Post-secondary education won’t close the income gap according to a new economic analysis


University of Toronto grads leave Convocation Hall earlier this month.

Published on Mon Jun 29 2015

Politicians, employers, teachers, economists and bureaucrats all agree that education is the key to lifting people up, improving their financial prospects, narrowing the gap between rich and poor and boosting economic growth.

Regrettably, this almost universal consensus is at odds with the facts. Rather than being the solution to rising inequality, education may worsen the problem, say two Canadian economists in a surprising study released last week.

“Education and training policy is no silver bullet,” warn David Green of the University of British Columbia and Kelly Foley of the University of Saskatchewan. Pouring billions of dollars into university education – as Ottawa and the provinces are doing – delivers the greatest benefit to middle-and upper-income students. Investing in apprenticeship programs and skills training doesn’t level the playing field because female participationis low (9.7 per cent), the drop-out rate is high (43 per cent), and students from low-income families often emerge with heavy debt loads.

The authors don’t object to all education spending. Investments in early learning targeted at children from low-income households make sense as an equalizer, they acknowledge. So does increased income support for parents of school-aged youngsters.

But overall, they caution, “the forces that are driving Canadian wages – like technological change and the resource boom – would not be offset by simply increasing the education level of the workforce.”

The pair reached these sobering conclusions after an exhaustive examination of hiring trends, employment levels, earnings, and differences in pay levels for graduates from high school, college and trade programs, university and post-graduate courses over the past 33 years.

What they found is that the return on investment in education rose steadily until 2000, when oil prices began to climb and computer skills became essential in most workplaces, then stalled. Rather than hiring university-educated workers, employers could adopt new technologies. Rather than staying in school, young men could get high-paying jobs on Alberta’s oil rigs.

“Increased educational spending, especially at the university level, should not be counted on as a central policy for reducing income inequality,” they caution. Their analysis was published by the Institute for Research on Public Policy.

Politically, this advice comes at an awkward time for all three party leaders. StephenHarper touts apprenticeship training as a “key provider of the vital skills and knowledge necessary to power and grow the Canadian economy.” Justin Trudeau’s plan to bolster the middle class is built on raising the post-secondary graduation rate to 70 per cent. Tom Mulcair says university “is more important than ever in this interconnected world.”

The easy response would be to brush off the inconvenient report. The smart response would be to look at the evidence and adjust policies to fit the facts.

AuthorLorenzo Somma