New Estimates of the Private Rate of Return to University Education in Australia

Melbourne Institute Working Paper No. 14/02

Date: 2002

Author(s):

Jeff Borland

Abstract

The objective of this study is to provide new estimates of the average private rate of return to a university degree in Australia. It considers the case of a hypothetical individual who has completed high school in 2000, and is making a decision on whether to begin a three-year bachelor degree or to enter the workforce in 2001. For the 'base case' scenario of a 'representative' individual making a decision on whether to attend university, the estimate of the average private rate of return to a three-year bachelor degree is 14.5 per cent. Underlying this estimate is a lifetime net monetary gain of $380,958 from undertaking the degree (assuming a zero rate of discount). Estimates of the rate of return to a bachelor degree are fairly robust to alternative scenarios. Rates of return do however show a wide variation across the field of qualification categories. The estimated returns are relatively high for business and administration, and engineering graduates, and relatively low for graduates in the fields of society and culture, and science.