Dollar for dollar, a B.A. is better

Grad studies are on the rise, but the payoff in cash is small

Dollar for dollar, a B.A. is betterMore Canadians are pursuing graduate studies than ever before. Even prior to the recession—university enrolments tend to spike during economic downturns—a significant shift was already under way: according to Statistics Canada, 32 per cent more people had master’s degrees in 2006 than in 2001, and 30 per cent more had doctorates. But, as a recent study by the C.D. Howe Institute shows, going to grad school doesn’t always pay.

While the desire to pad the mind, rather than the wallet, is what motivates many of those who get advanced degrees, it may still come as a surprise that a simple bachelor’s is a far more fruitful economic investment. According to “Extra Earning Power: The Financial Returns to University Education in Canada,” throughout their careers, men can expect an average annual return (after taxes) of 12 per cent on what they paid for tuition, books and living expenses in undergrad; for women, who have less lucrative opportunities with just a high school diploma, it’s 14 per cent. For master’s degrees, meanwhile, the annual rate of return drops to 2.9 per cent for men, and five per cent for women. The payback is smaller still for Ph.D.s: women can anticipate a 3.6 per cent return, while men actually emerge in the red.

As author François Vaillancourt explains, though grad school often unlocks added earning potential, due to “very high” costs of tuition, living expenses and income lost, master’s degrees and Ph.D.s don’t necessarily translate into bigger bank accounts. For society, the costs are even more significant. When men get master’s degrees, government, taxpayers and universities actually take a financial hit. But despite negligible and, in some cases, negative value to society, Vaillancourt points out that there’s more to determining worth than dollars and cents. “One thing we cannot measure is the content of work,” he says. However, in the case of degrees for which taxpayers, in the big scheme of things, seem to be carrying the load, he suggests, “Perhaps society should ask itself, ‘Why?’ ”

Dollar for dollar, a B.A. is better

  1. I assume they didn't examine college education as an alternative to baccalaureate or postgrad study.

  2. I am undertaking an MPA with no intention of earning more. In my mid-30s I am of the generation where continuous learning is a fact of life. Be it certificates, college courses, conferences, seminars or grad studies. It's a case of learning having has its own rewards.

  3. Some friends and I (all guys) did this calculation before we graduated from a B.Sc. We concluded that a Masters would pay off financially because it is short and opens a lot of higher-level research jobs. But a Ph.D. would not, because in the time taken to earn one you'd have progressed to the same level in salary/career as a Masters graduate, but earning money the whole time.

    That said, most of us went on to do Ph.D's anyway. In the end it's a matter of loving to learn, not loving to earn.

  4. Sad that a price tag has to be assigned to everything in our society. Whatever happened to knowledge for it's own sake? Is this the death knell to serendipitous discovery? All research must have an economic objective to make it viable. Sounds like a headlong rush to mediocrity. So much for Canada as a leader in innovation in the new millenium.. Third rate thinking produces third rate ideas. We have to soundly reject the anti-inlellectualism of Harper's brand of conservatism.

  5. You shouldn't condense the value of an education into a single number.

    Education is a multidimensional thing. You learn teamwork, accomplishment, hardship, research techniques as well as knowledge and critical thinking. You can even educate yourself by studying without the help or credit of an institution!

    Wealth can come from initiative, focus, determination, parents and the lottery!

    There is a connection but it is not direct, it is more like a contributing factor.

    Hidden beneath the simple comparison (connection?) of economics and education is another simple comparison (connection?) of wealth and happiness.

    There are more important connections for society today like giving and pleasure.

  6. Whatever the rate of return calculation says, a postgraduate degee is usually necessary if you want to work at the top levels of your profession. As a profesional economist for four decades I have watched the minimum requirements rise steadly over that time.

    Forty years ago, one could work as an economist with a BA. Now an MA is the minimum requirement and a PhD is frequently required. Top international organizations (I worked at the IMF for some years for example) will not even interview people with less than a PhD, and that had better be from a top rated university.

    The best a BA in economics will get you now is a research assistant job. Not really a satisfying career, even if the rate of return is better.

  7. Everyone seems to be getting very defensive about the content of the article. I don't believe that the author or study is attempting to devalue education, but simply give a small glimpse of relative economic payoff. Don't take it too seriously; obviously learning is a payoff in itself. I found the article both surprising and interesting.

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