In 1995, the Taiwanese government embarked on a policy of expanding the higher education sector. As a result, since 1995 there has been a dramatic increase in the number of university and junior college graduates produced each year. At the same time, however, the unemployment rate among university and junior college graduates has risen, raising concerns that the higher education sector is failing to cultivate the types of human talent that industry needs. In order to clarify exactly where the imbalance between high education talent cultivation and the needs of industry lies, and to explore the reasons for the imbalance, the present study analyzed a wide range of statistical data, and undertook in-depth interviews with persons directly involved with the higher education sector. The results obtained in the study helped to shed light on a number of “myths” regarding the relationship between the expansion of the higher education sector and the rise in the graduate unemployment rate. For example, the study found that the expansion of the higher education sector had not led to an across-the-board imbalance affecting the whole sector; rather, the imbalance was heavily concentrated in private sector institutes, private-sector technical and vocational colleges, and private-sector universities of technology. The results obtained in the study suggested that, overall, higher education does help to improve graduates’ long-term career prospects, and that “lifelong education” will become a significant trend in the future. The most significant finding was that government-imposed controls and government interference were the main cause of the imbalance between the types of human talent being cultivated by universities and the types needed by industry. A relaxation of government restrictions, and a lessening of government interference, will be needed to enable universities to compete freely and to develop autonomously, thereby putting Taiwan’s universities on the right development track and rectifying the imbalances in human talent cultivation.