Returns to Education in Australia 2001–2022

Andrew Leigh

Economic Papers, 2025, vol. 44, issue 1, 62-76

Abstract: What are the economic returns to education in Australia? Using data from the 2018–2022 waves of the Household, Income and Labour Dynamics in Australia survey, and taking account of the existing estimates of ability bias and social returns to schooling, I estimate the economic return to various levels of education. As in a 2008 paper in this journal, which used data from the 2001–2005 waves of the same survey, I report large returns. Across high school, vocational education and university qualifications, an additional year of schooling raises hourly wages by 7 per cent, boosts annual earnings by 13 per cent, and increases the probability of reporting positive earnings by 4 percentage points. In terms of hourly wages, the largest per‐year returns are from completing a Bachelor degree. In terms of annual earnings, the largest per‐year returns are from completing year 12. Testing for changes in returns to schooling over time provides little evidence of systematic trends over the period 2001–2022. Over the lifecycle, returns to education tend to decline from age 60 for high school and vocational qualifications, and tend to decline from age 55 for university qualifications, suggesting that the value of education diminishes as workers approach retirement age.

Date: 2025
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