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Margin Notes

Invest in education to beat the recession

That was the message from the OECD this week, but will governments respond?

BY LÉO CHARBONNEAU | SEP 10 2009

The press release accompanying the OECD’s annual Education at a Glance report earlier this week was pretty clear in its message: “Invest in education to beat recession, boost earnings.”

The release quotes OECD Secretary-General Angel Gurría:

“As we emerge from the global economic crisis, demand for university education will be higher than ever. … To the extent that institutions are able to respond, investments in human capital will contribute to recovery.”

Going to university pays dividends to the individual through higher salaries, better health and less vulnerability to unemployment, the report says. But it also pays dividends to society and governments, since university grads tend to pay more in taxes and require fewer social supports. The report’s author, Andreas Schleicher, put it this way in a report from the BBC:

“Countries which want to position themselves for after the economic crisis should create sufficient places in university,” said Mr. Schleicher. “It makes sense to create more places. It means more tax, better health, better participation in society,” he said.

Despite the expense of university – both in fees paid and income deferred – the report says there is consistent evidence that higher education is still cost effective. A student who completes a university degree can look forward to a significant earnings premium over his or her lifetime compared with someone who only completes secondary school.

The highest earnings advantages are in the U.S., where a male graduate can expect to earn more than $367,000 (U.S. dollars) extra over his lifetime and a female graduate more than $229,000. In Canada, the respective numbers are $170,510 for men and $137,899 for women, again in U.S. dollars (see Table A8.2, in Excel format).

I wholeheartedly support the report’s conclusions. But, if I may quibble, I note that the earnings premium for university seems to be slipping. The Association of Universities and Colleges of Canada claimed as recently as October 2008 that the premium was in fact about $1 million (CDN) – far more than the OECD’s estimate. I discussed the “million-dollar degree” in a previous post, here.

My other observation is that I’d be awfully surprised to see any significant new provincial investments in university education in Canada anytime soon. The provincial governments are all deeply in debt and, if anything, budget cuts may be more the order of the day once the recession subsides.

As for the federal government, with the prospect of an election, who knows? The federal government invested $2.7 billion in university research in 2007-08, and I think there’s a strong argument to be made to see that continue, if not expanded.

Statistics Canada, reporting on the OECD data, notes that, in 2007, 25 percent of Canadian adults aged 25 to 64 had received a university degree or a university certificate above a bachelor’s, surpassing 23 other OECD nations. Norway led the way with 32 percent, followed by the U.S. (31 percent). Ontario (28 percent) and British Columbia (26 percent) exceeded the Canadian average.

Canada owes its position to the older generations, says StatsCan. In 2007, the country ranked fourth for its proportion of adults aged 55 to 64 that held a university degree (21 percent). However, it was 12th, on par with Japan and the U.K., for its proportion of adults aged 25 to 34 that held a degree (29 percent). Increases in university attainment have been made in Canada across the generations, but to a lesser extent than in other countries, the agency concludes.

ABOUT LÉO CHARBONNEAU
Léo Charbonneau
Léo Charbonneau is the editor of University Affairs.
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