Increases in Autonomous University Cohort Participation Rate and the Labour Market

The Autonomous University Cohort Participation Rate (AU CPR) has risen since 2011, contributing to an increase in the intake of students in Singapore’s AUs, and consequently, a rise in the supply of university graduates relative to other educational groups in the labour market. Economic theory predicts that an increase in the relative supply of university graduates could lead to a fall in their relative wage unless the relative demand for them also rises concurrently.

To better understand whether the rise in the relative supply of university graduates was matched by an increase in relative demand, this article examines how the relative wage of university graduates changed with the increase in AU CPR between 2011 and 2016. It also delves into the possible mechanisms that drove these findings.

Using fixed-effects regression analysis (which controlled for students’ characteristics), we found that the composition-adjusted relative wage of university graduates remained stable even as AU intake rose between 2011 and 2016. This suggests that there was a concurrent increase in the relative demand for university graduates that matched the rise in the relative supply of university graduates.

Based on theoretically-motivated relative demand regressions, we found evidence that the increase in relative demand for university graduates was primarily due to exogenous demand shifts (e.g., secular increases in demand for university graduates from skill-intensive sectors). At the same time, there was some suggestive evidence that endogenous demand increases due to technological choice (i.e., sectors shifting towards existing skill-intensive technologies because of a rise in the relative supply of university graduates, which in turn raised the relative demand for university graduates) could have contributed to some extent too.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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