Innovative Research Challenges Myths about Post-Secondary Education Graduates’ Earnings in Canada

Press Release

Ottawa, July 26, 2016 – The myth that post-secondary education no longer carries the value it once did is being challenged by a new study entitled Barista or Better? New Evidence on the Earnings of Post-Secondary Education Graduates: A Tax Linkage Approach conducted by the Education Policy Research Initiative (EPRI).

Researchers used an innovative methodology that involved linking records on students from 14 colleges and universities in four provinces with income tax data to track the earnings of graduates. Their research shows generally strong labour market earnings patterns for both bachelor’s degree and college diploma graduates from 2005 through 2013.

“The growth in earnings over time is especially striking, and shows the value of following graduates for longer periods in order to get a proper assessment of their outcomes,” said Professor
Ross Finnie, the study’s lead author and director of EPRI.

Funded by Employment and Social Development Canada (ESDC) and undertaken in partnership with Statistics Canada, the study found that:

Average annual earnings for 2005 bachelor’s graduates were $45,200 (in 2014 dollars) for the first year after graduation, and then rose steadily, growing by 66% to reach $74,900 eight years after graduation.

The 2005 college diploma graduates earned an average of $33,900 (in 2014 dollars) the first year after graduation, increasing by 59% to reach $54,000 eight years after graduation.

Following the 2008 financial crisis, first year earnings for the different cohorts of all graduates taken together first dipped (after having risen the two preceding years), but then stabilized in 2010. Across the entire 2005-2012 period, earnings rose for later cohorts of certain fields of study, were stable for others, and declined for another set, but those declines could be described as moderate to substantial (at worst), rather than calamitous.

Both bachelor’s degree and college diploma graduates of engineering, mathematics and computer science, and business generally had higher incomes and greater earnings growth than graduates of other disciplines, but graduates of most other fields of study – including the oft-maligned humanities and social sciences degrees – also performed well.

Commenting on the methodology, noted Canadian economist Don Drummond asserted, “The EPRI approach offers a richer scope for studying the effects of education programs as graduates’ employment, social and other outcomes are tracked over time.”

The next steps in this kind of tax linkage research should include broadening the analysis to eventually include graduates from all post-secondary institutions, and digging deeper into the data to improve our understanding of how specific student characteristics and schooling experiences affect graduates’ earnings trajectories.

“Young Canadians who are contemplating their futures need up-to-date information on their education options and employment outcomes,” says Paul Davidson, President of Universities Canada. “This study provides much-needed data on graduates’ income potential, and demonstrates the significant value of post-secondary education – including liberal arts degrees – with respect to long-term earnings and career success. By linking field of study to individual tax records, and tracking over a long time frame, Finnie has made a valuable contribution to evidence-based policy discussion that can be used to strengthen outcomes for students and Canada.”

“By helping youth succeed, we will grow the middle-class and build on Canada’s economic prosperity. Young people today are facing serious employment challenges and we must do all we can to address it. We have a plan to help more Canadian youth get the skills, opportunities and experience they need to get the best start to their careers. This research will help us achieve that outcome.” – The Honourable MaryAnn Mihychuk, Minister of Employment, Workforce Development and Labour

For additional information, contact:

Ross Finnie,
Professor and Director
Education Policy Research Initiative
rfinnie@uottawa.ca
613-295-5798

Michael Dubois
Research Associate
Education Policy Research Initiative
mdubois@irpe-epri.ca
613-562-5800, ext. 2279

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