Let’s talk about investments. Stocks? A reliable pipeline stock like Enbridge Inc. is up only 2.5 per cent over the past year. Bonds? Canada Savings Bonds are paying 0.5 per cent in the first year. Real estate’s a roll of the dice, and some people are calling for a crash. I’m not even going to get into collateralized debt obligations since, like the leaders on Wall Street who navigated us into the 2008 financial toilet, I don’t understand how they work.
There is one sure bet, though, and no one understands it better than you and your parents. It’s an investment in your own education. That sounds corny, but listen to the numbers: the annual return on a university education in Canada is at least 10 per cent. That’s 9.9 for men, 12.1 for women. As the brilliant and frugal Ben Franklin (his raised eyebrows on the U.S. 100 dollar bill a steady rebuke to our spendthrift ways) said a few hundred years ago: “If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest.” With this in mind, we suggest you think of Maclean’s 21st annual university rankings issue as a comprehensive guide to the important business of investing in yourself.
The connection between a university education and a satisfying and successful working life is not speculative. University graduates have the highest employment rate in Canada and are much more likely to find full-time jobs. A degree is an insurance policy against the vagaries of the global economy. In the 2008 recession, says Statistics Canada, degree holders were less likely to be laid off, and more likely to be hired back promptly if they were laid off.
There’s no question a degree pays off on payday. A September report from TD Economics said a post-secondary education is “the best investment you can make.” Median after-tax incomes run—down—from $35,168 for university graduates to $27,741 for college graduates to $19,744 for high school grads to $15,523 for dropouts. Compound those earning differentials over time (I’ll let you do the math, you need the practice) and the lifetime benefit to a university degree is much bigger than in these figures.
There’s more. The Martin Prosperity Institute at the University of Toronto says a university degree boosts wages 20 per cent in the “creative occupations.” In fields such as health care, the degree effect is 40 per cent.
Lately, though, the high cost of a university education has led to questions about its reliability as an investment. “University education no guarantee of earnings success,” read one alarmist front-page headline in the national media. That same TD Economics study calculates that a four-year undergraduate degree today costs about $84,000 for a student attending school away from home, $55,000 for the kids who stay at home. That’s a big commitment early in anyone’s career. But if we lift our heads out of the daily slog and look to the gleaming future, the long-term returns clearly outweigh the upfront cost in time and money. And that’s what we’re talking about, isn’t it—your future.
One last statistic to note (sorry, but sometimes the truth really is in the numbers): the same study that put the annual rate of return for an undergraduate degree at 10 per cent found that a master’s degree is worth an extra 4.1 per cent per year for men and 8.6 per cent for women, and that medical degrees yield about 15 per cent per year for men and women. Just try asking your bank for a 40-year GIC with a 10 per cent interest rate!
So why the pessimism about university education? The source is a recent Organisation for Economic Co-operation and Development report showing 18 per cent of Canadians with a university degree end up earning half or less of the national median income. But dig a little deeper and the report acknowledges earnings for any individual graduate ultimately depend on supply and demand in the job market for their chosen occupation. Where there’s an oversupply, returns can be lower than average, and vice versa. That’s simply the nature of markets. The same report also happens to show the net lifetime benefit of a university degree for the typical Canadian exceeds $175,000.
No other investment comes close to a university education. I’m guessing none of you are planning on buying stocks in the old yellow pages phone directory—down 95 per cent this year, and falling. Of course not. The only stock you need to invest in at your age is your own.
Meet our cover student
Kelly Nootchtai, 20, is in her third year at Laurentian University. She grew up on the Atikameksheng Anishnawbek reserve and is a first-generation university student. Nootchtai credits her family (and in particular her grandma) for helping her find her path. “I love learning more about who I am,” says the Ojibway student, who is pursuing a combined major in native studies and philososphy. Her goal is to return to the reserve as either a teacher or a lawyer. “One day I hope to make a difference in someone’s life,” she says. For more aboriginal student success stories, see our story on page 72.