Changing wage benefits highlight need to align skills and jobs

Adelaide University research shows that while higher education (HE) in Australia continues to deliver a substantial wage premium, education, skills and labor-market policy need to align more closely.

The study, published in International Review of Economics & Finance, examined how the financial returns to HE and vocational education and training (VET) changed in Australia each year between 2001 and 2024.

Researchers analyzed 24 years of data from the Household, Income and Labour Dynamics in Australia (HILDA) survey, covering more than 250,000 observations of people ages 25–64.

Across the period, HE degree holders earned an average hourly wage premium of roughly 46%, while VET qualifications yielded an average premium of around 10%.

Comparing only the endpoints of 2001 and 2024 shows relatively little net change in hourly wage premiums, while the year-by-year analysis found a rise followed by a prolonged decline.

Hourly wage returns increased through the early 2000s and peaked around 2010, when HE graduates earned about 53% more than people with Year 12 or lower qualifications, while those with VET qualifications earned about 14% more. By 2024, those premiums were 38% for HE graduates and 2% for VET graduates.

The decline was sharper when researchers examined weekly earnings, which account for both hourly wages and the number of hours worked. The weekly earnings premium for HE graduates peaked at 71% around 2008 before falling to 40% by 2024. For VET graduates, it peaked at 32% in 2005, then declined to 3% in 2024.

Lead researcher Dr. Tinh Doan from Adelaide University’s School of Economics said the accelerated decline in weekly relative earnings reflected reduced work hours and underemployment.

“This erosion coincides with rapid growth in the number of post-school graduates, structural shifts toward lower-productivity sectors, and emerging skill mismatches—for example, approximately 30% of high-skilled workers are now employed in middle- or low-skilled roles,” Doan said.

“Over the past two decades, Australia’s post-school education system has expanded rapidly, with tertiary attainment becoming increasingly common among working-age adults.

“Educational returns reflect how qualifications are valued in the labor market, particularly when the supply of skilled workers grows faster than the economy creates high-skilled jobs.”

For students, the findings suggest that field of study, career opportunities and skill alignment are becoming increasingly important.

“Meanwhile, universities and VET providers should ensure programs keep pace with changing workforce demands,” Doan said.

The findings come as Australia seeks to substantially increase tertiary participation. The Australian Tertiary Education Commission (ATEC), established in July 2025, is supporting a national target for 80% of the working-age population to hold tertiary qualifications by 2050.

Doan said increasing access to post-school education should be accompanied by economic and labor-market policies that increase demand for highly skilled workers.

“These findings highlight the need for education policy that is closely aligned with labor-market conditions to ensure both efficiency and equity in Australia’s post-school education systems,” Doan said.

“Expanding tertiary participation without parallel growth in demand for high-skilled, non-routine work could place further downward pressure on relative wages and increase the risk of graduate underemployment.

“Education expansion therefore needs to be supported by broader economic development strategies that create high-productivity, high-skilled jobs.”

Doan said further research is needed to understand how returns differ across fields of study, occupations and cohorts, such as migrant workers compared with the local population.

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Swati Mestri

Swati Mestri holds a bachelor’s degree in Electronics Engineering and has worked as a content editor since 2019. She has experience editing research documents across technology, health care, and materials science, and has a particular interest in technology and space.

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Andrew Zinin

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