Return on University Education Expenditure

TAFKAS won’t classify every dollar spent on education as investment.  Particularly and especially university education.

Without doubt, for many, a university education is a pathway to a better standard of living.  But should every Australian child be nudged into university?  And should university credentials be required for many of the roles they are currently required of?  For child care workers?  For nurses?  For baristas?

The marginal student going to university because it is the thing to do is left with a poor education and a financial albatross around their necks for much of their life.

The economics of university education are supposed to be that you sacrifice 3-4 years of working life and a large amount of capital (repaid with interest through the tax system) in exchange for a higher than otherwise income for the rest of your life.  But what if that higher income does not eventuate?  What if there are other pathways to a higher income without the upfront capital?

Consider the following numbers in the United States:

  • The median income of an American farmer is $43,945, which is higher than the median income of Americans with bachelor’s degrees in early-childhood education ($39,000), human services and community organization ($41,000), and elementary education ($43,000).
  • The median income of an American mechanic is $46,919, which is higher than the median income of Americans with bachelor’s degrees in drama ($45,000) and art and music ($46,000).
  • The median income of an American plumber is $52,404, which is higher than the median income of Americans with bachelor’s degrees in art history ($49,000), humanities ($49,000), anthropology ($49,000), sociology ($51,000), ethnic and civilization studies ($51,000), art and graphic design ($51,000), botany ($52,000), and modern languages ($52,000).
  • The median income of an American electrician is $54,327, which is higher than the median income of Americans with bachelor’s degrees in English literature ($53,000), advertising and public relations ($54,000), history ($54,000), and communications ($54,000).
  • The median income of an American home builder is $59,275, which is higher than the median income of Americans with bachelor’s degrees in journalism ($56,000) and geography ($58,000).
  • In 2015, truckers who worked for private fleets made a median income of $73,000 — a little more than the median income for Americans with master’s degrees.

Granted these are American numbers, but are they fundamentally different in Australia?  Particularly when many of the recent reforms to University funding (eg demand driven enrollments) have driven up the costs of university education without driving up the value of university education.

One might say god help those with advanced degrees in Marxist Lesbian Dance Theory, but there will probably always be roles for such graduates in the public service.

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47 Responses to Return on University Education Expenditure

  1. Mike Rowe (of Dirty Jobs fame) has been advocating and funding trade skills for years (he saw the problem long ago): http://mikerowe.com/.

  2. sfw

    Drivers can and do make good money here but it’s a shit job, long days, you have up to 17 hours to do your 12 or 14 hours work. If you use your full 17 hours you then have a 7 hour break to sleep and it starts again. You’re rarely home and when you are you just sleep until it starts again. Have a look at the drivers next time your in a truck stop, they will all look tired and irritable, because they are, they live in a permanent state of semi exhaustion. One of the worst jobs around. $12ok a year sometimes more but a sure fire way to develop health problems and die early.

  3. Karabar

    There are several takeaways to this story.
    Surely one of them is why is not more money in farming?

  4. sfw

    Karabar, there must be money in farming, if there wasn’t you could buy existing farms cheap, if a business isn’t making money and it’s put on the market you would be lucky to get something for the assets. We have a lot of dairy farmers up our way, they often moan about how hard it is and how they are going broke, or only making wages. My response is to offer to buy their farm, I’ll ask how much they want for it and the answer is always in the millions. I point out that if they can’t make money off it it isn’t worth much at all, they stop talking to me at this point.

    If someone can give me a good argument showing my error here I’m interested.

  5. Peter Sommerville

    Right on target. The uncapping of University enrolments has proved to be one of the most disastrous changes ever made. It has led to a proliferation of “soft” meaningless degrees, a dropping of standards and the virtual destruction of the technical college system. Consequently Universities are producing innumerable gradients that nobody wants.

    This has been confounded by the introduction of degrees designed to “professionalise” occupations such as nursing, in the expectation this would lead to higher salaries.

    The problem of course is that the Universities have been complicit in their own decline, because they have proceeded to increase the quantity of inputs at the expense of the quality of outputs.

    I can well remember how entry to a University was competitive, and even then that competition continued so that the number of graduates emerging was considerably less than the number of undergraduates entering.

    Driving educational “equality” comes at a cost to “quality. More importantly the vast bulk of young people who are not academically inclined but nevertheless have a distinct practical bent are being left with fewer choices that suit them.

  6. Ellen

    It would be interesting to have the figures for median income separately for male and female farmers, mechanics, plumbers, electricians, builders and truck-drivers, and male and female arts and music, early childhood education, anthropologists, linguists, historians, advertising people etc.

    I’m not sure that these professions are equivalent in financial terms. Farming is often a family affair, with the income of the ‘farmer’ really the return on the work of husband and wife, plus children. In the academic professions, a few people reach senior positions on high salaries, while most junior academics work on low paid short term contracts. It’s notably that perhaps the most important of the humanities professions, early childhood education, is the lowest paid of all the jobs listed. If $39k is what you get with a degree, how little would you get without one?

  7. Ellen

    It would be interesting to have the figures for median income separately for male and female farmers, mechanics, plumbers, electricians, builders and truck-drivers, and male and female arts and music, early childhood education, anthropologists, linguists, historians, advertising people etc.

    I’m not sure that these professions are equivalent in financial terms. Farming is often a family affair, with the income of the ‘farmer’ really the return on the work of husband and wife, plus children. In the academic professions, a few people reach senior positions on high salaries, while most junior academics work on low paid short term contracts. It’s notably that perhaps the most important of the humanities professions, early childhood education, is the lowest paid of all the jobs listed. If $39k is what you get with a degree, how little would you get without one?

  8. cuckoo

    Surely we need uni courses for those people (mostly young women) who hold up the STOP/SLOW lollipops at building sites.

  9. Drivers can and do make good money here but it’s a shit job, long days, …

    If you’re talking about the US, it’s exactly the same here in Australia. And worse with unions attempting to prevent independent, self-employed, truckies from operating.

  10. Bachelor degrees in journalism have actually reduced the quality of media reporting compared to the prior system of on the job training.

  11. chrisl

    Don’t forget the enormous HECS debt that graduates accrue. Many of them would struggle to reach the threshold where they have to pay it back. Trades apprentices on the other hand come out on full pay , with work opportunities in front of them and some assets (vehicle and tools)

  12. Squirrel

    Logic – financial or otherwise – doesn’t seem to have all that much to do with this. In many cases, it would be as much about the aspirations of parents and grandparents – “my son/daughter is the first member of the family to go to university etc.”

    Aside from the misallocation of public funds which could surely be used much more effectively to deal with the skills shortages which we’re constantly being reminded of, there’s also the costs of credentialism across the economy.

  13. 2dogs

    Don’t forget the enormous HECS debt that graduates accrue. Many of them would struggle to reach the threshold where they have to pay it back.

    We need to fund places in university courses in proportion to HECS recoveries.

  14. Dr Fred Lenin

    When Hawke and Keating started the heaps of new “youniversidies “ to solve the youth unemployment crisis they had created ,thousands got to go to uni who would never been accepted before ,the standard of teaching dropped through the need for teachers , people became uni teacherswho would never have got a top job before ,they destroyed the integrity of uni education for politiical expediency .

  15. Sinclair Davidson

    Hmmmm.

    You’re not being entirely fair. Yes many of those qualifications are “bullshit degrees” but the expected return from some of those career paths is very high and the market competitive. By looking at median incomes you are comparing ex post returns. I suspect in many such careers the wage distribution is bi-modal.

  16. RobK

    Trade skills education is probably a better return for society generally. The apprenticeship schemes could do with some revitalisation, particularly the imposts now placed on employers for taking on the commitment.
    There was an explosion of bollocks degrees as stated above, especially to capture a so called market for personal enlightenment. These sort of degrees,(of the soft nature), should not receive government support and should sink or swim on the demand and funds from participants. The HECS type model is pretty good for career type courses.

  17. Frank Walker from National Tiles

    Take out the bullshit degrees and make-work jobs in universities and the Federal Dept. of Ed. and we’re back to excellent ROI data.

    Also remember courses are being made longer as a way to stymie competition from new entrants (think how lawyers never needed a Grad Dip or LLM once, only the SABBAB cert. or LLB) and that the problem with universities is generally waste all-around* as well as limited competition through accreditation.

    You should be able to do a degree in maths, stats and IT through a professional organisation at cut-price affordability. It is not like biotech. or chemistry where there are labs and costly analytical reagents or environmental or OH&S issues. Legally, you cannot grant a degree in Australia [NSW anyway] unless the Ed. Minister has written a “minute” allowing you to do so (basically, they make an executive order under the regs authorising you to be a “uni”).

    * Compare even the piss poor Australia post to a university’s “internal mail”.

  18. Frank Walker from National Tiles

    Being a chemist or an engineer is a trade, basically, even a lawyer has a trade more or less.

    The technical trades are immune to the AIDS-infected cancer that is feminist socialism that infects “higher” learning.

  19. RobK

    The Hawk era of free courses turned me into a professional student for more years than necessary , which was fun but pretty expensive for the tax payer. I was not alone.

  20. Bachelor degrees in journalism have actually reduced the quality of media reporting compared to the prior system of on the job training.

    A significant impact on the quality of newspapers, paper based or online, is the lack of sub-editors. Years ago every article went through a sub-editor who checked it for quality of writing, grammar, argument, facts, balance etc. These were experienced news staff who ensured that crap didn’t get to print.

    Now a newspaper is lucky to have any sub-editors and ‘journalists’ simply publish what they produce. And editors and editors-in-chief only care that the approved narrative is followed; quality doesn’t matter. Whatever is taught in journalism school clearly doesn’t cover any of the necessary aspects of what would have been considered journalism in the past.

  21. Beachcomber

    Universities are completely captured by the Gramsci-ite march through the institutions and they are now Marxist indoctrination and agitprop centres.
    Everything useful that is taught at universities can be taught on-the-job, by professional development, or at schools run by the professional bodies etc. Everything else is Marxist brainwashing that is corroding our society. Universities must be de-funded! Start with the ‘Schools of Journalism’.

  22. Beachcomber

    Watch the video to the end. The students are drone-walking towards the Halls of Marxist indoctrination. Most students come out of university less competent and lacking the the capacity for independent thinking.

  23. Tel

    The technical trades are immune to the AIDS-infected cancer that is feminist socialism that infects “higher” learning.

    As long as you have a tool box, drive a ute and listen to Ray Hadley on the AM band you will be fine.

  24. Jannie

    I am not sure about those stats. Most people with degrees in journalism are professional sandwich hands at woke coffee shops.

  25. Alan

    I agree with above comments regards the leftist destruction our education system.
    Professor Michelle Simmons said in 2017 she was “horrified” to find the nation’s high school physics curriculum had been “feminised”, using her Australia Day address to declare the current system was leaving students “ill-equipped for university”: [see @34mins 37secs]

    “to make it more appealing to girls, our curricula designers substituted formulae with essays! What a disaster.”
    “It’s being asked to write an essay on what’s the impact of a nuclear power plant on the environment.”

  26. yarpos

    Medians are deceptive. I’d suggest most of the trades jobs are gathered more tightly around the median point and the tertiary qualified roles have far more upside potential. In general though I think its true. that a degree is lost its value in terms of income potential. Another factor is that you start earning decent money many years earlier.

    In our own family , one child whose tertiary education only extended to TAFE is in a high paying role in IT Security , while the other who has an Arts degree from Melbourne Uni works at shopfloor retail. Go figure.

  27. Old School Conservative

    Tel
    #3119216, posted on July 30, 2019 at 8:09 pm
    As long as you have a tool box, drive a ute and listen to Ray Hadley on the AM band you will be fine.

    Slight correction Tel.
    Most tradies are hard at work by 7.30am: Ray doesn’t start until 9.00. Better change that to listen to Alan Jones on the AM band

  28. Up The Workers!

    A mate of mine back in the 1970’s, finished H.S.C. with good marks and enrolled in the Business Studies (Local Government) Associateship Diploma course at the R.M.I.T. (i.e. what was then called the “Town Clerks’ course”). He stuck with it -initially full-time, then part-time for several years until about two thirds of the way through when the then State Government said that the course needs to be a degree course, so they added another year full-time (two years part-time) to its length and decreed that in future years, anybody with the degree would be entitled to run City Councils, while those with the old diploma, would be banished to rural Councils out in the sticks. He swapped to the degree stream.

    Several years of part-time study later, the State Government came along and said that a degree course in Business Studies (Local Government) was far too restrictive, and kept good people out of the industry who had a wide range of outside business experience, so they abolished the qualification course; abolished the statutory protection for the position, abolished the formal position of ‘Town Clerk’ or ‘Shire Secretary’ and abolished the educational requirement for the position, thereby making everybody’s qualifications – whether Diploma or Degree, utterly worthless.

    Despite studying over the duration of a decade or so and having completed most of the course, he now had no qualification and no destination job to aim for, as the statutory position of Town Clerk had been abolished, but to add insult to injury, was told by Personnel Management that he would never, ever progress in Local Government, as he totally lacked any tertiary educational qualifications, and therefore he should go to one of the many new tertiary institutions and enrol to pick up a degree…any degree.

    Back to square one.

  29. Buccaneer

    I see evidence of oversupply of university education, particularly in areas where there are no actual practical consideration. However, I am also aware of the system advantaging individuals who are in favoured groups to continue in courses regardless of their suitability to actually practice in the occupation post degree. One example described was a person with gender dysphoria and some mental health issues who will not engage in human interaction with patients but will continue in a medical practitioner degree because favoured victim group.

    High wages for trades in most cases reflect high demand and low supply. Trades training and particularly TAFE is a dysfunctional system rife with subsidies and government intervention that makes for ineffective outcomes. The efficacy of training in this area bears no reflection to the outcomes of actual wages.

  30. Petros

    Well, sfw, since no one else has refuted your claim, here is a simple one: how many old farmers do you know whose children don’t want to go into farming. I know dozens in my area. If it was so lucrative why aren’t the kids falling over themselves to continue the family farm? More like the only trick the farmers have is to sell the whole lot in one go and then have no job. Great plan!

  31. MACK

    The drop-out rates have rocketed since Julia started funding anyone who wants to go: “One in three university students is dropping out without finishing their study within six years, new government data shows.”
    It’s a financial disaster for taxpayers and these students.
    https://www.sbs.com.au/news/uni-drop-out-rates-at-decade-long-high

  32. Deplorable

    chrisl
    #3119108, posted on July 30, 2019 at 5:33 pm
    Don’t forget the enormous HECS debt that graduates accrue. Many of them would struggle to reach the threshold where they have to pay it back. Trades apprentices on the other hand come out on full pay , with work opportunities in front of them and some assets (vehicle and tools)

    Apprentices start on very low wages increasing over 4 years. It is the 5th year that they receive the base salary for a tradesman rising with a level of experience and competence over a few more years .
    I know of no apprentices that come out with tools or cars that they have not paid for themselves. Full pay for most qualified tradesman is exactly that unless they work union sites and/or work much overtime. Apart from a few degree jobs that really are a wank the rest are much better off than a tradesman, not to mention the back breaking work most tradesman carry out that the degree powder puffs have nothing to do with but causes early health problems for most tradesman. Now how many of you degree people can change a tap washer?

  33. Rebel with cause

    Not all TAFE qualifications are equal either. Some such as retail actually have a negative return.

    Like most things, it is going to depend on the individual and their capabilities. However, for highly capable and motivated people the evidence is generally that a university degree provides a better return.

  34. Pyrmonter

    Why the premise that builders and farmers don’t have degrees? Ag and Construction have both been taught in Australian tertiary ed for generations – Ag since the 1890s, construction since at least the 1970s.

  35. Diogenes

    Some such as retail actually have a negative return.

    True
    In NSW we used to offer a full Cert 2 in IT at high school, it was dropped in favour of a partial cert 3 because as a junior with a cert 2 (in anything) you are entitled to about 50c an hour more, whereas with the partial cert 3 you cost employers less, and by changing the units covered the compulsory units in the Cert IV & Dip courses making them cheaper when the students left & went to TAFE

  36. Bruce

    Then there’s the Barter / Cash economy so hated by the bureaucrats and most pollies.

    The ATO has been trying to crush “traditional” free trade for decades. They want their cut of other peoples business.

  37. Elizabeth (Lizzie) Beare

    My experience has been that many people with bachelor’s degrees end up in jobs for which their degree was not required, and they may have upskilled due to on-the-job training post-degree. My husband’s nephew and niece in Britain, degrees in Psychology/Engineering and Zoology respectively are examples of that. His nephew works in the management of Information Technology start-ups, moving constantly to new ones, and his niece works in Arts management for the National Opera. There is no doubt that their degrees, requiring diligence, their previous broadly-educative private schooling with its network of contacts and its achievement-orientation, plus their general intelligence and their family’s expectations, all assisted this flexibility in outlook and thus in employment.

    Neither of them are ‘qualified’ in business management. He earns high, she earns low.

    I agree with Sinclair that with degree careers there is most likely a bi-modal pattern.

  38. Buccaneer

    It’s a general rule that the only occupations where one gets full pay unqualified on day one, are those jobs that require no qualifications to start. eg brickies labourer.

    My first pay as an apprentice was $104 per week before tax. The union wanted their share too and the union rep suggested I might have an unsavoury incident in the change rooms if I didn’t join. Full pay was some multiples of that. My brother did a pre apprenticeship, he didn’t get paid for a full year until he was placed.

    Let’s not pretend tradies have an easy road to big dollars. There are still employers who don’t train them properly and use them as cheap manual labour. If you don’t know what you’re doing when you’ve got your ticket, you will struggle to keep a job or customers.

  39. Rococo Liberal

    From what I can see, for many Americans college is just a 4 year extension of high school. The fact that they refer to places of higher education as ”schools” gives the game away.
    Also, I get the impression that the whole college experience, not just the educational aspect, is attractive to America’s youth.
    That doesn’t really have the same meaning for us in Australia, as most of us don’t board on campus.
    In the US, where you went to college is important. Here in Australia it is far more important where you went to school. If you are going to spend big money on education, you would do far better spending a lot of money sending your child to Ascham or Cranbrook rather than pinning all your hopes on a university education.

  40. max

    It’s long past time to stop subsidising universities and students:

    in 1909 Cosmopolitan magazine published an article by Harold Bolce, “Blasting at the Rock of Ages.”:

    “‘Those who are not in close touch with the great colleges of the country, will be astonished to learn the creeds being foisted by the faculties of our great universities. In hundreds of class-rooms it is being taught daily that the decalogue is no more sacred than a syllabus; that the home as an institution is doomed; that there are no absolute evils; that immorality is simply an act in contravention of society’s accepted standards; that democracy is a failure and the Declaration of Independence only spectacular rhetoric; that the change from one religion to another is like getting a new hat; that moral precepts are passing shibboleths; that conceptions of right and wrong are as unstable a styles of dress; . . . and that there can be and are holier alliances without the marriage bond than within it'”

  41. Deplorable

    Then there’s the Barter / Cash economy so hated by the bureaucrats and most pollies.

    Then there is the real cash economy namely drug dealers and organised crime who use their cash to bribe influential people, invest in property and compete against mainly honest businesses.

  42. Terry

    organised crime who use their cash to bribe influential people, invest in property and compete against mainly honest businesses.”

    Or, as we like to call it in Aus: government.

  43. sfw:

    If someone can give me a good argument showing my error here I’m interested.

    I can’t – it’s a bloody good point. And if I was sitting on assets of a couple of million while only getting wages, I’d sell it to the first person who came along and retire to a hobby farm with the missus and kids.
    And I’d let the kids give the couple of ducks/goats/sheep/cows/budgerigars/cats, and dogs names, and I’d promise not to eat them. (The animals – not the kids.)

  44. Sydney Boy

    As many have noted, it’s the degree that matters, not whether you have one. Both daughters are uni educated nurses and both are doing well – although there is obviously a limit on how much you can earn as a nurse. I’m an engineer and do quite well in the Army, although I could probably earn more outside, but I enjoy the Army lifestyle and comradeship. My brother is a petroleum engineer who earns buckets.

  45. Buccaneer

    Farmers don’t want to sell out of shame that they lost the farm, even when they work ridiculous hours and lose money. Many farmers can make great money but it can be heartbreaking stuff where your livelihood is dependent on the weather and commodity prices. Often your good fortune is someone else’s heartbreak. Modern farming practices mean scale is important, so if you don’t have enough scale you need to buy more land, but that requires more risk and if you overgear then suffer drought, you lose the lot. Foreign investors upping property prices also impact your ability to upscale. Sadly, there are many old guys who can’t upscale and it’s no viable for the next generation, so they sell and the venture disappears to hobby farming, commercial enterprise or foreign investors.

  46. sfw

    Buccaneer, that’s my point, if they work ridiculous hours and don’t make money the farm isn’t worth anything. Try and buy one and see how much they cost. You can’t have it both ways, if it doesn’t make money it isn’t worth much, why do they cost so much?

  47. Anthony

    We need to fund places in university courses in proportion to HECS recoveries.

    Lots of commenters here have suggested the proportion of HECS places be funded in proportion of graduates who get a job in the industry. I’ve suggested the amount the government funds a uni place goes down in line with graduates who can’t find a job. I.e. If 90% of lawyers can’t get a law job then the government funding of your degree is only 5% instead of 50% and you have to repay 95% on HECS.

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