College and then a Job at a Coffee House? Not Necessarily

Are you worried that after years of college or university, your kids will wind up as a barista?

That idea has been challenged by recent research showing that those who graduate from post-secondary education tend to land jobs with good salaries that continue to grow significantly over time.

Researchers at the Education Policy Research Initiative at the University of Ottawa looked at income data linked to tax records for 620,000 Canadian college (diploma) and university (bachelor’s) graduates from four provinces. The data studied covered the years 2005 through 2013.

The goal: Gauge the affect of higher education on future employment income. According to the researchers, spending years in post-secondary education is a valuable effort in terms of earning bigger bucks, almost regardless what you study.

“Very few graduates had truly barista-level earnings even to start, and they increasingly moved even further from that level as they gained labour market experience,” the report said. In fact the study, called Barista or Better? New Evidence on the Earnings of Post-Secondary Education Graduates shows that:

• College diploma graduates who finished their studies in 2005 had mean annual earnings of $33,900 (in 2014 dollars) in the first year following graduation, growing by 59% to $54,000 eight years after graduation.

• Engineering, Mathematics & Computer Science, and Business graduates generally had higher incomes and greater earnings growth than others, but graduates of almost all other fields of study, including the often-maligned Humanities and Social Sciences bachelor’s graduates, also performed well.

• Graduates in later years generally had similar earnings patterns and the ranking of fields of study remained consistent as well, although some fields of study did have greater differences in earnings across cohorts than others.

Income Potential

“This study provides much-needed data on graduates’ income potential, and demonstrates the significant value of post-secondary education – including liberal arts degrees – with respect to long-term earnings and career success,” said Paul Davidson, President of Universities Canada, a group that represents the interests of 97 Canadian public and private not-for-profit universities.

Students who graduated from university in 2005 earned $45,200 in inflation-adjusted terms – on average – in their first year after school. Every subsequent year, the figure rose for a total of 66% to $74,900 in 2013, the final year studied.

Students who graduated from college earned a bit lower in the first years, starting at $33,900 in inflation-adjusted terms in 2005, but by 2013, the amount had grown 59% to $54,000.

The study speculates that the reason for this discrepancy could be that Canadian colleges are generally mandated with developing occupation-specific, practical job skills in their students, often catering to local labour market needs. This means that the graduates of some institutions may do considerably better or worse than the graduates of others, depending on local labour market conditions for their graduates in different fields of study.

(Colleges of applied arts and technology have full-time and part-time diploma and certificate programs. Many also offer bachelor degrees in applied areas of study. Universities are institutions that can grant degrees. All universities have undergraduate (bachelor’s) degrees, and many have graduate (Master’s and doctoral) programs. Many universities also offer professional programs, such as medicine, dentistry and law. In some cases, you can begin these programs after 2 or 3 years of undergraduate study.)

Ranking of Earnings

The earnings for different courses of study were ranked in this order:

• Engineering and Health graduates (excluding doctors, dentists, and pharmacists), consistently had the highest average earnings to start, generally in the $60,000 range.

• Math & Computer Science and Business Graduates (in that order) started between the low $40,000s and as high as $52,700 for the 2007 graduates.

• Science & Agriculture, the Social Sciences, and the Humanities came in third, earning between the low $30,000s and $40,000 in their first year.

• Fine Arts came in last, with earnings ranging from around $25,000 to just under $32,000 in their best year (the 2007 graduates, as for most fields of study).

Attaching specific numbers to these patterns, earnings in the first year after leaving school for the 2005 cohort were:

• Health: $58,800,
• Engineering: $56,400,
• Math & Computer Science: $48,500,
• Business: $43,700,
• Science & Agriculture: $38,500,
• Social Sciences: $36,300,
• Humanities: $32,800, and
• Fine Arts: $28,800.

Graduates from bachelor’s programs saw their salaries grow by about $4,200 a year, and each new wave of graduates earned about $2,400 more than the grads the year before.

Trends were similar across community colleges, where engineering and health graduates started off making about $40,000 a year and rose as high as $72,000 for engineer grads after eight years.

Gender Gap

The numbers also show a wage gap between the genders that widens over time. The average male university graduate in 2005 earned $46,800 in the first year, while female classmates made $44,000. Eight years later, the gap spread widely. The typical male university student was earning $89,800 in 2013, a 91% surge. His female counterpart, on the other hand, saw earnings rise 42% to $62,500.

So the gender wage gap spread over those eight years from about 6% to almost 30%.

The results were similar for college grads: first-year male grads earned $36,700 on average in 2005 and $65,600 by 2013, while female grads earned $31,200 and $42,000 respectively.

Lead researcher Ross Finnie, in an interview with CBC, said: “To some extent these gaps are because men and women study different things,” noting that, for example, there are few women in engineering. He also suggested that women’s salaries often are reduced over time because they take time off to raise families. The study didn’t go into the discrepancies.

Financial Crisis

A post-secondary education even served as a buffer to the financial crisis of 2008. The popular story has been that regardless of how life was going before 2008, post-secondary education graduates’ employment rates and earnings levels dropped sharply in that year and haven’t recovered.

The data tells a different story. Immediately following 2008, first year earnings of all graduates dipped, after having risen the two preceding years. But earnings stabilized in 2010.

While those who finished their studies in 2005 earned an average $45,200 in their first full year after graduating, earnings rose somewhat for the next two sets of graduates, to $47,100 and $47,600 in 2006 and 2007, respectively.

Earnings turned down for the 2008 through 2010 graduates, to a low of $43,800 for the latter. But this cohort’s earnings were only $1,400 (or about 3%) below the level of the 2005 cohort, while those who finished in 2012 enjoyed a small uptick.

A fair conclusion, the study says, might be that although earnings did decline after 2008, the change was relatively moderate, especially if a longer-run perspective across all cohorts is taken rather than comparing the later cohorts to the peak earnings enjoyed by the 2007 graduates.

Ultimately, the study says, the skills “individuals develop play a pivotal role in determining their labour-market opportunities and life chances in general, and are of vital importance to a country’s economic performance and many social outcomes. Post-secondary education is a primary means by which Canadians obtain the skills that they need.

Informed Decisions

It’s essential to have accurate information so that students, institutions and the general public can make informed decisions. This is especially relevant, the study asserts, when “we are often confronted with the now familiar barista trope – the suggestion (even assumption) that going to university, or college, particularly in a non-STEM (Science, Technology, Engineering, Mathematics) field of study, is a waste of time and will leave graduates stuck in a job with low earnings and little opportunity for career advancement.”