The Changing Labour Market of University Graduates in Austria. Implications for the Financing System of University Education

In Europe, during the 1990s, university graduates have increasingly experienced difficulties of employment. This development also affected Austria. The changing job market of graduates is caused by various inter-related factors: on the one hand, the increased reorganisation and rationalisation of labour within the private sector as a reaction to augmenting pressures of competition and on the other, budget constraints of the public sector, the main employer of university graduates, cause unemployment of university graduates. The unemployment rates of Austrian university graduates (as a percentage of labour force) are still low in comparison to other skill segments. However, considering that approximately one half of the university graduates is employed within the protected public sector, the increase of the unemployment rate of university graduates from 0.2 percent in 1975 to 2.3 percent in 1999 gives cause for concern. The changed labour market conditions of university graduates, not least the increasing internationalisation of graduates employment, but also the augmenting share of graduates working in the private sector make it appropriate to reflect on the current financing of university education in Austria. Considering the complexity of the topic, a package of measures is necessary to guarantee a cost-efficient university education system. In order to achieve the greatest possible external effects instruments may have to be used which counter equity criteria. However, since these instruments contribute to a maximisation of economic growth, they indirectly have positive effects on employment and the general welfare. A restricted admission to university by introducing rationing measures (e.g., mark average) causes a loss in efficiency (reduction of positive external effects as a result of a decrease in the number of university graduates) as well as equity. In addition, a tightened university education, leading to a reduction of the average period of study, would, amongst other things, be beneficial to an increased cost-efficiency of university education. Moreover, the introduction of short-term studies would enable young people from the poorer strata of society to get access to university education. Within the current financing system, universities have no basis for a reallocation of resources into those areas where young people have the best chances of employment. If positive external effects of the university education correlate with an increase of labour productivity and economic growth, these facts should be reflected by the subsidisation of universities.