Does higher education pay off after college expansion? Evidence from nationwide surveys in China

East Asian countries witnessed a dramatic college expansion in recent decades. China is not an exceptional case. From the beginning of 1999, the higher education system of Mainland China undergone an unprecedented expansion, resulting more than six million college graduates flooding in labour market annually since 2003. Early studies suggest that college expansion worsens graduate employment while assuming a stable demand for skilled labour. However, policy innovation and an increasing supply of college-educated labour may stimulate employment opportunities. Since the launch of China’s plan for ‘mass entrepreneurship and innovation’, a large supply of graduates may meet the growing demand for skilled labour and even stimulate the growth of job opportunities.

Against the background outlined above, this study examines whether higher education pays off after college expansion in China by considering both the higher education expansion and the changing labour market. Drawing on the pooled data from nationwide surveys (Chinese General Social Survey) of 2006 and 2015, the author adopts the Difference in Differences (DiD) method to compare the earnings premium of higher education degree holders (versus upper secondary graduates) before and after college expansion. The results suggest that earning premium of higher education remains significant despite college expansion, while the premium decreases for young people who experienced expansion. In addition, this study finds significant impacts of employment status and company types on earnings. Young entrepreneurs or self-employed youth earn more than employees of the same age cohorts, and young people working in foreign-owned companies have more earnings than those working in private firms. More importantly, the employment status and company types explain a substantial amount of the difference of earnings premium before and after expansion. This study provides important theoretical and policy implications for education expansion and graduate employment.