Save your tears

Natasha Cica has a piece in today’s SMH about the plight of those with postgraduate degrees, living in poverty. I normally like Natasha’s stuff, and we’re on friendly terms, but this seemed to go a bit far. After all, we know from work by Melbourne University’s Jeff Borland (PDF file) that those with bachelor’s degrees earn on average $380,000 more over their lifetime than those without. Could it really be true that going on to get a Masters or PhD lands you back on struggle street?

The ABS doesn’t normally break down degree holders into grads and postgrads, so it took me a while to find a suitable survey – the 1997 Income Distribution Survey.

These are the average weekly earnings, in today’s dollars.

No degree – Bottom quartile $401. Average $590.  Top quartile $820.

Bachelor’s degree only – Bottom quartile $642. Average $898. Top quartile $1155.

Higher degree – Bottom quartile $833. Average $1122. Top quartile $1446.

Natasha’s story about "Tanya and Eddie" serves as a good reminder of the adage that data is not the plural of anecdote.

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5 Responses to Save your tears

  1. Andrew Norton says:

    Though this data is consistent with her point – the averages look fine, but there are highly varying outcomes. About 20% of graduates (not sure about postgrads) are in jobs that don’t require degrees, so this may be more than just a few of Natasha’s friends.

  2. Andrew Leigh says:

    Andrew, her point isn’t about variance per se, she’s implying that a significant number of postgrads are in poverty. Yet these figures show that a postgrad at the 25th percentile is still doing better than someone without a degree at the 75th percentile.

  3. Andrew,

    I think your comments are off the mark re Cica article. You seem to have an old concept of the privilege of higher education and the days when to have a degree meant you were automatically a member of an elite group. Higher education in Australia is now in the hands of grossly incompetent managers and administrators. It suffers from a horrible dose of institutional insularism that means graduates are not at all well served by their education or training. The boards of universities exercise no proper accountability and have no concept of what educational productivity might look like apart from turning out numbers who attract government or overseas student funding.

    Check your points of comparison. Compare a person with a trade who leaves school at Year 10 with the life earnings of somebody with a bachelors degree and you will find now that the person with the trade far exceeds the average earnings of a graduate student. See also Bob Gregory’s work on the falling worth of a university education. I haven’t references to hand but am exploring these areas myself.

    This whole subject is what we are exploring in the next issue of Australian Prospect – “the capacity paradox”. I’d be pleased if you would forward this to Natasha Cica who I believe has certainly hit the mark of something important. I am keen to publish some serious articles and debates on the issue and would encourage you to have a look at our website. Here is the introduction to the issue

    PCB

    Capacity Paradox

    A Call for Papers , Australian Prospect, Winter Edition

    Deadline for copy: June 1, 2005

    The next edition of Australian Prospect will address Australia’s “capacity paradox”, papers should be sent to editor@australianprospect.com.au

    Australian Prospect profit shares with all successful contributors based on the number of paid downloads for their article.

    Backgrounder: A capacity paradox besets modern Australia and many other western countries. We have a surfeit of raw and refined capacity symbolised by the third, fourth and fifth generations of welfare dependent children and the unemployed, highly-trained, graduate.

    Here are some of the dimensions of our capacity paradox:

    students pay more for, and, at aggregate levels, earn less from, higher learning;
    there are major shortages of skills in key trade areas, where it is possible to bargain for wage rates well in excess of awards;
    the demand for higher education is insatiable and many institutions are bursting at the seams;
    firms are unable to fill the required number of positions for particularly physically demanding jobs and apprenticeships;
    whole crops cannot be picked, and opportunities go begging in many parts of regional Australia;
    some of the best educated and trained generations of Australians – Indigenous and non-Indigenous – in our history are not working and do not know how to respond to economic opportunities.;
    relatively large, concentrated numbers of our population in particular locales or job ghettos have greater incapacity to participate in our economy and society than before in our history;
    large masses of labour and skill lie at our borders willing to work for one hundred times lower rates of pay than is the norm in Australia and
    there are severe skill shortages that beset industry and agriculture and have resulted in a flurry of short term governmental solutions such as increasing the numbers of skilled immigrants coming into Australia. Meanwhile detention centres, centres of unemployment etc are full of apparently unwanted labour.
    It seems that the supply and demand of skills and education are not in equilibrium with our social and economic sphere. Perhaps this is a good thing, perhaps it can be argued that an unemployed person with a graduate degree is a mark of civilisation. But it is extremely unlikely that the unemployed graduate is the modern equivalent of a monk who has sworn to live a life of frugality in order to satisfy a higher end. It is more likely that the plates of our economy and society have shifted and that our institutions and ideas have yet to accommodate it.

    For the entire twentieth century mainstream industrial production work and industry opportunities organised the way in which we directed our lives and valued our abilities. The value associated with earning a wage is not just a factor in renumeration, it is also a factor in individual and institutional psychology, and as we have seen in the current edition of Australian Prospect, in the general health and longevity of whole populations.

    Old time work meant standard hours, standard wages, standard conditions, standard housing, in short, common living standards. In the post war years high school graduates didn’t have to think about where to work or even what you did at work, because mass production and its associated industries were very clear in what they wanted and the demand was there for everyone, no matter their ability or training, to work.

    All this has changed. But have we forgotten that our education and training system was also based on the centrality of mainstream industry with standard working hours and conditions that would offer opportunities for all of those who wanted to work? Should education now entail training and education about how to create an opportunity? Do we need to add a new ingredient into our educational expectations: how to use our capabilities?

    Geoff Clark once observed that Indigenous Australians had more training than the clowns in the Moscow Circus! What kind of training would produce capability not clowns? The implicit assumption of the modern welfare income support system was that one would be out of work for no more than a few months. The implicit assumption of our education and training support systems is that once you have finished your training you will automatically find a job or be better off. TAFE keeps virtually no track of its graduates. Universities are more likely to track their alumni down for a donation, than monitor employability or lack of success in winning jobs and pay.

    At the same time people who never enter education and training institutions are doubly disadvantaged by trends in employment and particularly the loss of low skill blue collar jobs since 1975. This has created a ghetto of undercapacity where large concentrations of people have no access to employment and are falling out of contact with mainstream economy and society. As time goes on this group falls further and further behind.

    Surely to resolve the capacity paradox we must be far more critical of the structure and form of training and education that is taking place.

    Should we require university and TAFE institutions to sign a contract with every new student that guarantees a certain level of capability on graduation, by which I mean a direct job and a good standard level of living at the end of a course of study?
    Should we require those students who use the precious resources of education and training to sign a capability clause guaranteeing that the skills learnt will be skills used?
    Or is it another paradox of our times, that generalist training is the way to go and that workplace based training is what is required after completing basic, undergraduate degrees?
    Is there too much of an emphasis, as Robert Reich suggests in the current edition of Australian Prospect, on higher learning? Are we becoming middle class snobs when it comes to post-school education?
    Do we require a new kind of school and learning institution? The Howard government has brought about a revolution of funding independent secondary education, by allowing funds to follow the feet of students. Universal educational standards are not guaranteed by a universal, excellent public system; but by regulating a plethora of often new independent schools. Registered training organisations are doing things differently and arguably more innovatively than ever before. Should this sort of experiment be allowed to take place in the wider sphere of education?
    All these things underscore one thing. We need a new kind of education that is not about passively waiting for opportunities but is about creating them

  4. Andrew Leigh says:

    Peter, I’m sorry to say but you’re dead wrong. The earnings of those with trade qualifications are well below those of university graduates. I just happened to run into Bob Gregory and Bruce Chapman in the hall. Neither of them know anything about a study suggesting falling returns to a university education. Both agreed that university graduates earn substantially more than tradespeople.

    I’ve passed the information about your new issue along to Natasha Cica.

  5. Andrew Norton says:

    Andrew – I take your point that even in their bottom quartile postgrads do much better than someone with no degree. But an average of $833 a week, well below what’s need for the middle class lifestyle to which graduates might reasonable aspire, suggests a non-trivial minority for whom education has not paid (or not paid yet).

    But I agree with your response to Peter. Typically it still makes good fianancial sense to pursue higher education. I think his analysis started with an argument that Mike Gallagher – a former head of the higher education division in DEST and now at the ANU – made at a Monash seminar last year. Criticising Stott Despoja’s use of the argument rather than Gallagher I responded to him in the AFR:

    http://www.cis.org.au/exechigh/Eh2004/EH21204.htm

    There is no evidence that wage relativities are declining, though with cost shifting from the Commonwealth to individuals the private rate of return may be down slightly.

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