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In my opinion

A university degree remains a valuable investment

The current downturn is tough on new grads, but they will find relevant jobs and prosperous careers.

BY HERB O’HERON | JUN 27 2012

Every decade or so there is an economic slowdown that causes some media, parents, prospective students and others to question the value of a degree. Each of these downturns has its own, slightly different, characteristics, but in each case unemployment rates, especially for youth, have increased – in some cases dramatically so. While those with a university education fare much better than those who have not gone beyond high school, students who graduate during these downturns do confront more uncertain job prospects than other graduating classes. Media are quick to jump to the conclusion that Canada (along with other nations around the world) is wasting its investment in educating students for an uncertain future. This conclusion is not correct.

Canada, and Canadian students and families, have made significant investments in higher education over the last three decades. The number of university graduates has risen dramatically since 1990, both as an output of our own universities and through immigration of graduates who earned degrees abroad. Their employment levels also have risen: the number of university graduates employed in Canada has more than doubled from 1.9 million in 1990 to 4.4 million in 2011. And they hold good jobs – 1.4 million more graduates are working in professional and management careers now than 20 years ago, with an additional 600,000 in technical and administrative occupations.

This trend has continued even during the economic slowdown. According to Statistics Canada’s latest Labour Force Survey, in May 2012 there were 613,000 more jobs for university graduates than there were in May 2008, at the outset of the recession. There was an increase in employment for university graduates throughout the recession and there was quite strong job growth for university graduates since early in 2009. The 613,000 additional, net new jobs for university graduates between May 2008 and May 2012 represent a 15-percent increase in the employment level for university graduates.

Skeptics might counter that employers are hiring more graduates because there are simply more of them to choose from, regardless of whether the job requires a degree. If this were the case, then one would expect the income premium for university graduates to decline over time – in other words, an employer would not pay these graduates more than they pay others with less education to do the same job. But the income premium for university graduates has not declined and in fact has grown.

Several Canadian researchers have used census data to quantify the income advantage for university graduates compared with high school graduates. One of the more recent studies compares data from the last six censuses and shows that the income advantage for male and female bachelor’s graduates grew significantly between 1980 and 2006. The Boudarbat, Lemieux and Riddell study (PDF, 2010) shows that in 1980, a male bachelor’s graduate could expect to earn on average 37 percent more than a male high school graduate. By 2005, this income advantage had grown to 50 percent. The income advantage for women with university degrees is higher still. The research also disclosed an income advantage for college and trade school graduates over high school graduates for the same period, but this was much smaller, approximately seven percent in 1980, rising to 15 percent in 2005. Their research also shows the relative income advantage of bachelor’s graduates compared to college graduates has grown in this period. This is true even when college and university students were enrolled in roughly comparable fields of study.

Of course, not every graduate can expect to accumulate these income advantages during their career. Average income varies widely across different areas of specialization. In 2005, the average income for a bachelor’s graduate in the visual and performing arts was about $45,000, while average income for bachelor’s graduates in engineering and applied sciences was just over $90,000. Similar differences exist across disciplines for college graduates and Quebec’s CEGEP graduates. The lowest earnings for college or CEGEP graduates – in visual and performing arts, education and social sciences – were around $40,000. The highest average earnings were close to $60,000 and were in engineering and related technologies. While earnings in lower-paying disciplines are higher than the incomes of high school graduates, it is important to note that income is not the ultimate motivation for all students. Many are motivated by intrinsic values in studying music or the arts.

It is very hard to watch some of our young graduates try to establish their careers in these tough economic times. For those who find it more difficult than the typical graduate, it must be disconcerting to be told that their time will come, that, as the economy recovers and the boomers retire, they will encounter all kinds of opportunities in a changing world where labour shortages abound. In this respect, it was heartening to read the recent article in the Ottawa Citizen, “The Class of 2012 is going to be fine,” where graduates expressed optimism about their futures. I, too, have every confidence that today’s university graduates will have long and prosperous careers. Most have gained a host of skills that will allow them to adapt to ever-changing labour demands.

Governments across Canada and in developed and developing nations recognize that a fierce competition is emerging for talented people. Many private-sector employers worry about where they will find the talented graduates they need in the years ahead. The Canadian Chamber of Commerce has identified talent shortages as the biggest impediment to company growth and says shortages are already apparent in several sectors across Canada.

The students writing in the Ottawa Citizen expressed appreciation for public concerns about their current situation, but those graduates are not looking for our pity or a hand-out. They want opportunities to show how they can contribute to Canada’s future. I am certain that, just like the vast majority of the graduates in the economic downturns in the 1980s and 1990s, the graduates of the Class of 2012 will indeed be fine.

Herb O’Heron is director of research and policy analysis at the Association of Universities and Colleges of Canada.

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  1. Jon Dowery / July 21, 2012 at 14:28

    Herb, you of course need to toe this line given your own professional position. The reality is that the place of universities in setting youth up for prosperous careers has been greatly diminished. We cant place the professional future of our kids in the hands of some of the most esoteric people on earth and expect good results. I say this from experience with my newly minted doctorate which isn’t worth the paper its printed on.

  2. alex / July 26, 2012 at 12:56

    With such a disparity in university training programs and current skills needed to succeed in this economy, indeed the role of universities (including the Association of Universities and Colleges of Canada) is thrown into question.

  3. Rachel Abrahms / July 26, 2012 at 15:10

    Surely there is a place for training in professional degrees like medicine and engineering. However, does anyone really still see the value in a sociology degree? Science funding by the government was just cut to the bone as well.

    If students from the top tier US schools (Harvard, Yale etc) are unemployed, that spells even more trouble to respective students from Carelton, Concordia, Ryerson etc. This article seems to me like a sad attempt at defending the diminishing importance of universities and organizations like the authors.

  4. Ed / July 26, 2012 at 19:50

    If it was evident that “a university degree remains a valuable investment” why would the author have to go through such writing pains to argue it?

  5. William Johnson / November 14, 2012 at 21:18

    To me, what this post says, is that new grads must be strategic in their job hunt. The results are in: degrees generally lead to higher salaries and employability; it’s up to students to increase the likelihood of those outcomes.