Do the labour market returns to university degrees differ between high and low achieving youth? Evidence from Australia

Abstract In almost all developed countries there has been substantial growth in university education over the last half-century. This growth has raised concerns that the benefits of university education are declining and that university education is not appropriate for students who, without the expansion, would not have been admitted. For such students, vocational education or direct entry to the labour market may be more appropriate. The purpose of this study is to examine the effects of university and vocational qualifications, net of other influences on a variety of labour market outcomes for Australian youths up to age 25; and if the benefits of university degrees differ across the achievement continuum. Achievement is measured by test scores in the OECD’s PISA assessments. The six labour market outcomes investigated are: occupational status, hourly and weekly earnings, employment, unemployment and full-time work. The study finds that university degrees provide substantially superior labour market outcomes which are not confined to high and average achievers, at least for this cohort in their formative years in the labour market.