This generation is facing a different world of work and education than before. University tuition fees are higher (though a lot more aid is available), there are a lot more people getting degrees, and the workforce is more competitive. Do they have it worse than previous generations? Is a university education still good value for money – that is, is the increase in employment and income worth the money you pay (and borrow) for it?
A number of observers, including economist Armine Yalniziyan, argue that university has become prohibitively expensive without offering better employment returns, especially when today’s high student-debt burdens are taken into account. Others, such as education consultant Alex Usher, say that today’s university students have a better deal than ever before: The real-life costs of university are lower than they have been in decades, and the rewards are higher.
University students have lower costs and better outcomes than before
Alex Usher : The debate around post-secondary education in Canada tends to involve breathless discussions about “record” tuition or debt levels on the one hand, and tales of unemployed graduates on the other. The result is a widespread feeling that education simply isn’t worth it. But that’s wrong. Here’s why:
To begin with, costs aren’t increasing as quickly as is commonly assumed. It’s not the 1990s anymore: back then, annual increases were around 10 per cent each year and in some provinces much higher. Since 1999, tuition rises have been quite low – about 3.5 per cent, or just 2 per cent per year after inflation.
Parents have adjusted to the new situation by saving more. Last year, twenty-five per cent of full-time students took money out of a registered savings account, and the average amount they took out was over $7500. That’s well above levels seen fifteen years ago when the Canada Education Savings Grant was introduced -- and the increase in saving reduces pressure on student finances.
More importantly, students are receiving more aid than ever. Back in 1994, governments were issuing about $1.4 billion (in 2012 dollars) in scholarships, grants and tax credits. Add to that funding for First Nations through the Post-Secondary Student Support Program and institutional scholarships, and you get a total of about $2.1 billion. Fast forward to 2013 and that figure is now over $7 billion.
Not only does this $5 billion increase significantly outstrip the rise in tuition, it means that collectively, Canadian students are receiving about as much money from governments and institutions as they pay in tuition. Of course, not every student is paying zero; some (rightly) receive grant aid to cover part of their living expenses, which means that others must pay a positive sum. What it does mean is that after subsidies are included, the net cost of tuition has actually fallen over time. Could it be distributed better? Sure. But the increase in the overall generosity of the system is clear.
Increased savings and aid mean that student-loan repayment burdens are way down. Student debt seems to have stopped growing and may even have decreased slightly. But two other things have also happened: the first is that student-loan interest rates have fallen from around 10 per cent in the mid-1990s to about 5 per cent today, and the second is that taxes on incomes in the 40-50K range (i.e. what recent graduates tend to make) are down by about a quarter. That means that even though graduate incomes haven’t risen much in the past decade, the percentage of after-tax income the average new grad needs to pay to service their loan has fallen from 12 per cent to 8 per cent. For young people starting out on their careers, that’s a big improvement. And if they run into problem, the Canada Student Loans Program’s Repayment Assistance Plan is the most generous borrower-assistance program the country has ever had.
So, over the past 15 years or so, average net costs have fallen, debt burdens have fallen, and protection for low-income borrowers in repayment has improved. No doubt this has contributed to the explosion in participation rates. Since 1999, the percentage of Canadian 18-21 years olds attending university has shot up from 19 per cent to 30 per cent. So much for the scare-story that costs are keeping education out of reach.
And the benefits? Well, despite all the talk about BA graduates not getting jobs, an analysis of provincial graduate surveys shows that while employment rates have fallen by a couple of points since 2008 (same as everyone else), they remain almost without exception over 90 per cent, same as they have always been. Indeed, contrary to the snide claims that the country needs more welders and fewer BAs (claims usually accompanied with intimations that the BAs are inevitably going to be baristas), in British Columbia unemployment rates among recent Arts grads are exactly the same as they are among recent apprenticeship completers (9 per cent in both cases). And that’s just in the short term. Over the longer term, measured five years out or more, the returns to higher education remain very high
In sum, things are as good or better as they have been at any time in the last twenty years. Or maybe even longer: back in the 1970s, tuition was cheaper, but university graduates actually earned less than community-college grads.
One could make a more solid case that things are not as good as they were in the 1960s, but it’s a dubious comparison. If you were a student in both periods, you’d no doubt notice the difference, but now we are giving the benefits of higher education – and the high-paying jobs associated with one -- to a lot more people. For three quarters of the current student body, the fact that education might be more expensive than 50 years ago is irrelevant – they wouldn’t have had the chance to study back then. And an education with a debt is a lot better than no education at all.
None of this is to say that life is hunky-dory for today’s students. Getting through post-secondary and starting a career is a tough slog. But it’s getting better, not worse.
Rising costs and bad jobs have made degrees a bad deal for many
Armine Yalnizyan : It's that time of year when, for many, thoughts turn to the costs and rewards of a university education. The problem is that today's bachelor's degree is the new high school diploma. Is it worth it?
Students have to work longer to pay for university now than a generation ago, but how much more depends on where you study and what you study.
The most affordable place to study is Newfoundland and Labrador -- a result of deliberate public policy aimed at retaining and attracting bright young minds. You only need 37 more hours of minimum-wage work than you did in 1975 to pay for average full-time undergraduate university tuition fees.
Ontario has become the most expensive place to study, and home to the largest number of university undergrads. It takes at least twice the hours of minimum-wage work to cover tuition compared to a generation ago. But if you're studying business or engineering, you have to work 3.5 times as much as you did in 1975; in law, five times; in medicine, six times; in dentistry, nine times.
Pursuing a professional undergraduate degree has become a far more costly and consequential decision. Tuition fees played a negligible role in the consideration a generation ago. Deregulation has led to an explosion in costs in many provinces.
Meritocracy is still a cherished value, so soaring tuition fees have been accompanied by an explosion in student financial aid. (Loans don't count because they don't reduce costs; they delay them.)
There's piles of money in student aid, but navigating your way through the labyrinth of options is time-consuming and a bit of a crap shoot: what you're entitled to one year may not be available the next. Universally available tax credits are nice, but they don't pay the bill at the registrar's office, and offer the biggest benefits to those with enough income to claim them.
Financial help varies significantly across courses of study and schools. Much of it goes to graduate students.
The sticker shock of the suggested retail price of tuition is important. It's enough to deter many people from looking into what the net cost of study could be for them.
The justification for higher tuition fees is that they lead to higher incomes on the other side, so making tuition more affordable for everyone really just helps the richest most: As tuition fees for the “richest” have risen since the 1990s, income taxes on the richest have been dramatically cut.
Make no mistake. The returns on investment in human potential and employability are changing.
The wage premium associated with a university education – that is, the extra income you can expect to earn with a degree -- is falling, especially among young men. It's falling for young women too, but is still a big enough premium to explain why more young women are graduating from university than young men.
On the other hand, the employment premium – that is, your increased chance of having a job after earning a degree -- is growing for those who hold a bachelor's degree. It may be slim comfort for the underemployed, but a university education is still a good investment, because it now improves your odds of having a job in the first place.
But compared to a generation ago, the rungs on the income ladder have grown further apart. Fewer people earn between $30,000 and $60,000 than in the mid-1970s (adjusting for inflation); more work at both extremes.
At the top end, this chicken-or-egg logic sees higher university tuition fees rationalized because they lead to higher incomes, and income expectations raised because of the high entry costs of university.
At the bottom end of the wage spectrum, employers’ bargaining power is at an all-time high. Young university graduates compete for contracts that don't pay as well as the permanent positions they often replace. Some are even unpaid jobs, masquerading as internships. It's a buyer’s market, with the supply of new jobs a fraction of the people needing one, whether they're seniors, young people, or newcomers.
This generation of university students also has to contend with new public policies that work against them.
In the past few years the number of "low skill" temporary foreign workers has ballooned in every industrial sector of the economy. (We've had seasonal agricultural workers and live-in caregivers for decades. Their numbers are declining.) The even bigger Youth Exchange Program ("student guestworkers") adds insult to injury. This program provides international youth with work experience here in Canada. It's more than doubled since the recession.
You can decide for yourself if things are harder for this generation of university students. But there's no denying the rising numbers of young adults still living with, or returning to, their parents. Soaring costs of renting and owning, and more episodic job opportunities, are more likely driving this story than a mass increase in filial love.
What Canada has done for the past 40 years is most likely not the path for the next 40 years. Demographic shifts should mean a shrinking labour force is in a better bargaining position to demand better returns on their investments, either in the form of lower tuition fees or better pay. But public policy is key.
The province to watch is Newfoundland and Labrador, to see if their experiment pays off. These taxpayers are betting on the adage that a good education is a ticket to a good life – for individuals and for society too.