There are two reasons to go to university. 

Firstly, university can be great fun. You drink, socialise, date, make lifelong friends and spend several years surrounded by clever people discussing interesting ideas.

You escape your parents without yet having to become a fully functioning adult. It’s a good time of the lifecycle. 

The second reason is money. A university degree makes you more employable and results in a higher pay cheque. 

For decades, the deal was straightforward. You sacrificed four years of full-time earnings, accumulated a manageable student debt and emerged with a qualification that placed you near the front of the labour-market queue. 

Three years ago, I wrote a column asking whether Australia was becoming overeducated. 

I argued that the data still suggests you better get as educated as possible because, on average, the more formal education you have, the more money you earn. 

For now, this remains true. 

ABS data tells us that in August 2025, Australian employees with a postgrad degree earned $2000 per week while a bachelor’s degree earned you $1700.

Those with a certificate III or IV earned $1400, while employees without a post-school qualification earned $1000. 

The university pay premium is alive. The question is whether it will survive in its current form. 

A university degree traditionally does two things.  

First, it develops skills and knowledge. A nurse needs to understand anatomy. An engineer needs to understand mathematics. A lawyer needs to understand the law. 

Second, and perhaps more importantly for many generalist degrees, it sends a signal. 

Employers find it difficult to measure the true capabilities of a 22-year-old applicant. A job interview cannot reliably reveal intelligence, persistence, literacy, judgment, conscientiousness or the ability to work through a tedious task without giving up. 

Education becomes a convenient proxy. 

Completing a degree suggests that you can read, write, meet deadlines, follow instructions and stick with something for several years.

It does not prove that you will be a brilliant employee, but it is usually better than knowing nothing about you. 

The value of that signal, however, depends on three things. It must be scarce, it must be trusted and it must be relevant. 

All three are now under pressure. 

The Department of Education tells us that in 1950 only 30,630 students were enrolled in Australian higher education. University was a genuinely elite experience. A degree immediately distinguished you from almost everyone else in the labour market.

Of course, employers handed out pay premiums for university graduates. 

The new Year 12 certificate

Today, university is a mass-participation system. Of the Australians who completed Year 12 in 2023, 43 per cent went straight into higher education the following year.

The federal Department of Education estimates that 53 per cent will have commenced higher education within three years of finishing school. 

Meanwhile, 47 per cent of Australian residents aged 25 to 34 already hold a bachelor’s degree or higher. The federal government wants that figure to reach 55 per cent by 2050.

The frequently quoted 55 per cent figure therefore does not mean that 55 per cent of today’s Year 12 students go straight to university. It is a future attainment target for young adults.

The broader point still stands. Once half the population has a degree, possessing one no longer marks you as a member of a small educational elite. It places you among roughly half your peers. 

A bachelor’s degree becomes the new Year 12 certificate. This is credential inflation. The qualification remains useful, but each individual qualification carries less information. 

An employer who once required a degree for a relatively ordinary office job might soon require a postgraduate qualification, several internships and two years of experience.

The education system keeps producing more credentials while the labour market keeps moving the starting line. 

Recent Australian research suggests this is already affecting wages.

A 2025 study using HILDA data compared younger workers in the decade to 2011 with those observed between 2012 and 2023.

It found a significant decline in the wage premiums associated with most forms of post-school education, with PhDs and graduate certificates among the exceptions. The pay premium has not disappeared, but it appears to be weakening. 

At the same time, the price of obtaining a degree has increased. In 2026, the maximum annual student contribution for subjects including communications, society and culture, law, accounting, economics and commerce is $17,399.

A three-year degree consisting largely of subjects in that fee band could leave a graduate owing more than $52,000.

The precise debt depends on the mix of subjects studied, but an ordinary generalist degree now leaves you with a big pile of (inflation adjusted) debt.  

University students pay luxury fees for mass-market degrees. 

It seems unwise to pay more than ever for something that is less scarce than ever, doesn’t it? 

The AI factor

There is another, newer threat to the university pay premium – artificial intelligence. 

Later this year, the first cohort will graduate from university that at least theoretically could’ve cheated their way through their degrees using AI.

Theoretically, a student could have outsourced all essays, coding exercises, take-home exams and weekly assignments to a large language model. 

Most students will not have cheated their way through an entire degree. Many use AI responsibly as a research assistant, tutor or editing tool. 

It’s the perception that matters though. Whether a particular graduate cheated is less important than whether an employer believes the university can prove that they did not. 

Australia’s higher-education regulator, TEQSA, describes inappropriate generative AI use as a serious and immediate risk to academic integrity. Estimates of its prevalence vary enormously, partly because reliable measurement is difficult. AI-detection tools can also generate false positives and cannot provide a dependable solution. Universities are therefore being pushed to redesign assessments so they demonstrate that learning actually occurred. 

The old degree promised employers that the graduate had completed three years of assessed work. The new degree might prompt a follow-up question: Who, or what, completed the work? 

There is no evidence of an employer revolt yet. In the 2025 Employer Satisfaction Survey, 84 per cent of employers expressed overall satisfaction with recent graduates. Australian graduates remain highly regarded. Still, trust can erode before it appears in salary statistics. 

When employers become less confident in qualifications, they will conduct their own assessments. Candidates will face more work samples, practical tests, technical interviews, probation periods and demands for previous experience. Portfolios, references and internships will matter more. The degree will no longer prove capability. It will merely earn you an invitation to demonstrate it. 

This does not mean university is pointless. 

Doctors, nurses, engineers, teachers and many other professionals require substantial formal education. Australia will continue to need highly skilled knowledge workers. University also provides intellectual, social and cultural benefits that cannot be reduced to an earnings calculation. 

A Bachelor of Arts is not worthless because it does not lead directly to a specific occupation. Learning history, politics, literature and philosophy can make someone a better thinker, citizen and human being. 

But human value and labour-market value are not the same thing. 

The generic pay premium attached to having any bachelor’s degree is at risk. Employers will increasingly distinguish between fields of study, institutions, work experience and demonstrated capability rather than automatically paying more because an applicant possesses a piece of paper. 

How should Australia respond? 

I would aim for roughly 45 per cent of each Year 12 cohort entering university within the first few years after school, rather than the projected 53 per cent. 

This should not be achieved through a crude cap that favours wealthy students or locks disadvantaged young people out. Academic entry requirements should be tighter and more transparent, while bridging programs should remain available for students who did not receive the necessary support at school. 

The goal is not to make university socially exclusive again. It is to ensure that students are academically ready and that the qualification retains meaning. 

The students redirected away from university should not be abandoned. They should be channelled towards a properly funded, prestigious vocational system. 

TAFE must stop being presented as the waiting room for students who were supposedly not clever enough for university. 

Australia desperately needs tradespeople to build homes, energy projects, transport infrastructure and public facilities.

The students redirected away from university should not be abandoned. Photo: Getty

Infrastructure Australia estimated a shortage of 141,000 infrastructure workers in October 2025, potentially rising above 300,000 during 2027. The projected shortage among trades workers and labourers alone could reach around 126,000. 

At the same time, the number of active apprentices and trainees fell by almost nice per cent over the year to December 2025. 

We funnel capable teenagers into crowded white-collar degree markets while employers scream out for electricians, plumbers, carpenters and other skilled workers. 

A trade is not an educational consolation prize. In 2025, 95 per cent of trade apprentices who completed their training were employed afterwards. 

Australia needs more tertiary education, but tertiary education does not have to mean university. 

Young people should be able to move easily between the two systems.

A school-leaver might complete an apprenticeship, work for several years and later study engineering, construction management or business.

Education should be available throughout life rather than treated as a one-off decision made at 18. 

Restoring trust

More oral examinations, supervised assessments, practical demonstrations, workplace projects and individual defence of submitted work would make it harder to outsource an entire degree to AI.

Graduates should leave university with portfolios demonstrating what they can actually do. 

The degree must become evidence of capability rather than a substitute for evidence. 

The university pay premium will not vanish. Scarce technical qualifications will continue to command strong salaries. Highly capable graduates will continue to thrive. 

What may disappear is the automatic premium attached to possessing any university degree. 

Mass participation has weakened the scarcity of the signal. Rising fees have weakened the financial bargain. Artificial intelligence threatens trust in the assessment behind it. 

This isn’t the end of the university pay premium, but the end of the university degree as a guaranteed golden ticket might already be here. 

Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, or LinkedIn.