Emploring Correlation between Education Level, Income Level and Job Satisfaction in Gippsland

Jing LIN Chen GAO Ruth ZHUANG Nichole CHEN

Contents
Abstract .................................................................................................. 3 1. Introduction ..................................................................................... 4 2. Previous findings.............................................................................. 5 3. Data source and independent variables .......................................... 7 3.1. Data source................................................................................. 7 3.2. Independent variables ............................................................... 8 4. The Empirical Specification .......................................................... 11 4.1 4.2 4.3 Education difference and Income ........................................... 12 Age, Work Experience and Income ........................................ 16 Job Satisfaction ........................................................................ 19

5. Limitations ..................................................................................... 19 6. Conclusions .................................................................................... 21 7. Recommendations .......................................................................... 22 Appendix A........................................................................................... 23 Bibliography ......................................................................................... 29

Abstract
Commodities and the sectors that are related to the commodity boom in Australia such as finance and engineering is changing the demographics of the Australian society. As more well-paying jobs open up in these sectors, young people, who would otherwise choose farming, are moving to big cities to seek employment. These have resulted in shortage of labour in regional areas, which has caused serious concern to the public. This study is employed to assist regional area, especially Gippsland, to attract young professionals to work in regional areas. A survey named AGI & UoM Survey was conducted during July 2011 in Gippsland to correlate education level with income level and job satisfaction level of people involved in agribusiness. The purpose of the survey was to find out whether tertiary education could lead to higher income and job satisfaction. 57 surveys were conducted during this period. Information such as the interviewees characteristics and income level and job satisfaction is gathered by this survey. Statistic analysis, such as correlation analysis and chart analysis, was employed on the collected data. Conclusion is drawn that positive correlation exists between education level and income level for both agribusiness sector and farming sector. However, the correlation of 3% in agribusiness sector is relatively weak comparing to 36 % of farming sectors. The overall job satisfaction is very high regardless of the interviewees education level, age and working experience. It is recommended that an increased and unbiased sample should be employed to further help justify the correlation between income level and education level. With a

larger sample, regression models could be built to precisely identify the correlation, not only with education level but also with other variables that would influence income level. Key words: Education, Income, Job satisfaction

1.

Introduction

Lucrative and booming sectors of mining, finance and engineering industries are luring more and more young people to the big cities. Young people of regional areas, who otherwise would normally choose farming as a career option, now seek to obtain higher education in finance or engineering to get employment in professions that have higher wages. There is also evidence of farmers seeking higher education in areas related to agriculture to increase their earning potential. This has resulted in shortage of labour in regional areas, which has caused serious concern to the public. Sustained labour supply is essential to the viability and competitiveness of regional areas agricultural industries. Therefore, it is imperative to develop a new strategy to attract more labour, especially young professionals, to regional areas. This study is conducted by Agribusiness Gippsland and only focuses on Gippsland. The study seeks to assist the development of agriculture and highlights the demand of young professionals in Gippsland. In order to attract more young professionals, it is important to identify the determinants of income growth and pathways to job satisfaction. The improved understanding of income and job satisfaction

determinations will assist both potential and existing workers in Gippsland to better understand their career path and career options. In this study, an examination of the determinants of income and job satisfaction, especially the correlation between education level and income in Gippsland is conducted using data gathered in Warragul, Phillip Island and Inverloch. The survey provided in Appendix A. details demographic and economic features of the participants. This paper is organised as follows. Section 2 contains a review of previous research related to correlation between education level and income as well as job satisfaction. Section 3 describes the individual variables, as well as provides sample descriptive statistics. Estimation results and correlation analysis are reported in Section 4. Limitations, conclusions and recommendations are presented in Section 7, 8 and 9 respectively.

2.

Previous findings

Literature on correlation between education level and income level is extensive and the results have been proved by continuous findings. However, literature on this correlation of agriculture sector is relatively scarce. A study supported by ABERE examined the determination of total factor productivity (TFP) in the Australian grains industry. The relationship between education level and TFP could be treated as a supplementary indicator for correlation between educational level and income level. It was found that investing in human capital through education is likely to have a positive effect on TFP. The positive impact of education

on productivity could be associated with a number of factors, including better resource allocation, better business risk management strategies, or faster adoptions of productivity enhancing innovations by more educated farmers (Shiji Zhao, 2009). Other findings related to this correlation are demonstrated by major reports from the US. A study by US Census Bureau suggested that, people with a higher level of education made more money than those with less education. It is interesting to note that this relationship between education and earnings potential has been known since the 1970's, and has been consistently demonstrated by government surveys (the US Census Bureau, 2002). The correlation between education level and job satisfaction in general has been proved by various institutions. However, different institutions showed different result based on the surveys they used. Tom Smith from the University of Chicago suggested that Job satisfaction was higher among those with more education (Simth, 2007). His research was based on the General Social Surveys (GSSs), which led to an overall view of American societys job satisfaction. On the contrary, Keith Bender and John Heywood from the University of Wisconsin-Milwaukee focused on higher educated group by using survey of doctorate recipients (SDR) and found out that additional education resulted in lower job satisfaction (Keith A. Bender). The usual explanation relied on expectations. The more educated had higher expectations for the pecuniary and non-pecuniary returns from their jobs, and so were more easily disappointed and dissatisfied (Clark.A.E, 1996). Correlations between education level and income level/job satisfaction level of the whole Australia area and of other fields/other countries have been widely identified

by previous findings. This correlation of Gippsland in farming sector will be detailed stated in later sections.

3.

Data source and independent variables

Detailed demographic and economic features of the participants can be collected by

AGI & UoM Survey (Appendix A). This section provides brief explanations of data

sources and independent variables and discussions of summary statistics.

3.1. Data source The surveys we have gathered at this stage comprise of 57 members, 34 of whom are from Agribusiness employees and the other 23 people are from farmers. All the Agribusiness employees and 22% of the farmers we interviewed are either employees of Department of Primary Industries (DPI) and/or the attendants of ABARES regional outlook conference and Victorian Agribusiness Summit. Another 78% of farmers were got in touch through phone interview. This survey has a broader horizon than other surveys investigating agriculture feature. It not only covers farmers from dairy, cropping, beef and mixed farms but also individuals involved in agribusiness, agripolitics, agricultural R&D. Education level is classified in the categories of year 10, year 11, year 12, trade apprenticeship, TAFE certificate, TAFE diploma/advances diploma, university degree, university higher degree and others, which intended cover all the education level can be achieved in Australia. Due to the small sample size, we have grouped the education level into year 10-12, TAFE, university degree and university higher degree for further analysis.

The information collected in this study was collected during period from Jun 2010 to Jun 2011. Ideally only individuals who are younger than 45 years old should be included in our study. Except when analysing the correlation between age and other factors, all the valid surveys were included. Surveys with incomplete information were excluded from this analysis.

3.2. Independent variables Independent variables were grouped into three categories: Individuals characteristics: Variables are individuals gender, age, working

experience, business type, the role in work, formal education, On-going Education, and sources of information Income level: Variables are, currentl taxable income, off-farm income Job satisfaction :variables are primary reason for entering agribusiness sector,

financial expectation, current job satisfaction level

All the variables included in Individuals characteristics are assumed to have the potential to influence the income level and job satisfaction. The income and job satisfaction can be highly related to individuals age and working experience. As these two factors change over time, if this survey is conducted yearly, a clear trending of income and job satisfaction at an individual level can be found out. The other individuals characteristics stay the same in a short term, which may determine individuals income level and job satisfaction in a long run. Taxable income is employed in this survey instead of net income or gross income to avoid the incomparability derived from different tax rate and interest payment. The

percentage of off-farm income is included, as the income data is more reliable and comparable if only on-farm income is counted for farmers and only off-farm income is counted for agribusiness sector. The job satisfaction sector consists of motivation to work in Gippsland, job satisfaction at the current moment and expectation for the future, which could on the whole reflect individuals job satisfaction level. Table A below shows the means or percentage of the variables in each sector. The survey data indicated the average age is 34.4 years old and the average working experience is 10.5 years. Among them, 26.3% of surveyed people work in agribusiness, 21.1% in agricultural R&D and 1.8% in agripolitics. For the farming sector, dairy industry absorbs the most labour, which is 28.1% of the whole surveyed sample. It is followed by mix farming, cropping/other farming and beef. In the sample, 45.6% are agribusiness employee, 21.1% are farm owner and 14% are agribusiness manager. The operator/employee is the least group (3.5%). More than two thirds of people in the sample are highly educated. Almost 80% of them have a bachelor degree and the other 20% have either the master degree or a doctor degree. Based on the total 57 surveys, internet, agriculture consultants, newspapers and magazines and department of primary industries are the main channel of information. About the income level, one third of the surveyed people earned $40, 000 to $60,000 in the current year and another one third earned $60, 000 to $80,000. 28% of the people can earn more than $80,000 and only 5.3% of the peoples income is less than $40,000. Of the total taxable income, average 57.1% is generated from off-farm. This figure is high, mainly due to the containing of a majority of agribusiness workers in this sample.

Nearly half of the surveyed people got into agribusiness sector because of primary career choice and 21.1% of them inherit the family business. The other 33.3% switched into agriculture sector due to current employment or experience in previous professional area. A majority of people have a positive prospect for the future and a high job satisfaction is demonstrated by a scale of 8 out of 10.

Table A Summary Statistics Mean/Percentage Individuals characteristics Age 34.4 Working experience 10.5 Business type Agribusiness Agricultural R&D Agripolitics Beef Cropping Dairy Mixed farming Other farming The role in work Agribusiness Employee Agribusiness Manager Farm Manager Farm Owner Farm Partner Operator/employee Formal education TAFE University University higher Year10-12 Source of Information 26.3% 21.1% 1.8% 1.8% 3.5% 28.1% 14.0% 3.5% 45.6% 14.0% 8.8% 21.1% 7.0% 3.5% 19.3% 52.6% 15.8% 12.3%

Newspapers and magazines Radio/TV Internet/Online Department of Primary Industries Agricultural consultants Agribusiness retailers/salespeople Other farmers Other Income level Current taxable income ($0,$40,000) ($40,000,$60,000) ($60,000,$80,000) ($80,000,$100,000) ($100,000,$120,000) ($120,000,$140,000) (>$160,000) Off-farm income Job satisfaction Primary reason for entering agribusiness sector Family business Primary choice Other choice Financial expectation Better off Worse off Similar position Don't know Current job satisfaction level

15.80% 7.30% 20% 15.80% 17% 7.90% 13.90% 2.40%

5.3% 33.3% 33.3% 15.8% 3.5% 5.3% 3.5% 57.1%

21.1% 45.6% 33.3% 73.7% 1.8% 17.5% 7.0% 8

4.

The Empirical Specification

Statistic analysis, such as correlation analysis and chart analysis, was employed in our report. Instead of just analyzing individuals who were younger than 45, which was mention in Section 3.1, all data collected were used. This is due to the smallness of the sample.

4.1

Education difference and Income

15% 13%

15%

57%

Year10-12

TAFE

University

University Higher

Figure 1:Education Classification Source: AGI & UoM Survey

Education level was grouped into four major categories: year 10-12, TAFE, university degree and university higher degree. As Figure 1 presents, more than half of the participants in the survey received university degree and each of the other three groups consist of around 15% of the sample equally. For people who hold university degree, 65% of them majored in either agriculture or science. Basically, agribusiness sector receives higher degree than the farming sector in the sample. For instance, 26 people from agribusiness sector received university or university higher degree, while 13 people from farming group achieved the same education.

20 18 16 14 12 10 8 6 4 2 0

Farmer only Agribusiness Whole Sample

Figure 2:Taxable Income Source:AGI & UoM Survey

Current taxable income is used as the measure of income level. It is clear in Figure 2 that the taxable income of the sample clusters between 40,000 and 80,000 among the 57 interviewees. To gain a clearer picture about the potential correlation, the sample was decomposed into agribusiness sector and farming sector as illustrated by Figure 3 and Figure 4. For farming sector, it is suggested that higher education associates with higher income level, as farmers whose income is above 100,000 dollar have received university or university higher education. This evidence indicates potential positive relation lies between education level and income level. As for agribusiness sector, 61.76 % of them have received university degrees or university higher degrees and there is no distinct evidence shows that it is education that results in income difference. Thus it is assumed that there is no strong potential correlation between income level and education level. Based on the observations showed in Figure 3 and Figure 4, correlation analysis was built for further study. The results correspond to the previous graphs. For farming

sector, the correlation between education level and income level is 36%. This positive correlation figure indicates that as the level of education increases, the annual taxable income raises as well. The evidence that only 36% was explained by the education factor, however, indicates that other important factors may exist in explaining the differentiations of income level. One possible factor is farm size, which is referred by many interviewees as an essential determinant of annual income. Historically, farms of bigger size usually generate higher income than the relative smaller size farms. With regards to agribusiness sector, the correlation of 3% suggests no significant difference in taxable income regarding to different education level.

Numbers in Sample

14 12 10 8 6 4 2 0 University Higher University TAFE Year10-12

Figure 3: Income Level of Different Education Backgroung in Agribusiness Sector Source:AGI & UoM Survey

Numbers in sample

7 6 5 4 3 2 1 0 TAFE Year10-12 University Higher University

Figure 4: Income Level of Different Education Backgroung in Farming Sector Source:AGI & UoM Survey

4.2

Age, Work Experience and Income

Factors besides education that could affect the income level, such as age and work experience, were also studied during the survey analysis. In our sample, the average age of a farmer is 35 years old whereas the average age of an employee in the Agribusiness sector is 33.9 years old. An average work experience, in terms of years, for a farmer and an employee of an agribusiness sector is 13.6 years and 8.5 years respectively. The discrepancy in the work experience, of the two groups concerned, can be explained by a simple reason. More than one-third of the employees of the agribusiness sector have never worked in a different profession. Farmers, on the hand, tend to try different professions before settling in on farming. More than 83% of the farmers surveyed have tried an occupation other than farming. According to Figure 5 and Figure 6, there is a negative correlation (-5%) between age and income for the Agribusiness sector; whereas, there is a positive correlation (30%) between work experience and income. When compared to the correlation of 3%, between education and income, it could be concluded that work experience is the most important factor that determines the income level of an employee in Agribusiness sector.

120,000 100,000 Income 80,000 60,000 40,000 20,000 0 0 10 20 30 Age 40 50 60

Figure 5: Income and Age in Agribusiness Sector Source: AGI & UoM Survey

160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 0 5 10 15 20 25 30 35

Income

Work Experience

Figure 6: Income and Work Experience in Agribusiness Sector Source:AGI & UoM Survey

For the farmers, the correlation between age and income is 29 %; whereas,the correlation between work experience and income is only 4%. As mentioned above, the correlation between education and income is 36%, which is greater than the correlation of age and income. A conclusion could be drawn based on the above comparison that positive relationship does exist between education and income level among farmers and is stronger than any other factors that have been taken into account in the survey.

180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0

Income

10

20

30

40
Age

50

60

70

80

Figure 7: Income and Age in FarmingSector Source: AGI & UoM Survey

180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 0 10 20 30 Work Experience 40 50 60

Income

Figure 8: Income and Age in Agribusiness Sector Source: AGI & UoM Survey

4.3

Job Satisfaction

3%

97%
High Low

Figure 9: Job Satisfaction Source: AGI & UoM Survey

In the survey, a scale of 0 to 10, 0 being the lowest rating and 10 being the highest rating, was used to measure the job satisfaction level among the participants. As Figure 9 illustrates, 97% of people love their jobs. The average of job satisfaction level is 8. It implies that there is no direct relationship between the job satisfaction level and the income and education level. Generally speaking, people from agribusiness sector are more educated than farmers. However, it is interesting to note that both groups of people have higher level of job satisfaction irrespective of their income and education level.

5.

Limitations

During the process of data collecting and analysis, there are three groups of limitations in the scope of our analysis, which aided in the systematic and accurate analysis. The first group of limitations were brought by the design of the survey.

This survey is only designed and conducted for the current period. Though most of the individual characteristics remain unchanged, individuals income can fluctuate every year. The fluctuation may result from the unexpected market condition, changeable weather, strategic expenditure or unpredicted expense, which can distort the influence carried out by the main examined factors. The measurement of income also has certain defects. In this survey, taxable income was used as the indicator of income level. But taxable income would not be reliable enough to reflect the well-being of an individual. Take a farm owner for an example, if he/she has just invested in new equipment, his investment can significantly reduce the current years taxable income due to the offset of expense. It is pointed out by the farmers interviewed that it is more crucial for the farmers to accumulate their assets on the farms rather than focus on short-term profits, like current years taxable income. This statement further proves that taxable income is not reliable and comparable, especially in the farming sector. Another issue with the survey is that the on-farm income of farmers and off-farm income of agribusiness is unable to be computed as the interval is adopted to present the income level. Thus the total taxable income is implied, in our analysis, as the effective income. Limitations also rose from the data collecting process. First, there is a limited access to the target population during the two weeks survey conducting. A small sample of 57 interviewees was set up and only 23 farmers were approached. Hence simple correlation analysis is applied here to seek the linkage between incomes and individual variables for the empirical specification, rather than a more scientific analysis such as the panel data regression model.

Another drawback is that the interviewees were not randomly selected and thus the sample was biased. A large portion of the interviewees were surveyed primarily at DPI shire office and ABARES regional outlook conference and Victorian Agribusiness Summit. Most of them are researchers and bankers and hold university or university higher degrees. The others also work in agribusiness, such as agriculture sales persons, contractors or land lenders were not included in the sample. There is a high possibility that a proportion of them are less educated than attendants of the conference. Thus the excluding of this population biased the sample. Also most of the farmers approached through phone interview live near Warragul, Phillip Island and Inverloch. This population is not appropriate to be a representation for all the farmers in Gippsland. An extensive unbiased sample is required for accurate analysis. In the data analysis process, other independent variables that are important factors to influence income level were not able to be accounted in the analysis due to relative small sample. For example, specializing area of the farmers such as dairy, beef, cropping and so forth is also a factor that causes difference in income level. However, based on 57 surveys conducted so far, there is little difference from the number of people in each area. Thus it is nonsense and impossible to implement the analysis on this section in our study.

6.

Conclusions

There are several major finding through our analysis. First, for farming sector, with the current taxable income rises above 100,000 dollar, higher education (University degree and University higher degree) is associated with higher income level. This is supported by the positive correlation of 36 %. And this correlation between education and income is also greater than the correlation between income and age and

correlation between income and work experience. Other factors may explain the rest of the correlations for income difference. For agribusiness sector, there is not significant correlation between education level and income level. The relatively strong positive relation only exists between work experience and income level. For the job satisfaction, the average job satisfaction is scale of 8 out of 10 for the total sample. It implies that there is no direct relationship of job satisfaction with income level and education in agriculture business. 7. Recommendations It is suggested that the survey should be conducted every year within a certain period to exclude the influence of unrelated factors. These also raise our concerns that some factors, such as farm size, land use intensity, business type, number of partners and management costs and the stage of a farm should also be considered in the survey. So that curtain fluctuation of income caused by these essential factors could be excluded from the analysis. As taxable income could not be a reliable and comparable income indicator, especially for the farming sector, the assets of farmers should also be taken into account in the survey form. Furthermore, the limitation of the sample suggests increasing sample size, especially in the number of farmers. Based on a larger sample, a regression model can be run to estimate a more related relationship between education level and income level. Once the sample is increased, it is also recommended that more efficient income measurements could be adopted. For example, exact taxable income is required in the survey to solve the calculation problem of on-farm/off-farm income. Otherwise,

calculation of deducting the on-farm/off-farm income is suggested to be performed on the spot of interview. The asset investment amounts of farm owner should be also taken into account to avoid disturbance of such factor.

Appendix A

AGI & UoM Survey LEARN MORE = EARN MORE?

University of Melbourne/Agribusiness Gippsland survey, Gippsland June/July 2011

Section A. Personal Details 1. 2. 3. 4. Gender: Age: How long have you worked in farming/agribusiness? Are you primarily involved in:

Other farming Student (horticulture/forestry/lifestyle farm)

5. What is your role in your work? Owner Manager Farm Partner Sharefarmer/Leasee Operator/employee Agribusiness owner Agribusiness manager Agribusiness employee (includes R&D)

6. Education Level 1) What is your highest level of formal education TAFE Diploma / Advanced Diploma

Apprenticeship - III 2) What is the title of your highest qualification? _____________________________________ 3) What was the subject of your post-secondary education?

Specify) __________________________ 4) What is been your ongoing education? How many days/half-days have your spent in the last year at: _______ _______ _______ How many days/half-days have your spent in the past three years at: Short course(s) at an educational institution _______ _______ _______

7. Rank these in order of importance as sources of information Newspapers/Journals/Magazine Radio/TV Internet/Online Department of Primary Industries Agricultural consultants Agribusiness retailers /salespeople Other famers Other (Specify) _______

____________________________________________ Section B. Income Level 1. Estimate your current taxable income:

- $140,000 - $60,000 - $80,000 - $100,000 - $120,000 2. How much of this income is generated off-farm? _____________________________________ - $160,000 - $180,000 >$160,000

Section C. Outlook 1. Did you enter agribusiness/farming because it was: A family business A primary career choice A career choice after employment or experience in another job/business/profession (Specify) ____________________________________ 2. Financially, in five years time do you expect to be: Better off Worse off In a similar position to now Dont know

3. Do you expect to still be in this career in five years time? Yes No Dont know Can you specify a reason? _____________________________________ 4. On a scale of 0-10 are you happy / satisfied with your career choice in farming? (0 very unhappy, 10 delighted) 1 2 3 4 5 6 7 8 9 10

5. All things being equal, do you think you personally could have a more satisfying life style outside farming? Yes No Who knows?

THANKYOU

Bibliography

Clark.A.E, O. (1996). Satisfaction and comparison income. Journal of Public Economics , 359-381. Keith A. Bender, J. S. Job satisfaction of the highly educated: the role of gender, academic tenure and comparison income. Department of economics and graduate progrma in human resources. Shiji Zhao, E. Y. (2009). Exploring determinants of total factor productivity in Australias broadacre gain farms. ABARE. Simth, T. W. (2007). Job satisfaction in America: trends and socio-demongraphic correlates. Chicago: the university of Chicago. the US Census Bureau. (2002). Education And Income. Retrieved from Education of Online Search: http://www.education-online-search.com/articles/special_topics/education_and_income