Martin Hicks – Still worth it, after all these years

Last week, the Globe and Mail dissected Ontario’s latest annual university graduate survey results.  Lead conclusion: “recent graduates of Ontario universities are doing worse on almost all measures of employment compared to those who graduated before the recession.”   And more pointedly: “humanities graduates have been particularly affected, with their real earnings dropping steeply from what they could expect a decade ago.”

Not so fast.  Not the whole story.  What do the data say about recent grads versus those from the good old days before the recession?

Historically, Ontarians with a university degree have done well.  Recently, Statistics Canada calculated the 20-year earnings premium for baccalaureate-educated versus high school-educated Canadians born between 1955 and 1957.  It’s $730,000 for men and $440,000 for women.

But is that all yesterday’s joy?  What’s the story for graduates emerging through the 2008-2009 downturn?

Yes, it got harder to find a first job.  The unemployment rate of mid-recession Ontario graduates was double that of pre-recession graduates.  But in relative terms, the unemployment risk for university graduates improved during the downturn.  That’s because the unemployment rate for young adult Ontarians with just a high school diploma really spiked.  That’s the group in deep trouble.

Are graduates getting decent jobs, though?  For Ontarians who graduated mid-recession, in 2009, average incomes are holding steady in comparison to pre-recession grads.  Yes, there has been some wage slippage over the past decade for new Ontario graduates.  But three bits of context: Canadians’ incomes overall have been stagnant over that period; the 2009 recession did not open up a chasm of plummeting graduate wages compared to just prior to it; and new graduates’ wages are significantly higher than earnings for same aged Ontarians without a university degree.

What about those humanities?  This is an old story.   Consistently, over the past 30 years, university graduates from STEM disciplines (science, technology, engineering, math) have, on average, done better than those from the humanities.  Ever so.

But there is no evidence that today’s humanities grads are falling off a newly emerged cliff.  The average reported full time salary for 2009 (thick of the downturn) Ontario humanities grads two years after graduation was $38,600.   It’s holding steady for graduates since.  A full time Ontario minimum wage salary is $22,000.  A full time salary for a $16/hour job (the Ontario average for sales and service workers of all ages) is $32,000.  Take your pick.

It’s not enough that a university education delivers higher lifetime earnings.  Those higher returns must outweigh the up front costs of going to school.  Historically, longitudinal studies show the investment pays off.

And today?  We don’t know because those lifetimes haven’t yet unfolded.  The suspicion is that costs, namely tuition and debt repayment, have spiked to spoil the equation.  At Statistics Canada, Ontario posts the highest average provincial undergraduate tuition at $7,300.  But that’s the sticker price.  Subtract from it Ontario’s 30% off program, which the majority of students get, tax credits from which almost every student or supporting parent benefits, and the non-repayable components of OSAP available on an income tested basis, and tuition drops from the reported average of $7,300 to under $4,000.

Lastly, we hear a lot about graduates with debt.  This is not all bad.  Most student debt in Ontario is through OSAP, and OSAP is about access.  More students on OSAP, and yes, more students with debt, signals that the program is opening the path to university for to Ontarians who would otherwise not be able to go.  And OSAP layers in up front grants and backend loan forgiveness to bring the absolute costs of university down for those with less.  That’s right – students on OSAP get a break, not a kick in the seat, on the cost of their education.

The best test for whether or not debt is manageable is to measure the trend in default rates on loan repayment.  If there is a brewing debt crisis, this indicator would be spiking.  The default rate trend for both federal and Ontario loans programs is downward.

It’s OK to go to university.  It’s OK to take philosophy.  There are no guarantees, but the data shows it’s a very, very good bet, especially in a shaky economy.

-Martin Hicks, Executive Director, Data & Statistics