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Margin Notes

Long-term and short-term, a degree is still a good bet

The returns for university grads remain high, two recent studies show.


An interesting Statistics Canada study, released on Feb. 27, contained some very good news for Canada’s universities. The study, entitled Investment of a Lifetime? The Long-term Labour Market Premiums Associated with a Postsecondary Education, examined the earnings premiums associated with completing a college certificate or a bachelor’s degree, compared to completing a high school diploma. It found that a university degree pays off big time, with most university graduates earning hundreds of thousands of dollars more over their careers than those with college or high-school credentials. Those with university degrees also experienced fewer temporary or permanent layoffs (see the key data table here).

The study, by Marc Frenette, was also of interest in the clever way the author went about his analysis. (Alex Usher of Higher Education Strategy Associates gives a much better explanation of it here than I could.) Using longitudinal tax data linked to 1991 Census data, the study tracked individuals from 1991, when they were 35 years old, to 2010, when they were 54. Individuals were grouped according to their highest level of completed education by 1991.

On average, men with a high school diploma earned $975,000 over the 20-year period, while those with a bachelor’s degree earned $1,707,000. This puts the earnings premium for a degree at $732,000. That’s not as high as the $1.3 million the Association of Universities and Colleges of Canada estimates, but the AUCC figure is for lifetime earnings, not just a 20-year period, so the numbers are roughly concordant. Men with a college certificate, meanwhile, earned $247,000 more than those with a high school diploma. (All dollar figures are expressed in 2010 constant dollars to account for inflation.)

The earnings premium for women showed a similar pattern, but was markedly lower. On average, women with a high school diploma earned $525,000 over the two decades, while those with a bachelor’s degree earned $973,000, for a $448,000 premium. Women with a college certificate earned $179,000 more than those with a high school diploma.

The gender difference in earnings “warrants further investigation,” says Mr. Frenette, but he does give some explanation. At the median (the midpoint of the distribution, where half fall below and half above), men and women benefit more or less equally from a bachelor’s degree, with a premium of $504,000 for men and $487,000 for women. Where the premiums differ is at the top: at the 95th percentile, a bachelor’s degree is associated with $576,000 in additional earnings over the 20-year period for women, which is about the same as at the median; for men, the premium is almost five times larger at the top, or nearly $2.5 million. In other words, top-earning men earn way more than top-earning women.

There is also some interesting stuff in the study about how men and women fare comparatively in the public and private sectors, but again I’ll point you to Alex Usher’s analysis for more details.

The biggest caveat to this study, like the warning in mutual fund advertisements, is that past earnings do not guarantee future returns. Or, as the author puts it, “The results of this study apply to one particular cohort. Long-term outcomes for more recent cohorts are not yet available, and may or may not be similar to those in this study.”

However, a recent analysis from Ontario does suggest that the value of a degree remains high. The new University Works report from the Council of Ontario Universities, released two days before the StatsCan study, found that Ontario university graduates experienced the highest employment growth of any group of students over the last 10 years and are earning significantly more than those with other types of education.

“This report uses empirical data to debunk anecdotal reports about unemployed and under-employed university students,” says Max Blouw, COU chair and president of Wilfrid Laurier University, in a COU press release. A Toronto Star article, countering the “barristas with bachelor’s” meme, put it more colourfully: “Barrista, shmarrista. Ontario university grads have the best odds of landing jobs in their fields at good wages, according to a feisty new report from the Council of Ontario Universities that disputes any notion its members are glorified prep schools for a life making lattes.”

Léo Charbonneau
Léo Charbonneau is a former editor of University Affairs.
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  1. Rick / March 5, 2014 at 16:16

    The headline could really use something more… I propose: “Long-term and short-term, a degree was a good bet for those who graduated around 1980”.

  2. Charles / March 6, 2014 at 13:59

    Correlation is not causation. You can’t say college “pays off big time.”

  3. Kathy / March 6, 2014 at 16:31

    It would be equally correct if the article was entitled: ‘University grads earn higher wages despite their degrees’
    Surely an academically trained researcher must know that this study in no way demonstrates cause, as their titles suggests.

  4. Mackenzie Grosvenor / March 7, 2014 at 11:07

    This is hardly a fair argument to make. There is nothing in the data to suggest that holding a degree is what caused these people to earn more. You come to your conclusion through interpreting correlation in a way that suits your hypothesis.

    Perhaps there are other factors that are common to university graduates that cause them to earn more?

  5. Celestial / March 11, 2014 at 04:42

    It is a shame that this study does not look at the current situation and ignore Ph.D.

    If you wonder about the outcome of Ph.D. here are the short term numbers.

    I really like to see the “chart 12” on page 32 about the overqualification