The Graduate Effect

Higher education plays a critical role in developing Australia's human capital. The ability of our nation to expand the knowledge and skills of our workforce to drive productivity growth is vital if Australia is to raise living standards into the future. While the private benefits of higher education have been well documented, minimal attention has been paid to the associated spillover benefits of higher education to other parts of the workforce and the Australian community.

In a recent report for Universities Australia we addressed this knowledge gap, estimating the benefits to the wider economy and to workers without a degree when new higher education graduates enter the Australian workforce. This analysis was based on an innovative economic modelling approach to estimate the economic spillover effects of new university graduates on Australia's jobs, wages and economic growth for Universities Australia.

For further coverage of our analysis, see The Canberra Times, SMH, the AFR and The Australian.

Jobs

  • For every 1,000 university graduates entering the workforce, 120 new jobs are created for people without a university degree.
  • In 2014-15, the effect of new graduates entering the Australian workforce created 25,000 new jobs for people without a university degree.
  • The spillover employment benefits for those without a university degree are spread across a range of jobs and industries. Tradespeople, managers, machinery drivers, labourers and administrative workers benefit the most from graduates entering the workforce.
  • For example, an additional 8,064 technicians and trades workers found jobs in 2014-15 because of new university graduates entering the Australian workforce.

Wages

  • In 2014-15, the wages of workers without a university degree rose by $4.8 billion due to new university graduates entering the Australian workforce.
  • This equates to a weekly wage increase of $12.60 in 2014-15-or $655 a year-for workers without a university degree due to the spillover benefits of university education.
  • The estimated wage increase is 1.12 per cent. This is comparable with earlier research by Moretti (2004) which was based on analysis of US data.

Growth

  • Without new university graduates entering the workforce, the growth rate in employment for those without a university degree would have been zero over the last eight years.
  • University graduates account for almost 90 per cent of Australia's jobs growth over the last eight years.
  • In 2014-15, new skilled graduates entering the Australian workforce grew the nation's economic activity by $26.4 billion (as measured by GDP).
  • Every graduate entering the workforce increases Australian GDP by $124,450.
  • Due to higher economic activity driven by new university graduates entering the Australian workforce, government revenue increased by approximately $5.1 billion in 2014-15.

The full report can be downloaded from the Universities Australia website here.

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