By Garry Marr, Financial Post August 26, 2013 - Maybe you can’t put a price on education but a new survey says you can establish a value and it’s not as high as it used to be. For all those student racking up debt, their degrees are increasingly worth less. The news is downright gruesome for fine and applied arts graduates who are earning 12% less than high school graduates once their education costs are factored in.
CIBC World Markets economists Benjamin Tal and Emanuella Enenajor note the cost of a bachelor’s degree is 20% higher than it was in the late 2000s but the unemployment rate among university graduates is now only 1.7% percentage points lower than high school graduates.
The employment gap used to be much wider between university and high school graduates. University graduates also only have employment rate 0.7% percentage points better than college graduates.
“Higher education is a necessary condition for a good job in Canada. But it is no longer a sufficient condition,” say the authors of the report. “Narrowing employment and earnings premiums for high education mean that, on average, Canada is experiencing an excess supply of post-secondary graduates.”
The report notes that Canada has the highest proportion of adults with a post secondary education among Organisation for Economic Cooperation and Development countries and the cost of those degrees is about double the OECD average. Yet the share of Canadian university graduates making less than half the national median income is the largest among OECD countries.
Despite the fact that it is well known that certain degrees pay more in Canada, there hasn’t been any sort of gravitation towards those degrees among students to match the job market.
CIBC’s study is clear on which jobs pay more. Engineering graduates have a 117% wage premium to high school graduates, even after paying for their degrees. Math, computer and physical science graduates are second with an 86% premium with commerce grads at 74%.
At the other end of the spectrum is the fine arts grad earning less than the high school graduate but a humanities degree doesn’t do much better, only earning a 23% premium.
“If you have a B.A. in history and I graduate from high school. I can go work on an assembly line but you will not work on that assembly line. There is a negative premium,” said Mr. Tal, in an interview. “That fact that you went to university, that assembly line job is simply not in you.”
Part of the reason for the disappointing return on university degrees also seems to centre on degrees earned by immigrants. The unemployment rate for immigrants with post secondary education is higher than Canadian-born individuals with similar degrees.
The study found more than 50% of degree holders who earned their degree outside Canada earned less than the median income. It’s only 30% for Canadian born graduates. A bachelor’s degree earned abroad yields 40% less than a degree earned in Canada while the gap among engineering students is 70%.
“The troubling trend trend reflects many factors such as the low return on immigrants’ foreign work experience, difficulties with foreign credentials, concerns about the quality of skills earned abroad and low proficiency in English or French,” says the report.
But the authors say the field of study has been the more important driver of the low return graduates are getting. The underperforming sectors like humanities and social sciences still produce just under half of all graduates.
“Most Canadians are aware that on average, your odds to earn more are better with a degree in engineering than a degree in medieval history,” say the authors. “But it’s not clear that students, armed with that knowledge, have been making the most profitable decisions.”