Towards an estimate of Aboriginal and Torres Strait Islander human capital and how it is changing over time

Author: Nicholas Biddle

Public policy in Australia has historically failed to provide the supports and infrastructure for the Aboriginal and Torres Strait Islander population to engage in formal education in a way which meets the needs and aspirations of the population. This includes early childhood, school, and postschool education. For this reason, Human Capital development including but not limited to school completion and post-school attainment has been less than equitable, leading to worse outcomes by standard measures (income, employment, and health) and also by Indigenous-specific measures that Aboriginal and Torres Strait Islander Australians have cause to value (including access to land, language, and culture). Over recent years, there has been substantial improvement in the level of education completion for the Aboriginal and Torres Strait Islander population, although the measurement of this change is complicated by changing patterns of identification and location. The aim of this paper is to use publicly available data to measure the level of Aboriginal and Torres Strait Islander Human Capital and document how it is changing through time. The process of this measurement involves estimating the level of education, calculating the economic returns to that education, and then comparing lifetime income streams for different levels of education. Through this process, the paper highlights that the level of Human Capital for the Aboriginal and Torres Strait Islander has increased substantially in the decade between 2011 and 2021, is higher per working age adult for males than females (by a ratio of 1.17 in 2021), and is substantially higher for the non-Indigenous population than for the Aboriginal and Torres Strait Islander population (1.69 times higher for males and 1.59 times higher for females in 2021). At the end of the paper, I discuss how the method can be applied on slightly different data to extend our understanding, as well as the implications of the findings for understanding the education decisions of Australia’s First Nations population.

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