As I was writing this article earlier this week, I fell asleep. I hope you won't do the same as you read it. To clarify, it was late at night and I had a long day. That night, I dreamed that my son, Win, who is heading into his last year of high school, announced that he plans to pursue a postsecondary education – for a very long time. "Dad, you might as well get used to the fact that I'm going to be living at home until I'm about age 55 or 60, and then I'll start my career," he said. Then I woke up, in a cold sweat, realizing it was just a dream.
The reality is that young people in Canada today are in fact going to postsecondary schools in greater proportions and are living at home longer than ever. Canada's National Household Survey revealed that 68 per cent of young people aged 25 to 29 held a postsecondary degree or diploma (including trade certificates) in 2011, while this proportion was just 43 per cent in 1981. And in 2011, 25 per cent of young people aged 25 to 29 still lived with their parents, compared with just 11 per cent in 1981, according to the census published by Statistics Canada.
So, it shouldn't be surprising that young people are starting their careers later than ever. According to Canada's Labour Force Survey, the full-time employment rate in 1976 peaked at the age of 25. In 2012, that age was 31. That is, young people are starting their careers a full six years later today than they were 40 years ago – largely because they are gaining more education than ever.
This all raises the question: Is the education worth the time and money? And if so, what types of education result in the best outcomes for young people today?
There has been much research on the topic of postsecondary education and the earnings of graduates. Researchers have been trying to figure out the link between levels of education and financial success afterward. The most recent study was published by the Canadian Journal of Higher Education in 2012 by researchers at the University of Guelph.
The study I'm referring to focused on Ontario students because, the researchers explained, education is governed provincially and their research was to be used for policy decisions. The results, however, are consistent with earlier studies that were national in scope. The study came to the conclusion that the level of schooling (trades, community college and university) and field of study (business, sciences, engineering, computer sciences, health and other liberal arts) are key drivers of labour market outcomes – that is, they have a huge impact on how well students fare financially after graduation.
What's clear from the research is that today's economy and the proliferation of information technologies favour graduates with applied and technical skills over graduates with more generalist skills provided in the liberal arts. To be more specific, graduates of engineering and computer sciences reported the highest earnings two years after graduation, followed closely by those from health programs and then those with business-related credentials.
It was also clear that, when it comes to the level of schooling, college graduates reported the lowest earnings, followed by graduates of trades programs. Both of these groups earned significantly less than university graduates. Here are the details: Graduates with advanced university degrees reported the highest earnings two years after graduation (median of $58,943 for males, $52,654 for females), followed by university undergrads ($47,100 for males, $43,446 for females), and then followed by community college grads ($37,327 for males, $33,363 for females).
Here are some interesting stats for trades graduates: Although females with college diplomas have higher estimated earnings ($33,363) than those with trades certificates ($30,423), males who received trade certificates had higher earnings two years after graduation ($39,700) than those who graduated from community college in the same year ($37,327).
Back to the field of study. The median earnings (two years after graduation) of university graduates in each field of study were as follows: liberal arts grads – $38,958; sciences – $39,191; business – $44,886; engineering and computer sciences – $51,671; and health grads – $52,141. When looking at community college grads, the ranges weren't as big, from median earnings of $31,095 for liberal arts grads to $38,038 for graduates with diplomas in engineering and computer sciences.
So what does all of this mean? If your child is attending postsecondary school, the amount of money they pay and the debt they are willing to take on should be driven by their potential earnings afterward. More on this subject next time.
Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.