A long-run Australian analysis published in the International Review of Economics and Finance shows the private returns to post-school education have weakened since their peak around the global financial crisis, with implications for countries pursuing rapid tertiary expansion.
Wage premium peaked in 2010 and slipped by 2024
The study, conducted by Vietnamese-Australian economists and based on 24 waves of the Household Income and Labour Dynamics in Australia (HILDA) survey, which tracks at least 17,000 Australians annually, finds that the hourly wage premium for higher education graduates rose from 40% in 2001 to a high of 53% in 2010, before falling to 38% by 2024.
Vocational graduates saw a similar pattern: a premium of 10% in 2001 climbed to 14% in 2011 and then dropped to just 2% by 2024. When measured by weekly income rather than hourly pay, the premium peaked earlier, in 2008, indicating that reductions in working hours also contributed to the decline.
“Ballooning graduate numbers had produced a ‘saturation effect’ in the labour force,” the researchers report, noting that a rapid rise in the share of tertiary-qualified workers reduced their scarcity and thus the wage premium.
Supply has outpaced demand, researchers say
The proportion of 25–64-year-old workers with tertiary qualifications rose markedly from 51% in 2001 to 76% in 2024. The authors argue this expansion diluted graduates’ bargaining power in the labour market, especially in regions where enrolment growth outstripped employer demand.
They note similar patterns in other countries, including China, Malaysia, Portugal and Vietnam, and suggest the decline may reflect not just quantity but quality concerns. The paper raises the prospect that “declining instructional quality, outdated curricula and inadequate infrastructure” in tertiary institutions could also be eroding graduates’ advantages.
What this means for policy and classrooms
For education planners and departments, the study underscores several practical concerns:
- Alignment with labour markets: Expanding access must be matched by employer demand and job-creation strategies, otherwise graduate earnings advantages may continue to decline.
- Quality of provision: Growth in numbers without investment in teaching quality, curriculum relevance and infrastructure risks producing underemployed or lower-paid graduates.
- Regional variation: Areas with rapid enrolment increases but limited economic opportunities may see the sharpest fall in graduate returns.
The authors caution that the composition of labour-market changes matters: if more graduates crowd into occupations with limited pay growth, the aggregate premium will fall even if some fields retain strong returns.
Key figures from the study
| Measure | 2001 | 2010/2011 (peak) | 2024 |
|---|---|---|---|
| Higher education hourly wage premium | 40% | 53% (2010) | 38% |
| Vocational hourly wage premium | 10% | 14% (2011) | 2% |
| Share of 25–64 workers tertiary-qualified | 51% | — | 76% |
These figures are drawn from analysis of the HILDA survey. The paper warns that part of the apparent long-run gain in value comes from assumptions about working hours and labour supply; measured by weekly income the peak arrives earlier, signalling complexity in the drivers of returns.
Implications for South Africa
Although the research uses Australian data, its lessons are relevant for South African policy debates. National efforts to broaden tertiary access, including TVET and university places, should weigh the balance between increasing participation and preserving the labour-market value of qualifications.
Concrete steps that follow the study’s findings would include improving links between curricula and employer needs, strengthened investment in instructional quality and infrastructure, and targeted support for regional economies to absorb newly qualified workers.
For parents, learners and teachers, the research is a reminder that the returns to post-school study are not automatic: field of study, institutional quality and labour-market demand remain central to whether a qualification translates into better pay and employment.
Policymakers will need to consider both the supply of graduates and the demand-side measures—job creation, sectoral planning and curriculum reform—that preserve the long-term value of tertiary education.
