Features Australia

Julia Gillard’s dropouts

29 September 2018

9:00 AM

29 September 2018

9:00 AM

In 2008, Julia Gillard announced that the Rudd government’s policy of uncapping university places marked the start of ‘a higher education revolution to create one of the most highly educated and skilled nations on earth.’

Like most revolutions, the quest to reinvent the higher education system in Gillard’s Fabian image has left a hefty toll of casulaties in its wake.

For a depressingly large number of the hundreds of thousands of unexceptional students pushed into university at Labor’s behest, higher education has been a waste of time, effort and money.

It’s time to accept that the ‘demand-driven’ experiment of subsidising universities to enrol as many students as they like has failed. Far from creating a fairer and more prosperous society, it’s produced a new underclass of hapless dropouts and degree-holders in unskilled employment whose HELP debts are a costly and ever-present reminder of Government hubris.

The most recent cracks in Labor’s system were exposed last week with revelations that graduate salaries have wilted since Labor uncapped places. A new report by the Grattan Institute has found the wage gap between degree-holders and workers without any tertiary education has narrowed by thousands of dollars since 2006. For men, the average salary for a bachelor’s degree holder actually fell by $1,410 while wages across the board soared more than $10,000 in real terms.

The best evidence, however, that Gillard has sold students a pup lies in the breakdown in earnings per field of study. Degrees offering a credible pathway into a skilled occupation such as medicine, law and engineering have been largely immune from the slouch in graduate earnings. Meanwhile, humanities and performing arts graduates earn thousands of dollars less each year than workers whose highest qualification is their high school certificate. Science graduates are lucky to take home a skerrick more than school-leavers – a sign that all of the fanfare around STEM degrees may well be overegged. Yet even this gives undeserved credit to the value of many tertiary degrees. Comparisons between the earnings of degree-holders and workers with a high school certificate are distorted by the latter category carrying a vast number of workers who are happy to work in entry-level jobs with no desire for advancement.


A better benchmark is workers who have pursued a vocation without the help of our hallowed halls of higher learning.  Crane operators, train drivers, air traffic controllers and scores of tradies among many other occupations take home more than the average degree-holder.

That said, students who have graduated into unexceptional jobs have grounds to count themselves lucky. A third of their classmates won’t have found full-time work after four months of collecting their degree. This represents a doubling of the rate of graduate unemployment since Gillard’s Great Leap Forward began in 2008.

Worse still, one in three students will drop out of university without completing their degree. And as the ranks of demand-driven dropouts have swelled, entry standards have sagged. It should not be surprising that Gillard’s reckless rush to push lacklustre school leavers into degrees has created a groundswell of failed students. As a confidential report leaked to the ABC revealed a fortnight ago, students with ATAR scores below 19 (that is, in the bottom five per cent) are gaining entry into teaching degrees.

In one sense, the demand-driven university system is a textbook case of non-market failure. Just as nationalising fixed-line broadband gave us sub-par internet at eye-watering expense, licensing universities to enroll as many students as they see fit has produced a long line of graduates holding the vocational equivalent of a counterfeit note.

But at a more fundamental level, the concept of the demand-driven system rests on a flawed ideal of what higher education actually provides students. Labor’s equation of more degrees equaling a more productive workforce reflects what’s known as the human capital theory of education. In the same way that capital grows the productive capacity of a business, human capital theory posits that education lifts economic returns by building the skills and knowledge of the workforce.

It’s a neat theory that sounds self-evidently true. But applied to the stuffy credentialism of Australia’s higher education system, human capital theory speciously assumes that what’s churned out in lecture theatres makes students better equipped for their eventual occupation.

Human capital theory still stands up in a few narrow fields – some types of IT, medicine, and other health professions, for example.

But for the vast majority of students studying a generalist degree like business, arts, marketing or science, university doesn’t teach you how to do a job. As American economist Bryan Caplan masterfully explain in his recent book The Case Against Education, the main purpose served by most degrees isn’t skill-building, but signalling. A stint as an undergraduate provides school-leavers with a few years to signal to employers that they have the intelligence, conformability and self-discipline to perform mundane tasks for hours on end. In effect, their academic transcript and litany of ‘co-curriculars’ offer a litmus test of their fitness for full-time deskwork. And while a degree may provide some semi-relevant background knowledge along the way, most hard-skills are still learnt on the job.

As Caplan observes, for job-seekers, the signalling value of a degree is tied to its scarcity. In fields where the job-market is already awash with unemployed graduates, a degree with average grades is unlikely to hold much sway with employers. Hence, the need for today’s students to puff up their CVs by working multiple jobs, climbing the ranks of student societies and spending their holidays building schools in developing countries.

Caplan likens this process to bringing a stool to a rock concert. Although you might get a better view at first, soon enough others will also start buying stools as well. The sad truth is that in the context of Australia’s job-market, Julia Gillard’s dropouts have been sold a two-legged stool while taxpayers have been left to pick up the bill.

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