TORONTO – A new report says some students aren’t getting as much of a return on their education investment as they should because they aren’t focusing on the ideal fields.
The CIBC World Markets report says that while completing a post-secondary education is still the best route to a well paying, quality job, the premium is dropping as too few students are graduating from programs that are in high demand.
CIBC economist Benjamin Tal says that despite “overwhelming evidence” that one’s field of study is the most important factor in determining labour market outcomes, students have not gravitated toward the fields that make most financial sense.
Tal says students will get the biggest bang for their educational buck from specialized and professional fields such as medicine and law.
The fields of humanities and social sciences, on the other hand, carry much greater risk, while students of health or business face a more limited risk of ending up with lower income.
Yet the study found just under half of recent graduates fall under the sectors deemed “underperforming” – even though they know they’d earn more with a medical or law degree.
“Canadian students are continuing to pursue fields where upon graduation, they aren’t getting a relative edge in terms of income prospects,” said Tal, who co-authored the report.
The proportion of adults in Canada with a post-secondary education is the highest among all OECD countries even though the cost of that education is roughly double the OECD average, the report found.
Yet more and more of those degree holders fall behind in the earnings scale, with the share of Canadian university graduates who make less than half the national median income the largest among all OECD countries.
“A higher education may be a necessary condition for a good job in Canada, but it is no longer a sufficient condition,” says Tal.
“Narrowing employment and earning premiums for higher education mean that, on average, Canada is experiencing an excess supply of post-secondary graduates.”
That’s help put the unemployment rate among university graduates at just 1.7 percentage points lower than among those with only high school education, a gap that was much larger in the 1990s.
The university premium over college has also narrowed and now comes to 0.7 percentage points.
Masters degrees or PhDs signal more specialized skills than a bachelor’s degree, Tal adds, but that hardly translates to the unemployment statistics, with the jobless rate premium falling to just 0.5 percentage points.
“While higher education overall still translates into better wages – a bachelor’s degree buys you more than a 30 per cent earnings premium over high school graduates with Masters or PhD graduates tacking on an additional 15 per cent – that premium is also narrowing,” CIBC said.
Real weekly wages of high school and college graduates have risen by 13 per cent versus eight per cent among undergraduate degree holders and more than double the rate seen among MA and PhD holders.
The share of part-timer work among university-educated Canadians also rose from 10 per cent in the 1990s to 13.5 per cent today, with the gap relative to high-school graduates narrowing to only one percentage point.
The CIBC study examined various reports that have attempted to compute an annualized average “return on investment” on education and found stark divergences depending on the field of study.