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Canada’s unemployed: Bad training, or bad choices?

Graduating PhD and Masters students head towards Convocation Hall at the University of Toronto on Friday, June 15, 2012.

Matthew Sherwood/The Globe and Mail

A recent C.D. Howe report examined the problems of general unemployment and youth unemployment in Canada and found that the problem is not so much a lack of jobs, but a mismatch between firms and the unemployed. There are regions and industries in Canada that are desperate for workers, but the unemployed have a different set of skills and live in different areas.

The report recommends educational reform – increasing the focus on skills training – along with increasing labour mobility in Canada. These would be useful reforms, but we may be looking at the problem from the wrong end of the lens. The problem may be not so much that institutes of higher education are supplying the wrong type of education, but rather that students are demanding the wrong type.

When former Liberal Party of Canada leadership candidate George Takach visited the Richard Ivey School of Business, he proposed a rather elegant solution to the labour mismatch problem. He suggested that the market may be failing due to a lack of information. Simply put, students may not be making the best decisions possible for what programs to take or which school to attend, because they lack the necessary information to make that decision.

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The idea has intuitive appeal. If a young person going into higher education is making an investment, then why do we not treat it as an investment? In Ontario, if a financial institution wishes to create and sell a mutual fund, there are prospectus requirements. Investors must be informed of the goal of the fund, what the fund is invested in, and the past performance of the fund (with the rather large caveat that "past performance is no guarantee of future results").

Publicly traded companies must provide financial statements and public filings, such that investors can make an informed decision to purchase or sell that stock. Furthermore, the information in these reports is based on agreed-upon principles, so investors can make an apples-to-apples comparison among securities.

If students are going to spend several years and tens of thousands of dollars investing in higher education, then should there not be securities-type reporting requirements for institutes of higher education? If a student is considering enrolling as a biology major at a particular university, should she not be told the percentage of people who complete the degree and the employment rate after graduation? Should she not be told the starting salary of graduates and how many graduates get jobs related in the field? Should she not know how much graduates are earning five or 10 years after graduation, and what percentage of them went on to take further degrees? For this information to be useful, it must also be calculated and presented in such a way that she can make apples-to-apples comparisons among different programs at different universities.

Would it work, in the sense of changing the decisions made by students? Unfortunately, I have not seen any peer-reviewed studies on the subject, so the evidence is likely rather thin. Compared with other educational reforms, which largely involve increasing funding to the system, this is an incredibly low-cost idea. As such, it is worth investigating.

Mike Moffatt is an assistant professor in the Business, Economics and Public Policy group at the Richard Ivey School of Business, University of Western Ontario.

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About the Author

Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business – Western University. Mike also does private sector consulting for the chemical industry. More

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