Education still pays – just not as much as it used to. A new paper shows Canada’s oil boom, along with minimum-wage hikes, have narrowed the wage gap between people with a high-school diploma and those with a bachelor’s degree.
University grads have long seen higher pay than those without postsecondary schooling. But the premium is shrinking. Back in 2000 to 2002, male high-school graduates got just 68 cents for every dollar earned by young male bachelor’s degree holders, while female high-school grads received 64 cents. A decade later, young male high-school grads garnered 75 cents for every dollar, while female high-school grads got 68 cents, according to a Statistics Canada paper published Monday.
It’s a stark reversal after two decades, through the 1980s and 1990s, of a widening wage difference between the two groups. Several factors have narrowed the gap. The oil boom of the 2000s boosted economic activity and raised demand for less-educated workers “to a greater extent than it did for more-educated ones,” the study said. That affected wages for young men directly – as many blue-collar workers landed jobs in the oil patch – and for women indirectly as the boom fuelled wage growth in service positions such as hotel work and retail. The housing boom may also have played a role, churning out jobs for lower-skilled workers through the past decade.
“Higher education is still associated with better labour market outcomes, whether it’s pay rates or full-time employment rates. It’s just that there’s been a certain narrowing of wage differentials during the 2000s,” said René Morissette, Statscan economist and co-author of the paper with Marc Frenette.
Other reasons for the shift depend on gender. For women, increases in real minimum wages helped close the difference and so did rapid growth in the number of women earning bachelor’s degrees. For men, the oil boom was the big factor, while to a lesser extent, changes in unionization rates and increases in temporary jobs also affected the education wage premium.
The findings are based on how graduates aged 20 to 34 fared in the 2000-to-2002 period compared with a decade later, using data from the labour force survey.
The shrinking gap stemmed from better wages for high-school grads. Average real hourly wages of male high-school grads working full time rose by 9 per cent in the decade, while women in this group saw an 11-per-cent increase. By contrast, wages of young male bachelor’s-degree holders were unchanged, while those of young female university grads grew 5 per cent, the study found.
The results differed by region, with the wage gap narrowing much more in resource-rich Alberta and Saskatchewan than in Ontario.
There may be a shrinking difference in wages, but employment outcomes have widened, with university grads still more likely to hold a job.
The full-time employment rate of women with a bachelor’s degree stayed at about 63 per cent, while the rate for women with a high-school diploma fell to 44 per cent from 49 per cent. For men with a degree, the employment rate fell to 68 per cent from 72 per cent, but tumbled even faster among those with a diploma, to 61 per cent from 68 per cent.