Labour Market Performance of Indigenous University ... · reviews the literature on the labour market outcomes of the Indigenous Australians, and ... associated with adverse effects

Labour Market Performance of Indigenous University Graduates in Australia: An ORU Perspective*

Ian W. Li,TheUniversityofWesternAustralia

Abstract Indigenous Australians experience disadvantage in many aspects of life, including the areas of health, socioeconomic and labour market status. This study uses data from the Graduate Destination Surveys 1999 to 2011 to assess the performance of Indigenous Australian graduates relative to non-Indigenous Australian graduates, using the Overeducation, Required, and Undereducation framework. Indigenous Australians are found to be less likely to be overeducated, and have comparable earnings with their non-Indigenous counterparts. On the whole, Indigenous graduates perform positively in the labour market and initiatives targeted at Indigenous participation and completion of higher education should be supported.

Keywords:Indigenous,disadvantage,wagegap,highereducation,graduatesalaries,overeducation

JELClassification:J310,J700,J150,I240,I280

1. Introduction IndigenouspeopleinAustraliahavebeenfoundtoexperiencedisadvantagesacrossseveralmeasures,includinghealth,educationandwealth(SteeringCommitteefortheReviewofGovernmentServiceProvision,2011).AsAltman(2007,p.2)putsit,‘…this population demonstrated many characteristics, according to the 2001 Census, that

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Volume 17 • Number 2 • 2014 • pp 87 - 110

Addressforcorrespondence:IanW.Li,SchoolofPopulationHealth,TheUniversityofWesternAustralia,M431,35StirlingHwy,Crawley,WA6009.Email:[email protected]:The author acknowledges helpful comments froman anonymous reviewerfrom the National Centre for Vocational Education Research, participants from the 2014AustralianLabourMarketResearchworkshop,andresearchassistancefromJiaweiSi.TheauthorisgratefulforfundingsupportfromtheNationalCentreforVocationalEducationResearchanddataprovisionfromGraduateCareersAustralia.Viewsexpressedinthispaperarethoseoftheauthor and shouldnotbe attributed to theNationalCentre forVocationalEducationResearch,GraduateCareersAustraliaorTheUniversityofWesternAustralia.*Anearlierversionofthispaperwaspresentedatthe2013/14ALMRWorkshopattheUniversityofMelbourneinFebruary2014.©CentreforLabourMarketResearch,2014

88AUSTRALIAN JOURNAL OF LABOUR ECONOMICSVOLUME 17 • NUMBER 2 • 2014

are distinctly Third World: nearly 40 per cent are aged less than 15 years (reflecting high fertility); only eight per cent live beyond 55 years of age (reflecting very low life expectancy); levels of formal employment are extremely low (only 18 per cent have wages and salaries as their main source of income and another 28 per cent work for the dole); education levels are low (only one in 20 has a post-school qualification in very remote Australia); household income levels are low; and people are poorly housed, often living in extremely over-crowded conditions’.

Furthermore,areportfoundthatIndigenousAustralianshadalifeexpectancy10yearsshorterthannon-IndigenousAustralians,amongotherhealthdisadvantages(Thomsonet al.,2011).Thus,IndigenoushealthhasbeenidentifiedasapriorityareaforreforminAustralia,andpolicymeasuressuchasthe‘ClosetheGap’campaignand the prioritising of Indigenous health research have been initiated to addressthedisadvantages IndigenousAustralians face inhealth (AustralianHumanRightsCommission,2009;NHMRC,2012).

Substantialgapscanalsobe found forother socio-economic indicators forIndigenousAustralians.AstudybyHunter(2006)foundthatIndigenouspeopleweretwicemorelikelytobeinthelowestincomequintile,andfourtimeslesslikelytobeinthehighestincomequintile.Furthermore,twoprominentfactsrecentlyuncoveredintheliteratureevaluatingthelabourmarketarethatIndigenousAustraliansexperiencemuchpoorerlabourmarketoutcomesandhavelowerincomes,comparedtotheirnon-Indigenouspeers(ABS,2011;Ross,2006;Tayloret al.,2012).

It is apparent, therefore, that IndigenousAustralians facedisadvantages onmanyfronts.Manystudieshavealsoarguedthatthereisalinkbetweenthesesocial,economic and health factors.Marmot (2005), for example, argued that the poorerhealthoutcomes facedby IndigenousAustralianscanbe substantially attributed totheirdisadvantageouspositiononthesocialgradient.Thisissupportedbyevidencein other studies, which document the impacts and interaction among these threefactors(Grossman,1976;Kawachiet al.,1997;RossandWu,1995;Schnittker,2004).StrategiestoaddressIndigenousdisadvantagewould,therefore,needtobediverseandincludechangestoeducationandotherpoliciestargetedatsocio-economicoutcomes.

It had been noted that Indigenous Australians have much lower rates ofparticipation in higher education compared to non-Indigenous Australians. Whilegains have been made in closing the gap in Indigenous educational participationandattainment,Indigenoushighereducationparticipationisstillsubstantiallylowerthanforthenon-Indigenouspopulation(Altmanet al.,2008;SCRGSP,2011).Thisisdespite thefinding thatauniversitydegreebrings the largesteconomicbenefitsforIndigenousstudents(Biddle,2007).

In2012,theReviewofHigherEducationOutcomesandAccessforAboriginaland Torres Strait Islander People (hereafter known as theReview)was completed(DIISRTE,2013b).ThisreviewfoundthatIndigenousparticipationinhighereducationwaswellbelowtheirrepresentationintheworkingagepopulation,andhencecalledfor collaborative efforts between governments, universities, enterprise, schools andIndigenous communities to improve Indigenous participation in higher education.Following theReview, theAboriginal andTorres Strait IslanderHigher EducationAdvisory Council was convened to provide policy advice on Indigenous higher

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Labour Market Performance of Indigenous Univers ity Graduates in Austral ia: An ORU Perspective

education, researchandresearch trainingissues.Therehavealsobeenotherhighereducationpolicyprograms thatareaimedat increasing Indigenousparticipation inhigher education, as well as higher education academic outcomes. These includetheprovisionofawardsorscholarshipswhichsupportIndigenousstudentsinhighereducation,settingupofIndigenousHigherEducationCentresinuniversities,provisionof grants to higher education providers through the Indigenous Support Program,and the Indigenous Tutorial Assistance Scheme for Tertiary Tuition which fundssupplementarytuitiontoIndigenousstudents(DIISRTE,2013a).1

Thus, this study will contribute to the literature and inform IndigenoushighereducationpolicyinAustraliabyexaminingtheearlylabourmarketoutcomesof Indigenous graduates, fourmonths after graduation. In doing so, itwill provideinformationonthelabourmarketabsorptionandoutcomesofIndigenousgraduatesinAustralia.Thisinformationisimportantforatleasttworeasons.First,thelabourmarketoutcomesof Indigenousgraduates are a reflectiononhowwell universitieshave prepared them for the labourmarket. Second, asmentioned above, targetingIndigenousdisadvantagerequiresamulti-prongedapproach,anditisalsoimportanttoassesstheperformanceofIndigenousgraduatesinthelabourmarket.Asthebenefitsassociatedwithattainingadegreequalificationwouldincludeincreasedearnings,itwouldbeusefultohaveinformationonthelabourmarketactivityandperformanceofIndigenousgraduates.

Inaddition,thelabourmarketperformanceoftheIndigenousgraduatesinthisstudywillbeassessedusingtheovereducation,requirededucationandundereducation(ORU) framework. The ORU framework considers whether individuals areappropriatelymatchedtotheir jobswhenconsideringtheireducationlevels.Recentstudies of theAustralian graduate labourmarket, such as that byKler (2005) andLi andMiller (2012; 2013b) have found large incidences of overeducation, wheregraduatesareemployedinjobsthatarebelowtheirlevelofeducation.Furthermore,the earnings penalties associatedwith overeducation have been found to be rathersubstantial.Therefore,ananalysisoftheIndigenousgraduatesfromthislabourmarketperspectivewillbeuseful.2

Theremainderofthispaperisorganisedinthefollowingmanner.Section2reviewstheliteratureonthelabourmarketoutcomesoftheIndigenousAustralians,andrecentAustralianstudiesongraduateovereducation.Section3describesthedatausedinthestudy,presentsthedefinitionandmeasurementofovereducation,anddescribesthe estimation models. The results of the analyses are presented and discussed insection4,withaparticularfocusonthedifferencesintheprobabilityofovereducationand earnings for Indigenous and non-Indigenous graduates. Section 5 discusses theimpactofthefindingsonpolicy,directionsforfurtherresearch,andconcludes.

1NotethattheseprogramsarespecificallytargetedatIndigenousparticipationandoutcomesinthehighereducationsector.OtherprogramsthattargetIndigenoussocioeconomicdisadvantage,suchastheRemoteJobsandCommunitiesprogram(formerlyknownastheCommunityDevelopmentEmploymentProjects)exist.2 It isnoteworthythatstudies(suchasBattuet al.,1999)havefoundthatovereducation isalsoassociatedwithadverseeffectsonnon-monetaryoutcomessuchasjobsatisfaction,althoughthiswillnotbeexploredinthecurrentpaperduetodataunavailability.


2. Previous research Indigenous disadvantage in the labour market A substantial literature examines the labour market outcomes of IndigenousAustralians, often in comparison with non-Indigenous Australians. Borooah andMangan(2002),forexample,foundthatIndigenousAustraliansweredisadvantagedin securingemployment inhigher levelprofessional andmanagerial jobsandweredisproportionatelyrepresentedinlowerlevelsemi-skilledorunskilledjobs.However,one important finding from Borooah and Mangan’s (2002, p.46) study was thatIndigenous femaleswere primarily disadvantaged in the labourmarket as a resultof lower levels of attributes such as education, and hence argued that this labourmarketdisadvantagemightbeovercomerelativelyeasilythroughinvestmentsintheirhumancapitalendowments.ThiswasalsonotedbyNorris(2001),whoalsofoundthatIndigenousAustralianshavebeenclosing thegap in termsofskillsattainmentandemploymentinskilledoccupations,althoughsomegapsstillremain.

Further,Norris (2001)noted thatAustralianIndigenousdisadvantagecouldalsobeobservedinarangeofotheremploymentoutcomes.Norris’s(2001)studyuseddatafromtheAustralianBureauofStatistics,andshowedthatIndigenousAustralianshaveanunemploymentrateuptosixtimesthatofothernon-IndigenousAustralians.Whilethisdiscrepancyinunemploymentwasnarrowedwhenthefocuswasturnedto individuals with higher education qualifications, a substantial gap remains.Specifically,theunemploymentrateforIndigenousAustralianswasroughlytwicethatfornon-IndigenousAustralians,whenconsideringthosewithuniversitydegreesanddiplomas(Norris,2001).Thesegapsinemploymentoutcomescurrentlystillpersist,according to data from the 2011AustralianCensus,where the unemployment ratefor IndigenousAustralianswas reported tobemore than three times that for non-IndigenousAustralians,at17percent(Thomsonet al.,2012).

Substantialdisparities in incomewerealso reported inpreviousstudies. Inparticular,IndigenousAustralianshadmedianincomesroughly85percentofthatforallAustralianworkers,acrossdifferenteducation levels (Norris,2001). Inaddition,theincomegapwasmorepronouncedincertainsub-groupsoftheIndigenoussample.Forexample,theincomegapforIndigenousAustraliansaged25to44yearswasthelargest,andIndigenousAustraliansinthisagegrouphadmedianincomesthatwereonly 61 per cent of allAustralianworkers in the same age group.The IndigenousincomegapwasalsolargerfortheIndigenouspeopleslivinginremoteareas.

AnearlierstudybyDaly(1994)examinedthedeterminantsoftheIndigenousincomegapinAustralia,andmadeanumberofimportantfindings.First,IndigenousAustralianswere less likely to be in full-time employment. Second, they also hadincomeslessthantheirnon-Indigenouscounterparts.Theincomegapwaslarger,ataroundninepercent, forIndigenousmales,whileIndigenousfemaleshad incomesup to 6.5 per cent lower, relative to the non-Indigenousmale and female samples,respectively.Third,andmoststrikingly,adecompositionanalysisofthisincomegapfoundthattheIndigenousincomedisadvantageissubstantiallycausedbydifferencesin human capital endowments, such as education. This finding was particularlyrelevantforIndigenousfemales,asDaly(1994)foundthathumancapitalendowmentdifferencesalsoaccounted for theentire incomegapbetween Indigenousandnon-

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Indigenous females.Thus, it is important to lookat the impactofeducationon thelabour market outcomes for the Indigenous people in Australia, particularly forIndigenousgraduates,astheamountofinformationinthisareaismuchmorelimited.

The ORU framework Conventionalstudiesof labourmarketoutcomesgenerallyadopt thehumancapitalframework. A large amount of studies have been devoted to the analysis of howeducation,amongotherfactors,impactonearnings.Ineffect,theseempiricalstudiesyieldestimatesoftherateofreturnoneducation,andasurveyofthis literaturebyPsacharopoulosandPatrinos(2004)concludesthatinvestmentineducationgenerallyyieldstrongreturns.

Inmorerecentyears, therehasbeensubstantial interest inhowindividualsarematchedtotheirjobsinthelabourmarket.ThisliteratureisknownastheORUliterature,whichoriginatedfromFreeman’s(1976)seminalstudyofcollegegraduatesintheUS,althoughthemethodologicalframeworkusedincontemporarystudiesofORUisbasedonDuncanandHoffman(1981).

StudiesofORUareconsideredanextensionofthehumancapitalmodelinthatitconsidersthelabourmarketeffectsoftheutilisationofhumancapitalendowmentssuchaseducation,inadditiontotheeffectsofobtainingeducation.Inotherwords,theORUapproachintroduceslabourmarketdemandspecificationsintothehumancapitalmodel,whichhastraditionallycapturedtheearningseffectsoflabourmarketsupplycharacteristics. Therefore,while conventional empirical studies examine the rate ofreturnonattainmentofeducation,studieswhichusetheORUframeworkalsoanalyseshow the rateof returnoneducationareaffectedbyhowwell (ornot) theeducationobtained is utilised. Briefly put, conventional studies estimate the returns to actualeducation,whereasstudiesusingtheORUspecificationestimatethereturnstosurplus(overeducation),usual(required)andlower(undereducation)amountsofeducation.

IntheORUframework,whetheranindividualismatchedormismatchedtohis or her job is based on the education level attained in comparison to a definedbenchmark that captures the requirements of the job.3 Thus, individuals may begroupedintooneofthreecategories.First,individualswhoattainededucationallevelshigherthanthebenchmarkfortheiroccupationsareconsideredovereducated.Second,individualswhoattainededucationallevelslowerthantheeducationbenchmarkfortheir occupations are considered undereducated. Finally, individuals who attainededucationallevelsthatarethesameastheeducationalleveldefinedasthebenchmarkfortheiroccupationsareconsideredcorrectlymatched.

ThesubstantialliteratureonORUhasalsoledtodivergenceintheempiricalframeworkintermsofdefiningORUstatusandtheestimationmethodology.Thesehavebeendiscussed at length in earlier studies.Hartog (2000) provides a detailedexplanationofthevariousapproachesgenerallyusedindefiningORU,aswellastheprosandconsassociatedwitheachapproach.Nevertheless,Hartog(2000)hasnoted

3Insomestudies,theindividual’seducationisexpressedintermsofyearsofschoolinginsteadoflevels.However,thereviewoftheliteratureherewillexpresstheconceptsintermsofeducationlevels,wherepossible,toavoidconfusionasthisstudyuseseducationlevelsintheanalysis.Itisnotedthatthequalitativemeaningsdonotdifferregardlessoftheconceptsused.


thatthechoiceofapproachisdictatedbydataavailability.Discussionoftheoreticallabourmarket concepts and how they relate toORU, aswell as various empiricalframeworksandmethodologicalissuescanbefoundinMcGuinness(2006).Hartog(2000)andMcGuinness(2006)havebotharguedthatnotwithstandingthediversityofapproachesandestimationstrategiesintheORUliterature,thefindingswithrespecttoearningseffectsarequalitativelysimilarandrobust.

Two important findings from the literature are highlighted here. First, theincidenceofeducation-jobmismatch(overeducationorundereducation)isgenerallyquite high. Hartog’s (2000) survey of the ORU literature reported incidences ofovereducation ranging from 18 to 42 per cent, whileMcGuinness’s (2006) surveyfoundincidencesofupto45percent.Thesesurveyslookedatstudiesfromdevelopedcountries,includingtheNetherlands,Portugal,Ireland,theUKandtheUS.Thehighincidences of educationmismatch have also been reported inmore recent studies(CarrollandTani,2012;LiandMiller,2013b;Tsai,2010).

Second,whiletheovereducatedexperiencepositivereturnsontheirsurpluslevels of education, these returns are smaller than the returns to required levels ofeducation.Thatis,anovereducatedindividualcanexpecthigherearningsonthebasisofhisorherhigherlevelofeducation(comparedtosomeoneelsewithlowerlevelsofeducation),butwillearnlessthanhisorhercounterpartwhohasthesamelevelofeducationandisworkinginajobthatmatchestheeducationlevel.Miller(2007),who surveyed theAustralian literature, noted that these differences in the returnstoeducationareevenmoreexaggeratedwhensub-groupsofthepopulationsuchasmigrants,areexamined.

Recent studies have found that overeducation remains substantial in theAustralianlabourmarket,particularlyforuniversitygraduates.Kler(2005)reportedthataround46percentofAustraliangraduateswereovereducated.AnotherstudybyLiandMiller(2013b)reportedanaverageincidenceofovereducationof45percentforAustralianbachelor’sdegreegraduates,from1999to2009.CarrollandTani(2012)havefoundthatbetween24and37percentofAustralianuniversitygraduateswithabachelor’sdegreewereovereducatedshortlyafterthecompletionoftheirstudies,in2007.Thesefiguresarecomparable,andindicatethatovereducationisratherprevalentin the Australian graduate labour market. However, Carroll and Tani (2012) alsofoundthattheincidenceofovereducationwasreducedthreeyearsaftergraduation,especiallyforyoungergraduates.

A separate study by Li and Miller (2013a) explored the determinants ofovereducationforbachelor’sdegreegraduates inAustraliausinga logitmodel,andfound that the university group attended hadmodest effects on the probability ofovereducation, although these do not appear to be linked to university prestige asmeasuredbyuniversityrankings.Fieldsofstudy,however,arestrongdeterminantsofgraduateovereducation,withgraduatesfromthevariousfieldsofstudyexperiencingup to 57 percentage points difference in the probability of being overeducated.Specifically,graduatesinthenaturalandphysicalsciencesfieldweremostlikelytobeovereducated,whilegraduatesfromnursingweretheleastlikelytobeovereducated.

Thesestudieshavealsouncoveredadverseearningseffectsassociatedwithovereducation.Kler(2005),forexample,reportedthatAustraliangraduatesexperienced

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areturnofaroundfivepercenttosurpluseducation(overeducation),butthiswasmuchlower than the returns to required education, at around 12 per cent.Li andMiller(2013b)reportedthatovereducatedgraduatesexperiencedanearningsdisadvantageof12percent relative to theirwell-matchedpeers.Theearningsdisadvantagesareexacerbatedwhentheextentofovereducationisgreater(LiandMiller,2013a).Giventhe prevalence of overeducation in theAustralian graduate labourmarket, aswellas the substantial earnings disadvantage associatedwith it, a study for IndigenousgraduatesfromtheORUperspectivewouldaddvaluetotheliterature.

3. Data and methodology Data The study uses data drawn from the 1999-2011waves of theAustralianGraduateSurvey(AGS),whichisanannualcensusofallgraduatesfromAustralianuniversities.The AGS is a cross-sectional dataset which offers a rich array of information ongraduates’ demographics, as well as university and employment characteristics.GraduatesfromAustralianuniversitieswhohavecompletedrequirementsforahighereducationqualificationaresentacopyofthesurveybytheirinstitution.Thesurveyoccurs around fourmonths after course completion, and takes place in April andOctoberofeachyear.Non-respondentsarefollowedupwithphonecallsoremailsatthediscretionofthesurveymanagerateachinstitution.

While the survey is administered by each individual institution, overallresponsibility and oversight of the survey lieswithGraduateCareersAustralia. Inparticular,Graduate CareersAustraliamaintains the codingmanual used for dataentryandtheCodeofPracticegoverningtheuseofthedata.Thecodingofthedatais typicallyperformedat the institution level,andthedata is thensent toGraduateCareersAustraliaforcollationintoanationaldataset.Theresponseratesover1999to2011havebeeninthemid-60srange,withanaverageresponserateof62percent.AstudybyGuthrieandJohnson(1997)hadexaminedissuesrelatingtonon-responsetotheAGS,andconcludedthattheAGScanbeconsideredtobenationallyrepresentativeofthegraduatelabourmarketinAustralia.

TheAGS1999-2011hadatotalof1,440,513respondents.Inthepresentstudy,thesamplewillberestrictedtoAustraliangraduateswhohadcompletedabachelor’spassdegreeorhigherqualification,andwhowereemployedinAustraliaatthetimeofthesurvey.Furthermore,graduateswithmissinginformationonthevariablesusedintheanalysisareremovedfromthesample.Thevariablesusedintheanalysisarehourlywage,levelofqualification,age,doubledegree,sectorofemployment,industryofemployment,occupation,lengthofemploymentcontract,hoursofwork,languagebackground,residencystatus,genderandself-employmentstatus.Thereare711,198observationsinthefinalsample.

Measurement of ORU The study adopts the ‘job analysis’ approach in definingORU (seeHartog, 2000,foradetailedexplanationof thisapproach).The ‘jobanalysis’approachusesa jobdictionary,whichindicatesthelevelofeducationorqualificationnecessarytoperformajoboroccupation.Theindividual’sactualeducationalattainmentisthencomparedto the education required by the job dictionary to perform his or her occupation.


Individualswhohaveeducationlevelshigherthanthatrequiredintheiroccupationsare then considered overeducated, while those with education levels below thatrequiredintheiroccupationsareconsideredundereducated.Meanwhile,individualswitheducationlevelsthatmatchtherequirededucationlevelfortheiroccupationsareconsideredcorrectlymatched.

TheAGS has coded occupation data according to the Australian StandardClassification ofOccupations (ASCO) from 1999 to 2005, and theAustralianNewZealandStandardClassificationofOccupations(ANZSCO)from2006to2011(ABS,1997;ABS,2011).For thepurposesof the analysis, theoccupationdata from2006to 2011were recoded from theANZSCO format into theASCO format, using theANZSCO toASCO correspondence table published by theABS (ABS, 2009). Theminimum levelsof education required for eachoccupationwerealsodefined in theASCO,andthesewereusedtoassesstheORUstatusofthegraduates.TheASCOstatesthattheminimumlevelofeducationforthevariousoccupationscouldbeacertificate,diploma or bachelor’s degree. For example, associate professionals are classified asoccupationswherecertificatesareminimumqualifications.Conversely,accountantisanoccupationwheretheminimumlevelofqualificationisabachelor’sdegree.

Asthelowestqualificationofthegraduatesinthisstudyarebachelor’spassdegrees,anygraduateinacertificateordiplomaleveljobareautomaticallyclassifiedas being overeducated.Bachelor’s pass degree graduateswhowork in a bachelor’sdegreeleveljobareconsideredcorrectlymatched.Finally,postgraduatesarealso,bydefinition, consideredovereducated, as theywouldhave education levels above thehighestjobrequirementofbachelor’spassdegrees.4

Estimating equations Thedeterminantsofovereducationwillbeexploredwithabinarylogitmodel,whichcanbeexpressedas:

ORU*i =bXi+ei,i=1,…,n(1)

where ORU*i is a latent index representing the propensity of individual i to be

overeducated,Xi denotesavectorofgraduatecharacteristicsthatarehypothesisedtoimpactontheprobabilityofovereducationandbdenotesavectorofparameters tobeestimated.ORU*

i isnotobserved,but ratherabinary indicatorvariableORU*i is

measured,where:

ORUi =1where ORU*i ≥0(2)

ORUi =0where ORU*i <0

4Anearlier studybyLi (2013)adopteda slightlydifferent approach, anddefined the requiredlevelof educationbyusingaverage levelsof education in eachoccupationbasedondata fromtheAustralianCensus 2006. This approachwas found to yield similar estimates and findingscomparedtotheuseofASCOdefinedminimumlevelsofeducation,suchasinthepresentstudy.EstimatesofORUarethusrobusttoapproachesusedindefiningovereducation,apointthatHartog(2000)hadalsomade.

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ThedeterminantsofORUarethenestimatedusingthebinarylogitmodel:

Pr(ORUi =1|Xi ) =(3)

Earningsdifferencesofnon-IndigenousandIndigenousgraduatesinAustraliawill be analysedwith anORUmodel of earnings using theVerdugo andVerdugo(1989)specification.Thiscanbeexpressedas:

log(wi )=b1Zi+b2indigi+b3educi+b4expi+b5Do

i +ei(4)

wherelog(w)isthenaturallogoftherealhourlywagein2011dollars,Zrepresentsavectorofcharacteristicscorrelatedwithearnings,indigisadummyvariabledenotingIndigenous status, educ represents a vector of dummy variables for the level ofattainededucation,expdenotesageanditssquaredtermwhichareusedasproxiesforlabourmarketexperience,andD oisadichotomousvariableindicatingovereducationstatus(D o).

4. Results Descriptive statistics Selected summary statistics relating to personal, education and employmentcharacteristicsofthesamplearepresentedintable1.Commentsonsomevariablesofinterestareoffered.First,theproportionofIndigenousgraduatesinthesampleisverylow,at0.7percent.Thisfigure iscommensuratewithfigureson IndigenoushighereducationparticipationintheReviewofHigherEducationAccessandOutcomesforAboriginalandTorresStraitsIslanderPeoplereport(DIISRTE,2013b).Specifically,theReviewnotedthattheIndigenouspeopleaccountedforonly1.4percentofuniversityenrolmentsin2010,andalsonotedthatonly40.8percentofIndigenousstudentswhocommencedtheiruniversitydegreein2009completedthedegreeby2012.

Figuresfromthe2011CensusindicatethattheIndigenouspeopleaccountforaround2.5percentoftheAustralianpopulation,andtheyarethusunderrepresentedin higher education completions (ABS, 2012).While female representation in thesampleishighforthenon-Indigenoussample,at62percent,itisevenhigherfortheIndigenoussample,at67percent.ThehighproportionoffemaleIndigenousgraduateswasalsonotedintheReview.ThemeanageofIndigenousgraduatesisalsohigher,at33years,comparedto30yearsforthenon-Indigenousgraduates.

Second, the Indigenous and non-Indigenous samples attain similar levelsof postgraduate qualifications. However, there are some differences in theirmajorfields studied.While the proportions of each sample who studied agriculture andenvironmentarethesame,modestdifferencescanbeobservedfortheremainingfieldsofstudy.Themostpronounceddifferenceis inthefieldofeducation,where18percentofIndigenousgraduatesarein,comparedto13percentoftheirnon-Indigenouscounterparts. There are also slightly larger proportions of Indigenous graduates inhealth,societyandcultureandcreativearts,comparedtonon-Indigenousgraduates.Conversely,non-Indigenousgraduatesare slightlymore represented in thefieldsofnaturalandphysicalscience,informationtechnology,engineering,architecture,andmanagementandcommerce.

1+ebXi

ebXi


Table 1 - Descriptive statistics

Variable Pooled Non-Indig IndigDemographic characteristicsAboriginalorTorresStraitsIslander(omittedcategory=non-Indigenousgraduates) 0.007 (a) (a)Female(omittedcategory=male) 0.617 0.616 0.670Age(continuousvariable) 29.738 29.720 32.585Agesquared(continuousvariable) 978.619 977.367 1,169.083Physicalormentaldisability(omittedcategory=withnodisability) 0.024 0.024 0.064Non-Englishspeakingbackground(omittedcategory=fromEnglishspeakingbackground) 0.146 0.147 0.077EducationBachelor’spassdegree(omittedcategory) 0.566 0.566 0.598Bachelor’sdegreewithhonours 0.070 0.070 0.058Master’sdegree 0.144 0.144 0.123Otherpostgraduate 0.189 0.189 0.199PhD 0.031 0.031 0.022Doubledegree(omittedcategory=thoseinasingledegreeprogram) 0.088 0.088 0.075Engagedinfurtherstudies(omittedcategory=notengagedinfurtherstudies) 0.188 0.188 0.203Field of StudyNaturalandphysicalscience 0.053 0.053 0.035Informationtechnology 0.037 0.037 0.021Engineering 0.079 0.079 0.062Architecture 0.060 0.060 0.034Agricultureandenvironment 0.046 0.046 0.045Healthandrelatedfields 0.141 0.141 0.151Education 0.138 0.138 0.183Societyandculture 0.190 0.190 0.202Creativeartsandothers 0.086 0.086 0.114Managementandcommerce(omittedcategory) 0.169 0.169 0.152Employment characteristicsHourlywage,log2011dollars 3.238 3.238 3.255Self-employed 0.039 0.039 0.034Employedinpublicsector 0.416 0.415 0.608Employedinprivatesector 0.524 0.525 0.314Employedinallothersectors(omittedcategory) 0.061 0.060 0.078Employmentofoneyearorlonger(omittedcategory=employedfordurationlessthanoneyearoronacasualbasis) 0.707 0.707 0.719Overeducated(omittedcategory=correctlymatched) 0.640 0.640 0.605Observations 711,198 706,555 4,643

Note:(a)denotes‘notapplicable’.

Third,muchlargerproportionsofIndigenousgraduatesareemployedinthepublicsector(61percent) thannon-Indigenousgraduates(42percent).Conversely,lower proportions of Indigenous graduates are employed in the private sector (31percent)comparedtonon-Indigenousgraduates(53percent),whiletheproportionemployed in all other sectors are similar. The mean hourly wage, expressed in

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logarithmicterms,forbothsamplesaresimilar,at3.238and3.255fornon-Indigenousand Indigenous graduates, respectively. In dollar terms, Indigenous graduates havea mean hourly wage that is about forty cents higher than their non-Indigenouscounterparts. This suggests that Indigenous graduates aremarginally better off intermsoflabourmarketearnings,comparedtonon-Indigenousgraduates.

Finally, the proportion of non-Indigenous graduates who are consideredovereducatedis64percent,whichismodestlyhigherthanthe61percentobservedforIndigenousgraduates.Thesefiguresindicatethatovereducationisprevalentforall graduates inAustralia, and also suggest that Indigenous graduates fare betterwithrespecttothislabourmarketoutcome.Thisisexploredingreaterdetailinthenextsection.

Determinants of overeducation for Indigenous and non-Indigenous graduates Theresultsfromthelogitmodelofovereducationarepresentedintable2.Thelogitmodelwasestimatedforthepooledsampleofallgraduates,andthesub-samplesofnon-Indigenous and Indigenous graduates. Panels (i), (iii) and (v) presents the logodds ratio for those samples, respectively,while themarginaleffectsarepresentedinpanels(ii),(iv)and(vi).Thefollowingdiscussionontheresultsofthelogitmodelwillbeconfinedtothatforthemarginaleffects,asadiscussionofthelogoddsratioinadditiontothemarginaleffectsdoesnotaddmuchvalue.

Somegeneralcommentsareofferedwithrespecttotheresultsforthethreesamples. First, the results for the non-Indigenous sample are very similar to thatfor the full sample.This is likely tobedue to thevastnumericalandproportionalrepresentationofnon-Indigenousgraduatesinthefullsample,whoaccountedfor99.3percentofthesample.Hence,subsequentdiscussionwillbemainlyfocussedontheresultsforthenon-IndigenousandIndigenoussamples.

Second,thepseudoR2forthenon-IndigenousandIndigenoussamplesare0.149and0.110,respectively.Therefore,themodelcanbesaidtoestimatetheprobabilityofovereducationbetterfornon-Indigenousgraduates.ThismightalsobeduetothemuchsmallernumberofobservationsintheIndigenoussample.Furthermore,thenumberof statistically significantestimates (at the ten,fiveandonepercent levels) for theIndigenoussampleismuchlessthanthatforthenon-Indigenoussample.Again,thismightbeduetothesmallerIndigenoussample.

Thefirstfindingofimportancerelatestotheprobabilityofbeingovereducatedfor Indigenous graduates, in panels (i) and (ii).The estimatedmarginal effects forIndigenousgraduatesindicatethattheyare6.5percentlesslikelytobeovereducated,relativetonon-Indigenousgraduates.ThisimpliesthatIndigenousgraduatesactuallyoutperformnon-Indigenousgraduateswithrespecttofindingajobthatmatchestheireducationalattainment.

Attentionisnowdrawnto themarginaleffectsestimates inpanels(iv)and(vi), for the non-Indigenous and Indigenous graduates, respectively. Female non-Indigenous graduates have a statistically significant, but economically negligibleestimateofbeing0.8percentmorelikelytobeovereducated.Thisfindingforfemalegraduates,includingpostgraduates,iscomparabletotheresultforbachelor’sdegree


graduates in Li andMiller (2013a). Specifically, Li andMiller (2013a) found thatfemalebachelor’sdegreegraduatesweretwopercentmorelikelytobeovereducatedcompared to theirmalepeers. It is noteworthy that femalegraduates arenotmorelikelytobeovereducateddespitetheirlargerrepresentationinthegraduatepopulation.Female Indigenous graduates are estimated to be three per cent less likely to beovereducatedrelativetomaleIndigenousgraduates.ThisresultindicatesthatfemaleIndigenousgraduatesoutperformfemalenon-Indigenousgraduatesinthisrespect.

Graduateswithadisabilityarefoundtobeslightlylesslikelytobeovereducated,atthreepercent,comparedtograduateswithoutanydisability.However,thisresultisstatisticallysignificantattheonepercentlevelfornon-IndigenousgraduatesbutisinsignificantforIndigenousgraduates.Graduateswhoarefromnon-Englishspeakingbackgroundsaremorelikelytobeovereducated,atanincreasedprobabilityoftwoandfivepercent,fornon-IndigenousandIndigenousgraduates,respectively.Non-Englishspeakingbackgroundisthusassociatedwithmodestlypoorerlabourmarketoutcomesforgraduates,andhasmarginallylargernegativeeffectsforIndigenousgraduates.

Graduateswithdoubledegreesaresubstantiallylesslikelytobeovereducated,at12percent less, forbothsamples,significantat theonepercent level.However,statistically significant estimates for graduates who undertook further study isobservedonlyfornon-Indigenousgraduates,whoarefoundtohaveamodestfivepercentincreaseintheirprobabilityofbeingovereducated,relativetotheircounterpartswhodidnotengageinfurthereducation.

Thefieldofstudyisfoundtobeamajordeterminantofovereducationforthegraduates,withsubstantiallylargeeffectsontheprobabilityofovereducationbeingobservedforbothsamples.Inaddition,theestimatesforbothsamplesarequalitativelysimilar,withthesignofthestatisticallysignificantestimatesbeinggenerallyconsistentacrossbothsamples.Incomparisontomanagementandcommercegraduates,naturalandphysicalsciencegraduatesarefoundtohavemoderatelyhigherprobabilitiesofbeingovereducatedfortheirjobs,atnineandsevenpercent,fornon-IndigenousandIndigenousgraduates,respectively.Conversely,graduateswhomajoredinhealthfieldsofstudyhavemuchlowerchancesofbeingovereducatedby13or14percent,comparedtothesamebenchmarkgroup.ForIndigenousgraduateswhomajoredincreativearts,the increased likelihood of being overeducated relative to Indigenousmanagementandcommercegraduatesisalsofoundtoberathersubstantial,atninepercent.Therearethussubstantialdifferencesacrossthefieldsofstudy,withdifferencesofupto22per cent in theprobabilityofbeingovereducated, forboth thenon-IndigenousandIndigenoussamples.

Beingemployedinthepublicsectorisfoundtoreducetheprobabilityofbeingovereducated for both samples, by around five per cent, relative to the benchmarkgroups of those employed in all other sectors.However, non-Indigenous graduatesemployed in theprivate sector arealso less likely tobeovereducated, althoughnostatisticallysignificanteffectsarenotedforIndigenousgraduatesintheprivatesector.Likewise,beingemployedontermsofoneyearorlongerisassociatedwithatwopercentreducedprobabilityofbeingovereducatedfornon-Indigenousgraduates,relativetonon-Indigenousgraduatesemployedonacasualor short-termbasis.Conversely,nostatisticallysignificanteffectsareobservedforIndigenousgraduatesemployedoncontractsofoneyearormore.

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Table 2 - Estimates from the logit model of overeducation

Full Non-Indig Indig Log odds Marg. Eff. Log odds Marg. Eff. Log odds Marg. Eff.Variables (i) (ii) (iii) (iv) (v) (vi)DemographicsAboriginalorTorres -0.343*** -0.065*** (a) (a) (a) (a)StraitsIslander (-9.958) (-9.960) (a) (a) (a) (a)Female 0.042*** 0.008*** 0.044*** 0.008*** -0.144** -0.030** (6.993) (6.994) (7.199) (7.201) (-1.989) (-1.992)Age 0.234*** 0.044*** 0.235*** 0.044*** 0.107*** 0.022*** (109.334) (113.639) (109.192) (113.517) (4.558) (4.594)Agesquared/1000 -0.002*** -0.000*** -0.002*** -0.000*** -0.001*** -0.000*** (-81.467) (-83.279) (-81.351) (-83.171) (-3.051) (-3.061)Physicalormental -0.175*** -0.033*** -0.174*** -0.033*** -0.146 -0.030disability (-9.499) (-9.501) (-9.351) (-9.352) (-1.079) (-1.079)Non-Englishspeaking 0.106*** 0.020*** 0.106*** 0.020*** 0.255* 0.053*background (13.470) (13.475) (13.356) (13.361) (1.881) (1.885)EducationDoubledegree -0.672*** -0.126*** -0.672*** -0.126*** -0.590*** -0.121*** (-70.466) (-71.402) (-70.274) (-71.207) (-4.681) (-4.724)Engagedinfurther 0.262*** 0.049*** 0.263*** 0.050*** 0.131 0.027studies (34.694) (34.814) (34.718) (34.840) (1.512) (1.514)NaturalandPhysical 0.453*** 0.085*** 0.452*** 0.085*** 0.353* 0.073*Science (30.088) (30.162) (29.964) (30.037) (1.734) (1.735)InformationTechnology -0.493*** -0.093*** -0.493*** -0.093*** -0.540** -0.111** (-31.893) (-31.981) (-31.824) (-31.912) (-2.177) (-2.182)Engineering -0.246*** -0.046*** -0.247*** -0.046*** -0.279 -0.057 (-19.543) (-19.564) (-19.524) (-19.545) (-1.608) (-1.609)Architecture -0.087*** -0.016*** -0.089*** -0.017*** 0.219 0.045 (-6.011) (-6.011) (-6.130) (-6.130) (0.999) (0.999)Agricultureand -0.063*** -0.012*** -0.063*** -0.012*** -0.348* -0.072*Environment (-4.035) (-4.035) (-3.966) (-3.966) (-1.802) (-1.804)Healthandrelatedfields -0.762*** -0.143*** -0.764*** -0.144*** -0.641*** -0.132*** (-66.904) (-67.653) (-66.776) (-67.526) (-4.724) (-4.771)Education -0.300*** -0.056*** -0.303*** -0.057*** -0.129 -0.026 (-27.932) (-27.993) (-28.068) (-28.129) (-1.098) (-1.099)SocietyandCulture 0.200*** 0.038*** 0.200*** 0.038*** 0.113 0.023 (20.397) (20.424) (20.319) (20.346) (0.959) (0.960)CreativeArtsandothers 0.102*** 0.019*** 0.099*** 0.019*** 0.433*** 0.089*** (8.084) (8.086) (7.803) (7.804) (3.108) (3.120)EmploymentSelf-employed -0.123*** -0.023*** -0.122*** -0.023*** -0.327 -0.067 (-7.952) (-7.953) (-7.900) (-7.901) (-1.608) (-1.609)Employedinpublicsector -0.233*** -0.044*** -0.233*** -0.044*** -0.266** -0.055** (-17.596) (-17.618) (-17.497) (-17.519) (-1.980) (-1.983)Employedinprivatesector -0.170*** -0.032*** -0.171*** -0.032*** 0.023 0.005 (-12.897) (-12.906) (-12.914) (-12.923) (0.159) (0.159)Employmentofone -0.086*** -0.016*** -0.087*** -0.016*** 0.042 0.009yearorlonger (-13.570) (-13.573) (-13.643) (-13.647) (0.563) (0.564)N 711,198 706,555 4,643PseudoR2 0.148 0.149 0.110

Notes:Robust‘t’-statisticsarepresentedinparentheses.*,**and***indicatesignificanceattheten,fiveandonepercentlevels,respectively.(a)denotes‘notapplicable’.Themodelincludedcontrolsforindustryofemploymentandyearofgraduation.


In summary, Indigenous graduates have been found to be less likely to beovereducatedcomparedtonon-Indigenousgraduates,byaroundsixpercent.Anumberof determinants of overeducation for the non-Indigenous and Indigenous sampleshave been discussed, with English speaking background, double degree completionandfieldofstudybeingfoundtobe importantdeterminantsofovereducationfor thegraduates.Mostestimatesarequalitativelyconsistentacross theIndigenousandnon-Indigenoussamples,withtheestimatedcoefficientsbeingconsistentlysigned.Modestdifferences,however,existintermsofthescaleofthedeterminantsofovereducationfornon-IndigenousandIndigenousgraduates.Mostimportantly,therelativelypositiveperformanceoftheIndigenousgraduatessuggeststhatmorehighereducationcompletionofIndigenousAustraliansshouldbeencouraged,especiallywhentheirrepresentationinhighereducationcompletionwasfoundinanearliersectiontobetoolow.

Earnings differences of Indigenous and non-Indigenous graduates in Australia Theresultsfromtheestimationofequation(4)arepresentedintable3.Theestimatesforthepooledsamplearepresentedinpanel(i),whileestimatesfornon-IndigenousandIndigenousgraduatescanbefoundinpanels(ii)and(iii),respectively.TheadjustedR2are0.145,0.146and0.091forthepooled,non-IndigenousandIndigenoussamples,respectively.Again, theORUmodelofearningsappears tobeabetterpredictorofearningsvariationforthenon-Indigenousgraduates,comparedtoIndigenousgraduates.In addition, the estimated coefficients for the pooled and non-Indigenous samplesareallsignificantat theonepercent level. Incontrast,someestimatedcoefficientsfor Indigenous graduates are not statistically significant.Nevertheless,most of theestimatedearningscoefficientsforIndigenousgraduatesarestillsignificant,andoftenattheonepercentlevelofsignificance.

ThediscussionoftheresultsfromtheORUmodelofearningsforthevarioussampleswilltakethefollowingformat.First,theIndigenouswagegapwillbediscussed,basedontheestimatesforthefullsampleinpanel(i).Subsequently,thediscussionofresultswillbefocussedontheestimatesforIndigenousgraduates,withcomparisonsdrawnbetweencorrespondingestimatesforthenon-Indigenousgraduates.5,6

Severalfindingsofinterestemergefromtheresultsintable3.First,Indigenousgraduatesareslightlydisadvantagedintermsofearnings,comparedtonon-Indigenousgraduates(seepanel(i)).Specifically,Indigenousgraduatesearnthreepercent lesscomparedtonon-Indigenousgraduates.However,thiswagegapisrelativelylowwhencomparedtootherstudiesontheIndigenouswagegap,suchasDaly(1994)andNorris(2001).Onthisbasis,itappearsthatIndigenousgraduatesfarereasonablywellinthegraduatelabourmarket,andthusmoreIndigenousrepresentationinhighereducationshouldbeencouraged.However,onefurtherissuethatcanbeexploredinthisregard5Otherresultsforthepooledsamplefrompanel(i)willnotbediscussed,astheyareverysimilartotheresultsfornon-Indigenousgraduates.6 Chow tests for statistical differencewere also conducted to see if the estimated coefficientsdifferedbetweenthenon-IndigenousandIndigenoussamples.Thisrevealedthatonlythreeoutof the 26 coefficients in table 3were statistically different for non-Indigenous and Indigenousgraduates.Thesehavebeendenotedbya+besidethevariablenames.ItcanalsobeconcludedthatthedeterminantsofearningshavesimilarimpactsonIndigenousandnon-Indigenousgraduates.

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relates to the differences in the Indigenous wage gap, if any, for the graduates atvariouspointsonthewagedistribution.Hence,aquantileregressionwasestimatedon equation (4), following the approach ofMcGuinness and Bennett (2007).7 Therationaleforthisapproach,asarguedbyMcGuinnessandBennett(2007),isthattheindividual’spositiononthewagedistributionisanindirectmeasureoftheindividual’sability.UsingthequantileregressionapproachtoexaminetheIndigenouswagegapwillthuspermitanassessmentofhowtheIndigenouswagegapmightdifferamongstindividualsofvaryingability.

EstimatesonthevariableforAboriginalandTorresStraitsIslandergraduatesfromthequantileregressionarepresentedinfigure1.Estimatesarepresentedforthefirsttenpercentiles(1stto10thpercentile),andthereafterforeverydecile(20thto90thpercentile). Statistically insignificant estimates are represented by a hollowmarkerinsteadofablackmarker.Specifically, the5th,9th,10th,20thand90thpercentileestimatesarestatisticallyinsignificant,whiletheremainingestimatesarestatisticallysignificantattheten,fiveoronepercentlevel.Therearetwoimportantfindingshere.Attention isfirstdrawn to thequantile regressionestimatesat eachdecile, startingfromthe10thpercentileandsoon.Mostestimatesbetweenthe10thto90thpercentileofthewagedistributionindicatesthatIndigenousgraduatesearnslightlyhigherwagescomparedtotheirnon-Indigenouscounterparts,totheorderofabouttwopercent.ThisiscertainlyapositivefindingforIndigenousgraduates.TheslightwageadvantageofIndigenousgraduatesalsoappearstoberelativelystable.

Figure 1 - Quantile regression estimates of the Indigenous wage gap

Note:Statisticallysignificantestimatesofatleastthe10percentlevelarerepresentedbythefilledmarkers.

7Buchinsky(1998)describesthequantileregressionmethodology,particularlyforitsapplicationincross-sectionaldatasets.

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ThequantileregressionestimatesforIndigenousgraduatesinthefirstdecileof the wage distribution, however, tell a different story. Estimates from the 1st to10th percentile indicate that Indigenous graduates at this extreme endof thewagedistribution are heavily disadvantaged when compared to their non-Indigenouscounterparts.Specifically,Indigenousgraduatesatthe1stpercentileearnahuge27percentlessthantheirnon-Indigenouspeers.TheIndigenouswagedisadvantageisreducedatthe2ndpercentile,butisneverthelessstillsubstantialat13percent.TheIndigenouswagedisadvantageisstillrathermoderateatthe3rdand4thpercentiles,at nine and seven per cent, respectively. Thus, Indigenous graduates at the bottomofthewagedistributionexperienceratherlargeearningsdisadvantageswhichwerepreviouslyobscuredwhenlookingonlyattheresultsoftheOLSregression.

Hence, it might be said that generally speaking, Indigenous graduates farereasonably well in Australia’s graduate labour market. However, the huge wagedisadvantagefoundforIndigenousgraduatesinthebottomdecileofthewagedistributionsuggestthatsomeactionneedstobetakentoaddresstheselowperforminggraduates.

The second finding relates to the earnings effects of overeducation.Overeducationisfoundtoresultinrathersubstantialearningspenaltiesofaround11percentfornon-Indigenousgraduates,and13percentforIndigenousgraduates.Thus,beingovereducatedisassociatedwithlargereductionsinearnings,ashasbeenfoundinotherstudiesonAustraliangraduates(CarrollandTani,2012;Kler,2005;LiandMiller,2013a;2013b).

Third,attainingahigherdegreequalificationbeyondabachelor’spassdegreeconfers rather substantial earnings premiums, for non-Indigenous and Indigenousgraduates.TheseearningspremiumsassociatedwithpostgraduatestudiesappeartobemorelucrativeforIndigenousgraduatescomparedtonon-Indigenousgraduates.Forinstance,non-Indigenousgraduateswhoobtainamaster’sdegreeearn30percentmorethannon-Indigenousgraduateswhohaveabachelor’spassdegree.Indigenousgraduateswhohaveamaster’sdegreeearn35percentmoreincomparisontonon-Indigenousgraduateswithabachelor’spassdegree.Hence,theearningspremiumforamaster’sdegreeoverabachelor’spassdegreeisfivepercentmoreforIndigenousgraduates.Whilethepremiumsonpostgraduateandhonoursqualificationsfornon-Indigenous graduates are lower than that observed for Indigenous graduates, theyarestillconsideredsubstantial.8Thus,postgraduatequalificationscanbeconsideredagoodinvestment.Note,however,thattheseearningspremiumscanpotentiallybeerodedbybeingovereducated.Forinstance,anIndigenousgraduatewithamaster’sdegreewhoisovereducatedhasanearningspremiumof28percentfromthehigherdegree, but an earnings disadvantage of 11 per cent from being overeducated,resultinginaneteffectof17percent,ceterisparibus.Whiletherearestillpositiveearningseffectsfromtheindividual’spostgraduatequalification,thismightbelowerdue to being overeducated.Graduateswith an honours qualification, butwho areovereducatedhavetheirearningspremiumfromtheirhonoursqualificationcancelledoutbytheovereducationearningspenalty.8Further, recall thatonly theestimatedearningseffecton theattainmentof amaster’sdegreediffered statistically between Indigenous and non-Indigenous graduates, while there are nostatisticaldifferencesobservedfortheotherqualificationsestimated.

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Fourth, Indigenous femalegraduatesexperiencedanearningsdisadvantageofeightpercent.ThisgenderwagegapamongstIndigenousgraduatesismarginallyhigherthanthewagegapof6percentobservedfornon-Indigenousgraduates.

Fifth,rathersubstantialdifferencesinearningsareobservedacrossfieldsofstudy.Incomparisontothebenchmarkgroupofmanagementandcommercegraduates,estimates for other fields of study are typically of a negative sign, indicating thatmanagementandcommercegraduatescommandthehighestearningsinthegraduatelabourmarket, and for both samples of non-Indigenous and Indigenous graduates.Amongst Indigenous graduates, earnings differences of up to 14 per cent for thevariousfieldsofstudyareestimated,whereasthefieldofstudyearningsdifferencesfornon-Indigenousgraduatesistenpercent.Inbothsamples,graduatesfromthefieldsofagricultureandenvironment,healthandrelatedfields,andcreativeartsandotherfieldsperformedpoorlyintermsofearnings.Forinstance,theearningsdisadvantage(incomparisontomanagementandcommercegraduates)forcreativeartsandotherfieldsgraduatesaretenand14percent,fornon-IndigenousandIndigenousgraduates,respectively.Similarly,graduatesfromagricultureandenvironmentearnedseventoninepercentlowerthantheircounterpartsinmanagementandcommerce.9

Sixth, the sector of employment played a substantial role in influencingearnings.Indigenousgraduateswhoworkedinthepublicsectorearnedaroundnineper centmore than their counterpartswhoworked in the reference categoryof allother sectors, while Indigenous graduates who worked in the private sector haveearnings effects that are statistically indistinguishable from the same benchmarkcategory.However,non-Indigenousgraduatesworkingintheprivatesectoralsohaveanearningsadvantageoffivepercentcompared to theirpeers inallothersectors.Beingemployedontermsofoneyearormoreareassociatedwithearningspremiumsforbothnon-IndigenousandIndigenoussamples,of11andsixpercent,respectively.

Thus,anumberofconclusionscanbemadefromthefindingsinthissection.TheIndigenouswagegaphasbeenfoundtoberelativelysmall,ataroundthreepercent.WhenconsideringchangeintheIndigenouswagegapalongthewagedistribution,Indigenous graduates have modest earnings advantages over non-Indigenousgraduates.Furthermore, recall that earlier, the Indigenousgraduateswere found tohave a reducedprobabilityofbeingovereducated.Therefore, Indigenousgraduatesappeartofarereasonablywellinthegraduatelabourmarket.

Generally,Indigenousgraduatesdonotappeartobetreateddifferentlyinthegraduate labourmarket, as theearningseffectsobserved for themarequalitativelysimilar to those estimated for non-Indigenous graduates, and as there are veryfew instances where the earnings effects are shown to differ statistically betweenIndigenousandnon-Indigenousgraduates.Amoderategenderwagegapisobservedforgraduatesfrombothsamples,aswellasratherlargedisparitiesinearningsacrossfieldofstudy.

9TheearningsestimatesonfieldsofstudyaregenerallycomparabletothoseinotherstudiesoftheAustraliangraduatelabourmarket,suchasLiandMiller(2013a)andKler(2005).Therehavealsobeenotherstudies,suchasCorlisset al.(2013),whichestimatetheprivaterateofreturntouniversityeducationforvariousdisciplines.


Table 3 - Results from the OLS model of earnings

Full Sample Non-Indigenous IndigenousVariables (i) (ii) (iii)DemographicsAboriginalorTorresStraitsIslander -0.026*** (a) (a) (-2.684)Female -0.061*** -0.061*** -0.075*** (-42.132) (-41.938) (-3.988)Age 0.045*** 0.045*** 0.042*** (66.696) (66.636) (4.342)Agesq/1000 -0.491*** -0.134*** -0.511*** (-51.674) (-51.587) (-3.709)Physicalormentaldisability -0.049*** -0.050*** -0.010 (-10.189) (-10.258) (-0.212)Non-Englishspeakingbackground+ -0.038*** -0.038*** 0.027 (-18.643) (-18.704) (0.742)EducationOvereducated -0.110*** -0.109*** -0.132*** (-51.284) (-51.102) (-4.377)Honours 0.107*** 0.107*** 0.137*** (35.556) (35.412) (3.136)Master’s+ 0.304*** 0.303*** 0.350*** (105.352) (104.945) (8.785)Otherpostgraduate 0.199*** 0.199*** 0.250*** (75.450) (75.098) (6.802)PhD 0.310*** 0.310*** 0.336*** (68.432) (68.173) (5.771)Doubledegree 0.008*** 0.008*** -0.042 (3.172) (3.310) (-0.880)Engagedinfurtherstudies 0.022*** 0.022*** 0.014 (11.314) (11.317) (0.490)Naturalandphysicalscience -0.074*** -0.075*** -0.046 (-20.472) (-20.445) (-1.090)Informationtechnology -0.045*** -0.045*** -0.103* (-10.812) (-10.718) (-1.945)Engineering -0.019*** -0.019*** -0.043 (-6.603) (-6.574) (-0.870)Architecture -0.040*** -0.040*** -0.073 (-13.660) (-13.585) (-1.469)Agricultureandenvironment -0.074*** -0.074*** -0.094** (-20.813) (-20.749) (-2.029)Healthandrelatedfields -0.062*** -0.061*** -0.097*** (-21.244) (-21.133) (-2.718)Education -0.036*** -0.036*** -0.084** (-13.044) (-12.931) (-2.115)Societyandculture -0.031*** -0.031*** -0.060** (-13.025) (-12.962) (-1.973)Creativeartsandothers -0.096*** -0.096*** -0.135*** (-26.432) (-26.299) (-2.954)EmploymentSelf-employed 0.021*** 0.020*** 0.079 (4.085) (3.990) (1.412)Employedinpublicsector 0.091*** 0.091*** 0.092** (28.564) (28.496) (1.985)Employedinprivatesector 0.049*** 0.049*** 0.052 (15.105) (15.042) (1.056)

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Table 3 - Results from the OLS model of earnings (continued)

Full Sample Non-Indigenous IndigenousVariables (i) (ii) (iii)Employmentofoneyearorlonger+ 0.110*** 0.110*** 0.059** (64.570) (64.608) (2.425)Constant 2.332*** 2.331*** 2.503*** (196.080) (195.675) (14.962)N 711,198 706,555 4,643AdjustedR2 0.145 0.146 0.091

Notes:Theabsolutevalueofheteroscedasticity-consistent‘t’-statisticsarepresentedinparentheses.*,**and***indicatesignificanceattheten,fiveandonepercentlevelsofsignificance,respectively.Themodelincludedcontrolsforindustryofemploymentandyearofgraduation.+indicatesstatisticaldifferencefornon-IndigenousandIndigenousgraduates.

Postgraduate and honours qualifications are found to offer rather largeearningspremiums,andalsofollowahierarchyofearnings that increaseswith thelevelof thequalification.This isobservedforboth Indigenousandnon-Indigenousgraduates. However, the earnings penalties associated with overeducation are alsorathersubstantial,ataround11to14percent.Itshouldthusbenotedthatearningspremiumsfromfurtherstudycanpotentiallybeerodedduetotheearningspenaltiesassociated with overeducation. In the case of honours study, for instance, beingovereducatedisfoundtoessentiallynegatealladditionalearningsassociatedwiththeattainmentofanhonoursdegree.

5. Conclusion Indigenous Australians experience a number of disadvantages across multipleinter-relatedareas.Therefore, inorder to ‘close thegap’ for the Indigenouspeople,solutionsneedtobemultifacetedandtargetedatvariousareas,includinghealthandeducation.Moreover,itwasnotedearlierthatanumberofhighereducationpolicieshadbeenimplementedtoboostIndigenousparticipationandperformanceinhighereducation. This study thus evaluates the labour market outcomes of IndigenousuniversitygraduatesinAustraliafourmonthsaftergraduation.AnothercontributiontotheliteratureliesintheuseoftheORUframeworkinevaluatingthelabourmarketoutcomesoftheIndigenousgraduates.

Thefindingsfromthepresentstudyareveryencouraging,andindicatethatIndigenousAustraliansfarereasonablywellinthegraduatelabourmarket.Indigenousgraduateshavea lower likelihoodofbeingovereducatedbysixpercent,comparedto non-Indigenous graduates. Given that overeducation had been associated withnegativeoutcomes,suchaslowerearningsandjobdissatisfaction(see,forexample,Hartog,2000),thisisapositiveoutcomeforIndigenousgraduates.

ItisalsoimportanttonotethatthedeterminantsofovereducationwerefoundtohavesimilareffectsforbothIndigenousandnon-Indigenousgraduates,withonlymodestdifferencesonthescaleof their impactacrossthetwosamples.ThelabourmarketthusappearstoaffordthesametreatmentofIndigenousgraduatescompared


to non-Indigenous graduates. From these perspectives, Indigenous participation in,andcompletionofhighereducationshouldbeencouraged.WhileitmightbearguedthatincreasedparticipationinhighereducationmighterodethepositivelabourmarketreturnsforIndigenousgraduates,compellingcounterargumentscanbefoundinthecurrent (disproportionately) low rateof higher education completionby IndigenousAustralians,aswellastheirbetterperformanceinthelabourmarketcomparedtonon-Indigenousgraduates.

Another important finding from this study is that the Indigenous graduatewagegapisaroundthreepercent,whichismuchsmallerthantheIndigenouswagegapsreportedinearlierstudies,suchasDaly(1994).Again,thisisencouragingforIndigenousgraduates,andsuggeststhathighereducationcouldbeonestrategythataids in alleviating Indigenous poverty.However, quantile regression estimates alsorevealthatwhileIndigenousandnon-Indigenousgraduateshavecomparableearningsforthemajorityofthewagedistributioninthetop90percentiles,theIndigenouswagedisadvantage isexceedinglyhighfor those in thebottom10percentiles,withsomeIndigenousgraduatesinthebottomonepercentearningupto27percentless.Someattention thusneeds tobepaid to the Indigenousgraduateswhoare at thebottomdecile,includingresearchonwhythecausesofthelargedisparityinwages,andwhatmightbedonetoaddressthose.

The earnings effects of overeducation are also very similar for Indigenousandnon-Indigenousgraduates,astheadverseeffectsongraduateearningsarearound12percentforbothgroupsofgraduates.Inaddition,otherimportantdeterminantsofearningsforthegraduates,suchaspostgraduatequalifications,fieldsofstudy,sectorofemploymentandemploymentlengthhavebeenidentified.Again,thesedeterminantsofearningsaffectIndigenousandnon-Indigenousgraduatessimilarly,inaqualitativesense,withdifferencesbeingconfinedtothatofthescaleofimpact.Thus,itcanbeconcludedthat thegraduate labourmarket isnotdiscriminatorybetweengraduatesonthisbasis.Afurtherpointofnoteliesinthefindingmadebyotherstudies, thateducationalattainmenthasbeenlinkedtoimprovementsinhealthstatus.ApaperbyBiddle(2006),forinstance,foundthatIndigenousAustralianswhodidnotcompletehighschoolweremorelikelytoreportpoorerhealthstatusthanthosewhocompletedhighschool.Thus,IndigenousAustralianscouldpossiblyaccumulatebenefitsinotherareas,suchashealth,ontopofmonetaryreturnstohighereducation.

However,itneedstobeborneinmindthat,asmentionedabove,thelabourmarket performance of graduates are being evaluated four months after theirgraduation.Thestudy, therefore, isunable to trackdevelopments in the Indigenousgraduates’ outcomes further in time. Thus, future research evaluating the longerterm outcomes of Indigenous graduates would be welcome. Another direction forresearchofinterestliesintheperformanceofIndigenousgraduatesinuniversity.Asmentionedintheintroductorysectionabove,programssuchastheIndigenousTutorialAssistance Scheme for Tertiary Tuition are in place to boost Indigenous students’academicperformanceinuniversity.Itwouldthusbeofusetoevaluatethesuccessofsuchschemes,andfurther, toexamine the linksbetweenacademicperformanceandlabourmarketoutcomesforIndigenousAustralians.ItalsoneedstobenotedthatthelabourmarketsuccessofIndigenousgraduatesuncoveredinthispaperarelikely

107IAN W. LI


tobetheresultofaselectionprocess.Thatis,theIndigenousgraduatesexaminedinthis study are thosewhohave successfully completed high school,whohave beenadmittedtouniversityonthebasisofacademicperformanceorotherattributes,andwhohavesuccessfullycompletedtheiruniversitycourses.Whilegainsineducationparticipationandoutcomeshavebeenmade,muchmoreremainstobedone.10Hence,as recommended in the Review of Higher Education Access and Outcomes forAboriginalandTorresStraitIslanderPeoplereport,policymeasurestoclosethegapforIndigenousAustralianswouldneedtoinvolvemeasurestodevelopacademicskillsat theprimary and early secondary levels, build aspiration toparticipate in highereducation,andprovidementoringandpathwaysupportforstudentsinYears10to12(DIISRTE,2013b).

References ABS (1997), ‘Australian Standard Classification of Occupations (ASCO) Second

Edition, 1997’, ABS cat no. 1220.0. Available from: http://www.abs.gov.au[cited11June2013].

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Labour Market Performance of Indigenous University ... · reviews the literature on the labour market outcomes of the Indigenous Australians, and ... associated with adverse effects