The thought of attending four-plus years of college or university and coming out with thousands of dollars in student debt can be scary for students, not to mention their parents.
Regardless, experts say a post-secondary education is still the best long-term investment a student can make in his/her career across a wide-range of professions.
While a bachelors of arts may not secure a job as easily as an engineering degree, it is better than no degree at all, says Rowan O’Grady, president of recruitment firm Hays Canada.
“It’s not an advantage to have a degree anymore, but it’s a disadvantage if you don’t have it,” says O’Grady.
The key is matching your interests with the realities of the future job market. Students in career-choosing mode should look at professions that require specific skills such as nursing and engineering.
While an engineering degree may cost more than a bachelor of arts (roughly $40,000 in tuition for four years versus $28,000 for a BA), the payoff is also higher. According to TalentEgg, the starting annual salary for a mining engineer in Canada is between $66,000 and $70,000. That compares to minimum wage for an arts major whose first gig could be at a local coffee shop.
“You want to be the person in demand, not the one in excess supply,” says O’Grady.
The post-secondary premium
A recent CIBC study shows the post-secondary education "premium" is dropping as too few students are graduating from programs that are in high demand.
While a bachelor's degree buys you more than a 30 per cent earnings premium over high school graduates, that gap is narrowing from the 1990s. The study says weekly wages of high school and college graduates rose by 13 per cent over the past decade, compared with 8 per cent among undergraduate degree holders and more than double the rate seen among MA and PhD holders.
The report says Canada may have the highest proportion of post-secondary degree or diploma holders among OECD countries, but it also has the highest share of university graduates earning less than half the median income.
"A look at the dispersion of earnings across fields of study shows that there is a much greater risk of falling into a lower-income category for graduates of humanities and social sciences, with a limited risk for students of health, engineering or business," the report states.
Despite what CIBC calls "overwhelming evidence" that field of study is the most important factor determining labour market outcomes, "today's students have not gravitated to more financially advantageous fields in a way that reflects the changing reality of the labour market, says CIBC deputy chief economist Benjamin Tal, who coauthored the report with CIBC Economist, Emanuella Enenajor.
Student debt and earning potential
"And with roughly half of all bachelor's degree students graduating with debt, a significant share of the population is starting their career one step behind in terms of financial health."
Still, racking up student debt – if that’s your only option – should not be a deterrent for people thinking long-term. A TD Bank study cites “overwhelming evidence” of the direct and indirect benefits of post-secondary education.
People with a college or university degree are more likely to have and keep a job, and find a new one if they are laid off, the report says.
Using data from Statistics Canada, TD says people with a post-secondary education had an employment rate of 72.6 per cent in 2010, well above that for those with high school only at 61.4 per cent, and more than double the 33.6 per cent for those without a high school diploma.
A post-secondary degree also translates into better earnings. Citing the 2006 Census, the TD report says median after-tax income for students that went to university was $35,168. That’s well above the median after-tax income of $19,744 for high school only graduates and $15,523 for those that didn’t complete high school.
“Keep in mind that the earnings differential is compounded over one’s lifetime and the greater savings by higher earners can produce investment income, which provides compounding returns as well,” the TD report states.
Still, students might need to temper their earnings expectations for their first few years on the job.
A 2011 survey by gencareershift.ca shows Millennials have high hopes for how much they earn after graduation. There's also a huge gap in expectations between men and women.
Women expected an average first-year salary of about $42,000 versus the more realistic income of $35,900, while men expected $48,800 versus the actual $42,000.
Both sexes surveyed expected a huge pay hike in the first five years on the job, reaching $84,800 for men and $67,800 for women. That is a salary increase of 74 per cent over five years for men, and 61 per cent for women – and unrealistic for many.
While the results make Millennials sound greedy, the report authors say they are more likely just uniformed. They say it's up to employers to educate workers, particularly those entering the workforce, about income levels in their chosen profession.
“Employers can help to manage expectations by having frank conversations with young employees about their prospects for future pay and promotion,” the report says. “Giving Millennials evidence about the actual pay of employees 5, 10 and 15 years ahead of them will help them to form more realistic expectations for their own careers and will help save them from the disappointment of unmet expectations.”