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Higher education? Yes, we can have too much of the thing

By Andrew Norton - posted Thursday, 17 October 2002

For decades now, at least since the Murray report in the 1950s, we’ve assumed that more people going to university is a good thing. Governments boast about the number of student places they’ve created and blame others when, despite a growing student body, some applicants still miss out. The Australian Vice-Chancellors’ Committee has set a year 2020 target for 60 per cent of Australians to possess a higher-education qualification. As just over 30 per cent of today’s 19-year-olds are at university, that would require a big boost in school leavers going on to university, and many mature-age students.

In a recent and provocative book Does Education Matter?, Alison Wolf, a British academic, argues that at least from an economic point of view, expanding higher education is not always desirable. The labour market genuinely needs only so many graduates. Surplus graduates encourage credential inflation, since employers know they can demand higher qualification levels than jobs require. This pushes less qualified but perfectly competent people into lower skill jobs or unemployment. Expanding higher education beyond a certain point is at best wasteful, and at worst positively harmful for those unable or unwilling to attend university.

In Australia, there is a plausible argument that we have reached the point at which expansion should stop. Labour market surveys suggest that about 20 per cent of graduates work in jobs that do not require degrees, such as clerical, retail and labouring occupations. This number is supported by an opinion survey which found 19 per cent of graduates thought their degree was not necessary for the job they did.


However, snapshot-in-time numbers need to be treated with caution. Even when similar results are found in multiple surveys, it does not mean that we are looking at the same people every time. Just because a graduate holds a lower-skill job today, it does not mean that is true of a year ago or a year hence. Adults with family responsibilities may deliberately though temporarily absent themselves from more demanding jobs. The inevitable ups and downs of the labour market mean that some graduates end up in low-skill occupations between other jobs. Nevertheless, there is no evidence in these numbers that we need more graduates.

Other labour market data suggests that current flows of graduates are largely adequate, and there is no need for more. Only in a few occupations have we seen sustained labour market shortages, most seriously in nursing. While more graduates are probably part of the solution here, the main problem is low pay and poor retention rates once in the workforce, not anything universities are doing. The added students places could be created by moving places from areas such as Arts, with chronic underemployment problems, rather than creating new places.

While labour market forecasting results must be viewed sceptically, predictions of future demand for graduates similarly offer no support for the argument in favour of more graduates. A few years ago, as part of its education campaign, the ALP commissioned the Centre for Policy Studies to predict future demand for graduates. They forecast 550,000 extra jobs for graduates in the period 1997-2010. Labor seemed to take this as a case for more university places. But even at current completion rates more than 1,000,000 Australians will graduate from university in that period. Even if the CPS seriously understates future demand, we will still have more graduates than the labour market needs.

Another reason to doubt that more university students makes sense is that the quality of the untapped school-leaver pool is too low. Even among those Year 12 students who now apply for university, many have mediocre results. The problem is particularly acute for students from government schools in low and middle socio-economic status areas. The ENTER system is now used for school leaver university admissions. It ranks students, with a highest possible rank of 99.95. Victorian government school university applicants from middle SES areas in 2000 achieved a median score of 59.85, and from low SES areas 49.90. The historical record is that university completion rates starting dropping off significantly below the top 30 per cent of school leavers. Encouraging more students with results like these to try university will leave a significant portion of them with a HECS debt and feelings of failure, not a passport to high-paying jobs.

All four funding models the Commonwealth suggests in its recent discussion paper on university finance deal with graduate oversupply by restricting the total number of subsidised student places. The problem, however, is their mechanisms for distributing those places. Distributing by university, as proposed in their first two models, disregards student preferences and undermines competition, both of which contribute substantially to the system’s current mediocrity. Distributing places to students based on Year 12 scores, as suggested in the government’s second two models, means information about student aptitude and motivation, along with universities’ willingness to provide marginal students with support, is ignored. So Year 12 students with no interest in university education would be awarded subsidies, while keen prospective students with slightly weaker school results miss out.

To allocate student places effectively we need universities and students deciding who goes on to higher education, not governments. One possibility for enhancing their decision-making is to establish higher-education brokers, people with good knowledge both of the available courses and of individual students, to give prospective students realistic advice about their options and prospects. The Commonwealth has suggested more students do at least their first year in TAFE, with the possibility of receiving a credential at the end of first or second year. This would get students into post-secondary education without committing them to a degree programme to which they may be unsuited. This proposal is also well worth considering.


On the available evidence, the results of more university graduates are likely to be increasing the unemployment risk of workers without degrees, higher university failure rates, students with HECS debts but no qualifications, and the opportunity cost of money spent on extra students that could have been spent on something of greater social value. The onus is on the Australian Vice-Chancellors’ Committee, and other advocates of greater participation in higher education, to defend targets that seem to have been plucked out of the air, without regard for the economic or social consequences.

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About the Author

Andrew Norton is a research fellow at the Centre for Independent Studies and Director of the CIS' Liberalising Learning research programme.

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