Income Advantage for College Graduates

Key Messages

Putting the provinces’ performance on the income advantage of a college education in context

Investing in education has its benefits. In most countries, individuals who graduate from college or university (tertiary education) tend to benefit from better labour market prospects, reduced risk of unemployment, and higher earnings over the course of their working lives.¹ While individuals clearly benefit from investing in a college education, they are not alone. Economies that invest in the education and skills development of their populations—through post-secondary education systems and other avenues—also stand to benefit in terms of higher tax revenues and fewer social transfer costs. Building an educated workforce also contributes to a more innovative and competitive economy.

How is the income advantage of a college education calculated?

The incomes of individuals with a college education were compared with the incomes of individuals with a high-school education. Income is calculated using salaries and wages. The median income (the point at which 50 per cent of respondents are below and 50 per cent are above) was selected because it is less susceptible to outliers, unlike average income, which can be skewed by a relatively few individuals with very high incomes. The results are shown as the dollars earned by a college graduate for every $100 earned by a person who graduated only from high school. The province with the highest income advantage may have a lower income in absolute terms, but a relatively higher income for individuals based on their education level.

Which province had the largest income advantage of a college education?

College graduates in Newfoundland and Labrador earned $129 for every $100 a high-school graduate earned in 2013, earning the province an “A” grade. In relative terms, Newfoundland and Labrador significantly outperforms all other provinces on this measure. Most of the other provinces show relatively similar income advantages for a college education, ranging from $120 in Alberta to $117 in Manitoba. Quebec receives the lone “D” on this indicator, with college graduates earning $112 for every $100 earned by a high-school graduate.

In absolute terms, Alberta and Saskatchewan have the highest income for people with a college diploma. This is likely driven by the need for skilled tradespeople to work in the resource sector. Newfoundland and Labrador also has a well-developed resource sector. That province has periodically experienced labour shortages that have required the province to import labour. The need to attract more skilled tradespeople is one significant factor that could explain the increased premium of a college education in Newfoundland and Labrador.

Does the income advantage of a college education vary by gender?

The income advantage of a college education is highest for women in Newfoundland and Labrador and in Prince Edward Island. In the remaining provinces, the income advantage is roughly equivalent or higher for men.

Although the income advantage for graduating from college is higher for women in two provinces—P.E.I. and Newfoundland and Labrador—actual income levels are significantly higher for men in all provinces. Thus, while women are earning similar returns to men for investing in a college education, the actual gaps in the incomes of college-educated men and women speak to the significantly lower overall incomes of women who obtain a high-school or college diploma.

There are many reasons for this persistent gender gap—some are individual, others are societal. They include the choices individuals make about major fields of study (for example, arts and humanities versus business, math, or engineering), what programs are offered at colleges and universities, occupational choices, wage differences across major fields of study and occupations, labour force status, equity issues, and even broader social and economic policies. However, as the data show for men and women, an investment in education is a worthwhile endeavor with significant returns.

Does the income advantage of a college education vary by occupation?

As a group, college-educated individuals working in natural and applied sciences and related occupations have significantly higher annual incomes than those employed in areas such as education, law, and social, community, and government services. When comparing these two categories of occupations against all employed college graduates, those working in natural and applied science earn on average $15,188 more, while those in education, law, and social, community, and government services earn an average of $76 less—making their incomes comparable to the average of all occupations.

While these results do not provide information on the actual field of study, it is widely acknowledged that certain occupations are associated with higher income. Studying science, which is frequently a prerequisite for a career in science, is one way individuals can try to maximize their return on an investment in their college education.

Has the income advantage of a college education changed over time?

There is some debate about whether the income advantage of post-secondary education is diminishing. One school of thought, with some support, is that given the increasing numbers of individuals obtaining a post-secondary education, the relative value is not what it used to be.² Still, the overall income advantage for full-time employed individuals with a college education has remained relatively stable for at least the last 15 years in most provinces; for Canada as a whole, the average income advantage for a college education grew from $116 in 1997 to a high of $120 in 2004 before returning to $116 in 2013.³ But some provinces, particularly Newfoundland and Labrador, have seen more variability.

Use the pull-down menu to compare the provinces’ income advantage.

Footnotes

1    See for example, Marc Frenette, An Investment of a Lifetime? The Long-Term Labour Market Premiums Associated W ith a Postsecondary Education (Ottawa: Statistics Canada, 2014).

2    Malcolm Brynin, The Financial Rewards of Higher Education(Essex, U.K.: Economic and Social Research Council, 2013).

3    For a detailed examination of income changes due to education, among other factors, see René Morissette, Garnett Picot, and Yuqian Lu, The Evolution of Canadian Wages Over the Last Three Decades (Ottawa: Statistics Canada, 2013).