ABSTRACT Introduction The income returns to a bachelor's degree in Australia declined in the period from 2001 to 2016. We attempt to uncover the drivers of this decline. Methods Our analysis investigates the income premium to a bachelor's degree through two lenses: (1) the effects of the demand for and supply of skill in the economy and (2) the effect of changes in the occupation composition of employment by education attainment and changes in weekly earnings within occupations. Findings We find the 2001–2016 decline in returns is potentially explained by strong earnings growth in low‐skill occupations, due to increases in real minimum and award wages, as well as possibly the mining boom. Downgrading of the occupations in which bachelor's degree holders worked was also a significant phenomenon from 1986 to 1996, but its (otherwise negative) impact on the income premium to a bachelor's degree was offset by higher relative growth in weekly earnings in occupations in which bachelor's degree holders were concentrated.
Coelli et al. (Mon,) studied this question.