jobs). While outcomes this year were slightly better than last year, 51% of life science graduates were still looking for work 4 months after graduation. Maths, chemistry and physics all trended down, although with small numbers of respondents.

Another STEM discipline, computer science, did slightly worse than the overall average, with 33% un- or under-employment. Of the STEM disciplines, only engineering produces employment outcomes that are significantly better than average, with most improving on 2014.