WHAT THE HECS
27 YEARS OLD. 71 EMPLOYEES. $13 MILLION TURNOVER. NO UNI DEGREE.
EARN OR LEARN
High fees, massive debts and no job guarantee despite your degree. Is university really worth it?
In the 1950s, only 8 per cent of Australians attended university. Today, a quarter of the adult population – or about 1.3 million people, including international students – are currently studying for a bachelor’s degree or higher.
And it’s not cheap: according to public-policy think tank the Grattan Institute, students owe a record $26 billion in debt, the highest it’s ever been. Loans to current and former students for the Higher Education Loan Program (the Higher Education Contribution Scheme, known as HECS, became HECS-HELP in 2005) rose by a staggering $10 billion over the past nine years because, year on year, university enrolment numbers are growing. More people are going to uni than ever before.
The Grattan Institute estimates that $6.2 billion in loans will never be paid back either because former students move overseas for work (and thus escape the recouping system through the Australian Tax Office), or they fail to find high-paying jobs in their degree area and never earn the $54,126 a year required before HELP loans start being repaid.
With record high youth unemployment – almost double since 2008 and now standing, on average, at about 14 per cent – outcomes for graduates have never been worse. The full-time employment rate for graduates has been in decline for the past six years and is now at the lowest level ever recorded by Graduate Careers Australia, which has conducted annual surveys tracking employment outcomes for new graduates for the past 30 years.
Today, universities are also big businesses, competing for students, who are seen as “clients”. In a 2014 address to the National Press Club, Professor Ian Young, previous chair of the Group of Eight (comprising Australia’s eight leading research universities), admitted Australia had created “a perverse incentive that rewards universities for enrolling as many students as possible and teaching them as cheaply as possible”.
The Grattan Institute’s Higher Education Program director, Andrew Norton , says that under the historical higher education funding arrangements the number of university student places was limited, so only small numbers of people with weaker
12 results received offers. “Now that bachelor degree places are in [almost] unlimited supply for public universities, they are much more willing to offer places to people with weaker school results. As a consequence, young people are having to make choices that, in the past, were largely made for them.”
In other words, in trying to expand access to higher education, universities and governments have effectively combined to flood the job market with new graduates. That’s bad news for Australia’s students, some of whom will leave university with a massive debt and no guarantee of a job.
In Britain, it’s even worse. The most recent figures from the Higher Education Statistics Agency found a third of graduates took jobs as cleaners, office juniors and road sweepers six months after leaving university, and more than 60,000 worked in other “non-professional” roles, such as administration and secretarial, service and caring industries, and customer service. So, is university worth it?
Aged 26, Jordan Grives was a finalist in the Young Business Person of the Year category in last year’s Brisbane Lord Mayor’s Business Awards. Grives, now 27, is founder and chief executive of Fonebox, a corporate call solution provider, which employs 71 people and has an annual turnover of more than $13 million. His company provides 1300 and 1800 numbers and also runs a call centre from its Brisbane office. Clients include car manufacturers, a gym group and retailers. Not bad for someone whose only qualification is a higher school certificate. Grives left St Peters Lutheran College, a mixed, independent private school at Indooroopilly in Brisbane’s west, in 2006 with a high enough Overall Position (OP) to get him into a business/economics degree at university. “I always passed. I didn’t always enjoy school but I excelled in business,” Grives says. “I took a business class [at school], and that’s what I did. I definitely thought of going to uni, doing a business degree, but I didn’t end up applying. Part of me still thinks that one day it might be great to go and do an MBA.
“Look, don’t get me wrong, university is needed. Uni is needed to get into a big law firm or a big accountancy firm or whatever. But if you’re someone who has that Type A personality, who’s driven to do something for themselves, then, as cliched as it is, try and get out there and have a go.”
The high achiever went to school with friends who are only now on the bottom rung in various professions. “They’re just starting to make their way,” Grives says. But, when pressed, he admits he’s earning much more than them, with ownership of two expensive cars, a cool warehouse in the inner- northern suburb of Teneriffe where he lives, plus two investment properties. He argues that too many kids are pushed towards university, as if a degree will automatically result in a better life – and not just economically. “I think schools – and parents – put a lot of pressure on study and OP results. There’s too much pressure.”
Other avenues might be preferable – vocational courses, or exploiting one’s entrepreneurial flair. “[Sometimes] people have these ideas, but they don’t do anything with them, or there’s no support from institutions or anyone willing to help you,” Grives says. “That’s why these new little hubs are so good, River City Labs and those incubators [co-working spaces for new start-ups], they’re great. Australia needs more of those and more people willing to help foster some of that younger talent. From an investment point of view, if you’ve got all these smart young kids in a room, you’re going to make something work.”
Grives says he didn’t have exceptionally wealthy parents or anyone to give him a leg up. His parents – Steven, an actor who did voiceover work and later set up an early corporate on-hold messaging business with Leanne, his wife and Jordan’s mother – wanted him to go to university, but Grives talked them into letting him work in their business instead. “I started working for them straight out of school, and that’s where I learnt to sell. I just started to adapt – learning from Dad, primarily – how to talk to people. I really got thrown in the deep end – we had 300sqm of office space and I was in one corner and he was in the other. Basically, he put a Yellow Pages on my desk and said, ‘start ringing people’.
“I did that for about a year, and that business started to grow, and it got to a point where I was looking for something a little bit different, that I could cut my own teeth on. I always wanted to be in business, to do something for myself.” First he worked for another telecommunications company, then saw there was a gap in the market around Interactive Voice Response – you know, press one for sales, two for whatever – and began working on a concept for businesses so they could re-route incoming calls to the nearest store. Bingo.
Grives says he doesn’t particularly have any IT nous; he pays people for that. “You don’t need to know all the ins and outs – which is why you’ve got smart people here – you just need to know the vision for what you’re trying to create and execute it.”
Now, both of his younger brothers, Nick, 23, and Harry, 24, are working on the operational side of the business; neither of them has been to university either. “I’ve got a lot of friends who’ve gone to uni, a lot of people who were a lot smarter than me at school, and they’ve said, ‘You’ve basically passed it nice and quickly’, because the things they’ve learned
at uni I’ve learned on the job. So you either get that book experience or real-world experience. Some people are book smart, some are street smart.”
Grives says that when he’s looking to employ people, he doesn’t look at uni degrees. “I wouldn’t know in my office who has one and who doesn’t,” he says. He’s about to move to larger offices, is employing about five new employees a month, and the business is growing 30 to 40 per cent, year on year.
of Australia’s most outspoken critics of the push towards higher levels of university education is Business Council of Australia president Catherine Livingstone, who, in speech after speech since she assumed the influential role last year, has argued that many school-leavers would be better off training in job-related and technical areas. She told an Australia-Israel Chamber of Commerce lunch last year that “too many people [are] going to university, and not enough [are] going through the VET [vocational education and training] system … some students would be better off with vocation and skill training and having work experience”.
At a 2015 conference in Canberra, Livingstone also asked hard questions about whether Australia could still afford the luxury of degrees being all about education and not training, asking if the “product” fit the purpose “given the level of unemployment and underemployment among graduates”. She argues that many entry-level roles for graduates are already significantly diminished in number “if not gone” and that, moreover, we have “created a serious discontinuity between education and work”.
Livingstone is not alone in suggesting universities should take more responsibility in ensuring potential students are fully informed and equipped to make decisions that will profoundly affect their lives, and that there also should be much greater focus on education meeting the world of work. “Is there a better model more suited to the new era where, from age 16, all young people pursue a dual track that combines education and work?” Livingstone asks.
As the work landscape changes, and boundaries between disciplines become increasingly blurred, some companies are already adapting their employment procedures. Global accounting conglomerate KPMG, for example, has announced that its Australian audit division has broken a 100- year tradition by hiring graduates without business or accounting degrees in an attempt to “enhance soft skills and diversity in the division”.
Paul Fiumara, a partner in Brisbane accountancy business DFK Hirn Newey, talks up the value of apprenticeships. His practice has run a successful school-leavers’ cadet program for eight years, supporting 18 cadets through a part-time four-year accountancy degree by paying them and providing practical work experience. “We found employing
was a bit of a lottery,” he says. “They think a degree is an open door, but most employers want practical experience.” Fiumara believes there needs to be a tripartite agreement between government, industry and universities to ensure better employment outcomes. “Governments want kids to be employed, industry is looking for graduates with practical experience, and universities want to send out educated people – everyone’s got a stake in this, it’s not the responsibility of just one group,” he says.
Fiumara’s firm no longer employs graduates and says that while it is obviously cheaper for DFK to employ cadets rather than graduates, it’s also a win-win for cadets: they are paid throughout their courses and by the time they graduate, they earn about $10,000 more than a newly employed graduate with no real-world experience. Some larger firms, such as Ernst & Young, also have cadet programs, but others, like Deloitte, only employ graduates (but do have undergraduate internship programs).
However, while an accounting degree generally follows a direct path to a job in accounting, other degree outcomes are less clear – for those still willing to take on debt to pay for a full-time university course, choosing the right degree is more critical than ever. The latest Graduate Careers Australia data shows dentistry and optometry result in the highest-income jobs (paying about $75,000 for new graduates), while “soft” degrees, such as those related to the humanities, are the lowest paid (although the worst-performing degree is pharmacy, graduates of which earn about $40,000). Accounting hardly fares much better, with the median starting salary for a new graduate under 25 at $50,000.
and entrepreneur Adrienne Jory, 24, who lives with her partner, Rick Gibson, at Scarborough, 30km north-east of Brisbane, lasted exactly one day of a bachelor degree course in business at the University of Queensland. Jory and Gibson now run a bespoke online T-shirt business out of Brisbane and Bangkok, employing 17 staff. They recently took on investment to grow the business from Brisbane venture capitalist firm Black Sheep Capital, which has a solid record in picking successful start-ups. Jory is one of River City Labs’ success stories, using desk space once or twice a week, partly as a means of connecting with other start-ups.
The pressure on her to attend university was immense. “In Year 11 and 12 [at Mount Alvernia College, Kedron, an independent Catholic girls’ school in Brisbane’s north] we were expected to pick the courses at uni we wanted to do,” she says. “There’s so much building pressure then to get the right OP, to get you into your first choice. There just isn’t the same push to be your own boss, or to be an entrepreneur, you know? If you don’t fit into this uni mould, or you don’t fit into this trade mould, what are you?”
Having achieved a respectable OP10 in 2008, which got her into many courses, Jory still had no real idea of what she wanted to do at uni or what she wanted out of it, so she took a job at the women’s clothing store Witchery. “Then I thought, I’m just a retail chick, I need to go and do something with my life.” So Jory enrolled, “just to do it, and see what it was like”. She remembers her first day in an economics tutorial (she had randomly chosen economics and public relations as her majors) and thinking, “well, I hate maths, number one, so this was a really bad idea, and then, this just isn’t me. I felt like I left school to get out of that kind of scene. I just didn’t work well in that environment and I think it was partly because I was doing something out of pressure and partly because I was doing something I just randomly picked for the sake of it. I just felt like it wasn’t where I needed to be.
“I believe street smarts outweigh educational smarts. [At Witchery] I had a woman working for me when I was managing and she had three degrees, yet she was a retail assistant because she couldn’t get a job [in her field]. And I thought, this is insane, you’ve got this massive push into uni and you’ve got people who’ve done the hard yards and they’re still not any better off, and might even be worse off if they’ve also got student loans.”
Jory was still living at the family home at Albany Creek in Brisbane’s north. “I paid two-and-a-half- grand for a semester and I walked out. I came home and said to Mum [Jeanette], ‘This isn’t going to work’. I called my boss – I was still working part-time – and I thought, I can’t do both and uni is absolutely not for me, so I went back to [retail] managing.”
You see in all the data that on average university graduates out-earn other workers in the workforce.
DR JOSH HEALY, SENIOR RESEARCH FELLOW
If people are going out into life thinking that a degree and a job is a security blanket for the rest of their lives, I think they’re kidding themselves. ADRIENNE JORY, ENTREPRENEUR
She hasn’t looked back – her business, FanTees, has sold nearly 100,000 units since last March. “There could be so many more amazing businesses, so many more amazing women entrepreneurs – and men, for that matter – if the idea to start your own business was pushed more, more supported … You can’t have all these people graduating school, and all of them going to university, and every single person finding a job.”
Besides, Jory believes the days of someone being in a job for life are over. “If people are going out into life thinking that a degree and a job is a security blanket for the rest of their lives, I think they’re kidding themselves,” she says. “I was only ever going to make as much as my employer was prepared to pay me. You’re never going to be a complete success if your employer is only prepared to pay you $50,000 a year.”
She’s happy to take a riskier path: “I’m a firm believer [in the idea] that a university degree does not dictate the success of an individual; it’s completely up to the individual and their willingness to make something of themselves.”
the poor job climate for graduates, all the data suggests university graduates ultimately earn more than high-school leavers. A 2012 report by the National Centre for Social and Economic Modelling estimated that someone with a degree is likely to earn in excess of $1 million more in their working life than a person who did not finish Year 12.
Graduate Careers Australia’s policy and strategy adviser, Bruce Guthrie, says its research shows unemployment is not a long-term concern for graduates and that when the economy – still reeling from the after-effects of the GFC in 2008 – picks up, graduate jobs will too. “It’s important to understand that getting a degree is not just about the first job after university – it’s about a lifetime of advantage in the labour market as well as the potential for huge personal growth.”
Dr Josh Healy, senior research fellow at the University of Melbourne’s Centre for Workplace Leadership, also believes that, in the end, university is probably still worth it. “If you were to compare such things as job satisfaction, earnings, employment probability of the entire population of university graduates compared to the population of non-uni graduates, you would find that, on average, uni graduates have the best outcomes.
“For instance, the average wage associated with having gone to uni is well above the average wage of someone who’s only gone to high school or has a VET qualification,” he says. “But the economic cycle does matter, and so you’ll get periods of temporary spikes in the wages of, say, non-university educated people in the mining industry who for a time saw very high wages, and since the mining boom has tailed off, those wages have come down again. But, generally, over the period of an economic cycle, you see in all the data that on average uni graduates out-earn other workers.”
The thing is that the “average” can never predict individual outcomes: “Some graduates will go on to high earnings, but others may not,” Healy says. Equally, for young people forgoing university to start their own business, there is no “average” outcome. For every Jordan Grives or Adrienne Jory, thousands more have ended up broke. Which makes it very difficult indeed for anyone deciding whether to go into hock – or not – for that hefty student loan.
MAN … JORDAN GRIVES, 27, ESCHEWED UNIVERSITY TO BECOME A SUCCESSFUL BUSINESS OWNER.