Role and Impact of Education on the
Labour Market in Australia
This article examines the role and impact of education on the labour market in Australia. Education plays an important role in a country’s economic growth. It is used as a strategic tool to combat poverty for individuals to gain employment that offers increased remuneration and to enhance the quality of lives.
The Australian Bureau of Statistics (2011) categorizes blue-collar occupations as encompassing technicians, trades workers, machinery operators, drivers, and labourers. The blue-collar industries contributed to 27.1% of Australia’s gross domestic product (GDP) in 2024 (Reserve Bank of Australia, 2024). Furthering this economic narrative, Deloitte (2020) has highlighted the leverage effect of educational investments on the economy, stating that each dollar invested in university research and development yields a five-fold return in GDP in present value terms.
Labour outcomes are evaluated mainly by unemployment/ employment rates as well as scale of wages and earnings. Research indicates that higher levels of education correlate with improved employment prospects, offering individuals a more resilient position in the face of labour market fluctuations or crisis (Ionescu, 2012). This trend underscores the value of educational attainment in bolstering job security and economic stability for the workforce. Additionally, research conducted by Gangl (2000) within European contexts has shown an inverse relationship between unemployment rates and increasing level of education/qualification.
More than half of the GDP growth in OECD countries over the past decade is related to labour income growth among tertiary educated individuals. The most attractive wage growth, for people with tertiary education, are found in Australia, Luxembourg, and Ireland (OECD, 2014). Even during the Global Economic Crisis in 2008, labour income growth among tertiary graduates generated a positive impact on GDP of more than half a percentage point per year. While GDP shrank by almost 4 percent across OECD countries in 2009, labour income growth among tertiary graduates still made a positive contribution to GDP of 0.4 percent (OECD, 2014).
To promote economic growth in coming years, compulsory education, vocational education, training and higher education for Australia should be made more accessible and affordable. On the contrary, there is a concerning trend at the federal level toward increasing the proportion of education costs borne by students (Matsushita, 2006). While government funding for private schools in Australia has increased almost five-fold the rate of public-school funding in the past decade, public schools still face a funding shortfall of $74 billion (Ore, 2022). Additionally, reducing higher education enrolments could significantly impact economic growth, potentially decreasing the annual growth of GDP per capita by as much as 12.6 percent of the current 1.5 percent growth rate (Hannam, 2024). These trends underscore the need for a balanced approach to funding and policy that supports all sectors of the education system.
References
Australian Bureau of Statistics. (2011, October 11). Australian Labour Market Statistics, Oct 2011. https://www.abs.gov.au/ausstats/[email protected]/Previousproducts/DB1BFFF6CB753F05CA257922000E2865?opendocument
Gangl, M. (2000). Education and labour market entry across Europe: The impact of institutional arrangements in training systems and labour markets. Working papers = Arbeitspapiere. IDEAS, 25. http://files.eric.ed.gov/fulltext/ED462544.pdf
Hannam, P. (2024, March 7). GDP figures show Australia’s economy grew by just 0.2% in the December quarter. The Guardian. https://www.theguardian.com/business/2024/mar/06/australia-gdp-december-quarter-2023-reserve-bank-interest-rates
Ionescu, A. M. (2012). How does education affect labour market outcomes. Review of Applied Socio-Economic Research, 4(2), 130–144. http://reaser.eu/RePec/rse/wpaper/17_Ionescu_Reaser4_130-144.pdf
Matsushita, S., Siddique, A., & Giles, M. (2006). Education and Economic Growth: A Case Study of Australia. (Economics Discussion Papers; Vol. 6, No. 15). UWA Business School.
OECD. (2014). Highlights from Education at a Glance. Highlights From Education at a Glance. https://doi.org/10.1787/2076264x
Ore, A. (2022, February 15). Private school funding in Australia has increased at five times rate of public schools, analysis shows. The Guardian. https://www.theguardian.com/australia-news/2022/feb/16/private-school-funding-has-increased-at-five-times-rate-of-public-schools-analysis-shows
Reserve Bank of Australia. (2024). Composition of the Australian economy. https://www.rba.gov.au/snapshots/economy-composition-snapshot/pdf/economy-composition-snapshot.pdf?v=2024-04-02-20-32-18
World Bank Open Data. (2022). World Bank Open Data. https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2022&locations=AU&start=2021