University degrees: No longer a financial fast-track

The future of university degrees in Australia looks bleak, with the financial edge they yield later in life falling due to one glaring factor.

A recent study has revealed that the financial benefits of university degrees in Australia, particularly at the bachelor’s level, are on a downward trajectory.

The study from the Mackenzie Research Institute, led by Tom Karmel, titled ‘The return to education – an occupational perspective’ found that a decade ago, bachelor’s degree holders enjoyed a 57 per cent income premium, but this figure has now shrunk to 53.1 per cent in 2023.

A new study has highlighted a significant decline in the income advantages of university degrees in Australia. Picture: Supplied.

This trend is even more pronounced among those with higher qualifications, with the income advantage for master’s and PhD holders taking a significant hit, dropping from a substantial 93 per cent to 71.5 per cent compared to their peers without high school completion.

“For each of these qualifications, that premium has declined, with the decline greater the higher the qualification,” the report stated, emphasising a 22 percentage point drop for higher degrees, compared to a more modest 4 points for bachelor’s degrees.

An oversupply of graduates has been attributed as the main cause of the narrowing income gap. Picture: Supplied.

The report attributes this trend to an oversupply of graduates, leading to fewer landing top-tier managerial and professional roles.

“In a broad sense, the supply of persons with higher degrees has outstripped the demand,” it read, raising concerns about the future prospects of university graduates in Australia.

Aleks Nikolic, a finance wellness and career advice influencer, admitted that she is not surprised by these findings, citing increased demand and salary expectations in trades and non-professional roles.

Finance wellness and career advice influencer, Aleks Nikolic. Picture: Broke Girl Wealth

Ms Nikolic, a master’s in law holder, contrasted her career trajectory with her husband’s, a non-university graduate in engineering, who outearned her for several years.

“I have a masters in law and my partner went into a technical field … He earnt more than me for several years!” she shared.

Her insights delve into the concept of ‘salary velocity’ and skill portability, especially in professional fields, highlighting that a degree’s value often hinges on job market demands. “Where a degree’s value increases is ‘salary velocity’ and portability of skills. My husband works in a specialist field, while I work as a lawyer,” she said, noting that professional roles often require degrees and offer more transferable skills compared to trades.

The increase in demand for jobs like trades mean that the salary expectations for those roles have increased dramatically. Picture: Supplied.

With enrolment figures in bachelor’s degrees witnessing a 13 per cent decline since 2016, and rising tuition fees and student debt further complicating the picture, the government’s ambitious target of 55 per cent of young Australians holding a bachelor’s degree by 2050 appears increasingly challenging.

Ms Nikolic has advised students to carefully weigh their options, considering both the financial implications and the career opportunities of their chosen degree.

“Doing a degree without an understanding of the type of work waiting at the end of that HECS debt is critical,” she emphasised, urging prospective students to think critically about their educational choices in today’s evolving job market.