Opinion & Commentary
Graduate supply fails to match jobs demand
This year more than 170,000 Australians will enrol in an undergraduate course, yet according to academics and politicians there should be more.
Over the past six months, prominent Monash University academic Bob Birrell and federal Labor MP Craig Emerson have both argued that university enrolments are growing less quickly than demand for graduates.
Birrell and Emerson's case rests on two observations. Graduates normally aspire to enter occupations classified by the Australian Bureau of Statistics as managerial, professional, and associate professional, and the total number of jobs in these occupations has increased significantly since the mid-1990s. By contrast, annual university commencements have grown at a slower rate over the same time.
But does it follow that, as Birrell has suggested, "enrolment levels are well below those needed given the demand for trained persons in Australia"? Closer analysis of the graduate labour market suggests that it is like Australia's climate: drought in some places, flood in others.
In some occupations Birrell and Emerson are right. The annual Department of Employment skills shortage report tells the same story every year: we cannot meet our health workforce needs, even after extensive international recruiting. Over the past few years, demand for engineers has also exceeded supply. Surveys of recent graduates confirm that qualifications in these areas lead quickly to full-time employment.
But this drought exists alongside a flood of graduates whose jobs do not make obvious use of their qualifications. The latest Education and Work survey, carried out annually by the ABS, recorded around half a million such people. Most were employed in clerical, sales or service jobs, with some others working as labourers or unemployed. Together, they make up one-in-five of all graduates in the workforce.
Occupational categorisations can miss the nuances of individual jobs, which in practice may draw on higher or lesser skill levels than broad descriptions reveal. But when workers self-assess the skills needed for their jobs we find very similar results. In a 2005 survey, 18 per cent of people with a bachelor degree said they did not get a chance to use their abilities or qualifications at work, with another 15 per cent responding ambivalently perhaps people using their skills less often than they would like.
How can this be the case if demand for "graduate" jobs in increasing? One reason is that graduates do not have managerial, professional and associate professional jobs to themselves. In fact, only around half of the people currently holding these jobs have a university qualification. Most associate professional jobs require diplomas rather than degrees, and many managers draw on experience rather than MBAs.
With some "graduate" jobs taken by non-graduates, in most years there are too few suitable new jobs to absorb all the net graduate inflow into the labour market. This has created a large reserve graduate labour force, equivalent to around five years of university completions.
There is room for debate about how serious a problem this is, since not all graduates in non-graduate jobs are necessarily there involuntarily or permanently. Qualifications and job mismatch are much higher for people aged in their 20s than aged in their 30s. But these people make it hard to argue that there is any general case for increasing the number of graduates.
What is hard to dispute is that we have a mismatch in the graduate labour market, with in some areas universities producing more graduates than the labour market needs, and in others too few. Nobody can know exactly what the future labour market will look like, and there are long lead times between enrolling students and sending them out into the graduate workforce. So some level of mismatch is to be expected.
Even within these constraints, however, the Australian higher education system has performed poorly. We had all the elements needed to co-ordinate supply and demand. What we didn't have was government policy that let the three parties connect.
Instead, government policy obstructed, and still obstructs, the market through imposing quotas and distorting price signals. These restrictions foster inertia in universities, with the pattern of enrolments reflecting historical allocations rather than future needs. We need a university system capable of keeping up with the dynamic world that surrounds it.'
Andrew Norton's paper "Mismatch: Australia's Graduates and the Job Market" is published by The Centre for Independent Studies.
