The importance of education in Australia’s knowledge economy

As Australia transitions into a knowledge economy are we becoming over-educated?

Well, according to the latest data, no.

Not if you want to earn more.

In fact, in his article in The New Daily, Simon Kuestenmacher said:

"The more formal education you enjoyed, the more money you make.

While some people with a trade certificate will certainly earn much more than many people with postgraduate degrees, education still tends to result in higher incomes.

This analysis throws part-time and full-time workers into one bucket.

This is obviously silly for some pieces of analysis.

Lower-skilled jobs lend themselves more to part-time employment – hospitality and retail jobs, for example."

It is important to note that professions with higher barriers to entry, typically requiring university degrees, tend to offer higher salaries compared to those with lower barriers to entry.

The Australian Bureau of Statistics (ABS) categorizes jobs based on their skill level, which ranges from 1 to 5 and reflects the amount of formal training needed to work in that profession.

Skill level 1 jobs require a university-level education, skill level 3 jobs require TAFE education, while skill level 5 jobs do not require any formal qualifications.

Australia continues its transition into a knowledge economy

Back in 1986, just 23% of jobs were categorized as skill level 1, which requires a university-level education.

However, presently, 34% of all jobs necessitate a university degree to qualify for a skill level 1 position.

While there are a few exceptions, they are negligible.

Some employers do not emphasize formal qualifications for certain specialized programming skills such as cyber security, SEO, or crypto.

As these jobs are relatively new, employers primarily evaluate candidates based on their programming skills, rather than their degrees.

Overall, individuals working in knowledge-based roles tend to have obtained university degrees.

Mr Kuestenmacher explained:

"Workers with more formal educations earn more money, put more dollars into their super accounts, and don’t need to be subsidised through the pension system during their retirement years.

An Australia with a large proportion of workers in skill level 1, 2, and 3 jobs needn’t rely as much on the pension system to subsidise people’s retirement.

More tax dollars are then left to throw at other things.

Looking at our national workforce by age and education, we notice that almost half (46 per cent) of the workers aged 25 to 40 hold at least a bachelor’s degree."

Are we sending too many young workers to university?

Well, looking at the job pipeline we probably will need even more university-trained workers in the next five years.

According to the National Skills Commission, over half (53%) of the new jobs that will become available in the next five years will require academic training, specifically for skill-level 1 jobs.

This reinforces the general advice of encouraging young people to pursue as much education as possible.

What does this mean for the university system?

Mr Kuestenmacher shared his insights:

"First and foremost, this means growth.

Expect new buildings on campuses, higher enrolments, additional purpose-built international student accommodation, more transparent pathways to citizenship for holders of certain degrees (healthcare in particular), and new university degrees."

Source of charts and commentary: The New Daily

About Joseph Ballota Joseph is a Property Coach who put hundreds of people on the road towards wiping away their mortgage in under 5 years through expert Property Investment Plans.