Wage gap between high school grads and degree holders narrows

The gap between the earnings of a college or university degree graduate and what someone with a high school diploma makes is narrowing, new research from Statistics Canada shows.

Post-secondary grads more likely to be employed, but high school grads see greater wage gains

Wage gap between high school grads and degree holders narrows

10 years ago
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Featured VideoBriar Stewart reports on the shrinking wage gap between high school grads and those with university degrees

The gap between the earnings of a college or university degree graduate and what someone with a high school diploma makes is narrowing, Statistics Canada research released today shows.

According to the data agency, high school grads are making wage gains, while the earnings of holders of a post-secondary school degree are staying flat — and in the case of young men, even decreasing.

The federal agency's analysis of data compares earnings for the two groups in two different time periods — in 2000 to 2002, and then between 2010 and 2012.

The results were counter-intuitive, in that education didn't lead to greater wage gains, at least in the short term.

Between those two periods, men aged 20 to 34 whose highest level of education was a high school diploma saw their salaries increase by nine per cent. Women in the same group saw a rise of 11 per cent.

"In contrast, the average real hourly wages of young male bachelor's degree holders was unchanged, while those of young female bachelor's degree holders increased by five per cent," Statistics Canada said.

Data points like that suggest young workers are being misled, some experts said Monday. "The numbers reveal that what we thought was the standard track to a middle-class life — the university degree — maybe isn't all it's cracked up to be," public policy professor Ken Coates said in an interview.

If you follow the swarm you're just goingto walk over the cliff.- Professor Ken Coates

Coates said the educational system and parents value university educations almost at all cost, but that's not in keeping with economics realities.

"We overemphasize the so-called knowledge economy, but the reality is we have not yet produced very many of those jobs and what we have is a natural resource economy that's propping up the rest, and a service industry tagging along behind it," Coates said.

Indeed, the numbers appear to suggest that Alberta's oil boom may be skewing the data by driving up demand for unskilled labour.

"Increases in economic activity fuelled by the oil boom of the 2000s ― which raised demand for less educated workers to a greater extent than it did for more educated ones ― accounted for roughly one-fifth of the narrowing wage differentials among young men and young women," the data agency said.

Coates said the real lesson to be gleaned from the numbers is not that the fate of those with just a high school diploma is getting better, but rather that the fate of those who blindly pursue more schooling is stagnating.

"If you follow the swarm you're just going to walk over the cliff," Coates said. "When we keep focusing on what the economy looked like in 1980, we are doing a very poor service to young people coming out of high school."

Degrees still earn more

Post-secondary degree holders still earned more than  their lesser-educated peers, but not by as much as during the previous period, Statistics Canada data shows.

For every $1 a male degree holder earned between 2010 and 2012, a high school grad earned 75 cents. That's up from 68 cents a decade earlier. Meanwhile, a female fresh out of high school earned 74 cents for every dollar a college or university degree holder earned a decade ago, but 10 years later, that ratio increased to 78 cents per dollar.

In recent years, many provinces have moved to increase their minimum wages, and that trend was clearly visible in the data.

About a third of the narrowing of the wage gap for women was directly attributable to that, while on the men's side, there was virtually no impact. "This was because young female high school graduates were more likely than their male counterparts to have hourly wages at or near the minimum wage rate," the data agency said.

High school grads may be doing comparatively better in terms of salary growth, but as a whole, fewer people are sticking with just a high school diploma, and not going on for more education.

There were 42 per cent more women with bachelor's degrees over the decade studied, compared with only five per cent more high school grads. On the men's side, there were 30 per cent more college degree holders, and 16 per cent more high school grads.

More college grads have jobs

Individuals with a higher education were also still much more likely to have a job in the first place.

"While the full-time employment rate of young women with a bachelor's degree remained around 63 per cent," Statistics Canada said, "the rate for young women with a high school diploma declined from 49 per cent to 44 per cent." 

"Likewise, the full-time employment rate of young men with a high school diploma fell from 68 per cent to 61 per cent over the decade, while their counterparts with a bachelor's degree saw their employment rate drop from 72 per cent to 68 per cent.

But not everyone agrees that post-secondary schooling is losing its value. Royal Bank economist Eric Lascelles notes that the comparative value of schooling has always ebbed and flowed, and consistently reverses direction over time.

"Despite this, the premium paid by a university degree is still massive," he said in an interview, "and the odds of being employed in a full-time job are also 20 to 40 per cent higher."

"When combined with the fact that wages tend to rise more quickly for the university educated and that white-collar jobs tend to be more secure, interesting and less dangerous, the choice is still fairly clear," Lascelles said.