Aug 20: New Adelaide University research shows while higher education in Australia continues to deliver a substantial wage premium, education, skills and labour-market policy need to more closely align.
The study, published in International Review of Economics & Finance, examined how the financial returns to HE and vocational education and training changed in Australia each year between 2001 and 2024.
Researchers analysed 24 years of data from the Household, Income and Labour Dynamics in Australia survey, covering more than 250,000 observations of people aged 25 to 64.
Across the period, HE degree holders earned an average hourly wage premium of roughly 46 per cent, while VET qualifications yielded an average premium of around 10 per cent.
Comparing only the two endpoints of 2001 and 2024 shows relatively little net change in hourly wage premiums, while the year-by-year analysis found a rise followed by a prolonged progressive decline.
Hourly wage returns increased through the early 2000s and peaked around 2010, when HE graduates earned about 53 per cent more than people with Year 12 or lower qualifications, while those with VET qualifications earned about 14 per cent more. By 2024, those premiums were 38 per cent for HE graduates and 2 per cent for VET graduates.
The decline was sharper when researchers examined weekly earnings, which account for both hourly wages and the number of hours worked. The weekly earnings premium for HE graduates peaked at 71 per cent around 2008 before falling to 40 per cent by 2024. For VET graduates, it peaked at 32 per cent in 2005, then declining to 3 per cent in 2024.
Lead researcher Dr Tinh Doan from Adelaide University’s School of Economics said the accelerated decline in weekly relative earnings reflected reduced work hours and underemployment.
“This erosion coincides with rapid growth in the number of post-school graduates, structural shifts toward lower-productivity sectors, and emerging skill mismatches, for example, approximately 30 per cent of high-skilled workers are now employed in middle or low-skilled roles,” Dr Doan said.
“Over the past two decades, Australia’s post-school education system has expanded rapidly, with tertiary attainment becoming increasingly common among working-age adults.
“Educational returns reflect how qualifications are valued in the labour market, particularly when the supply of skilled workers grows faster than the economy creates high-skilled jobs.”
For students, the findings suggest field of study, career opportunities and skill alignment are becoming increasingly important.
“Meanwhile, universities and VET providers should ensure programs keep pace with changing workforce demands,” Dr Doan said.
The findings come as Australia seeks to substantially increase tertiary participation – the Australian Tertiary Education Commission established in July 2025, is supporting a national target for 80 per cent of the working-age population to hold tertiary qualifications by 2050.
Dr Doan said increasing access to post-school education should be accompanied by economic and labour-market policies that increase demand for highly skilled workers.
“These findings highlight the need for education policy that is closely aligned with labour-market conditions to ensure both efficiency and equity in Australia’s post-school education systems,” Dr Doan said.
“Expanding tertiary participation without parallel growth in demand for high-skilled, non-routine work could place further downward pressure on relative wages and increase the risk of graduate underemployment.
“Education expansion therefore needs to be supported by broader economic development strategies that create high-productivity, high-skilled jobs.”
Dr Doan said further research is needed to understand how returns differ across fields of study, occupations and cohorts, such as migrant workers compared to the local population.
