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Liberal arts education: good for your mind and your wallet

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Friday, August 30, 2013

 

Jean-Marc Mangin Executive Director, Federation for the Humanities and Social Sciences

With the excitement, anticipation and promise of a new academic year inevitably come questions about the long-term value of a degree.

Recently, Benjamin Tal and Emanuella Enenajor at CIBC World Markets attempted to quantify the long-term economic value of post-secondary education, concluding that “Canada is experiencing an excess supply of post-secondary graduates,” and that students are making unprofitable decisions by choosing in vast numbers to study in the humanities and social sciences.

A discussion on the value of education is always welcome. Taking Tal and Enenajor’s numbers at face value, their conclusions are very much open to debate and, I will argue, not based on their own evidence.

But before entering into the discussion at all, let’s once again remind ourselves of the fact that a post-secondary education has tremendous value beyond the long-term economic impact on earnings. Post-secondary study develops critical thinking, effective communication and reasoning skills. The lifelong impact on graduates’ intellectual and personal development – the way education can quite simply change a life – is harder to quantify than the impact on finances, but as many of us know from personal experience, it is just as real. The Federation’s President, Antonia Maioni, addresses this in a recent opinion piece in the Globe and Mail.

However, there is undoubtedly long-term economic value to a post-secondary education. By Tal and Enenajor’s calculations, a bachelor’s degree provides a 30% earnings premium over a high school diploma and advanced degrees a further 15%. Previous analysis has shown that over a lifetime, the premium translates to over $1.3 M in additional income for a bachelor’s degree, and $1.8 M for a master’s.

Canadians can be proud of the often-documented fact that Canada has the highest rate of post-secondary education participation in the OECD. However, contrary to Tal and Enenajor’s assertion that this means “Canada is experiencing an excess supply of post-secondary graduates,” their own analysis of the numbers shows that a premium continues to exist even with over half of Canadians having graduated from a post-secondary institution. Two points need to be made: firstly, with such a high participation rate, overall income is strongly correlated with the overall income distribution of graduates (if all Canadian adults were post-secondary graduates, there would be no difference between the two data sets). Secondly, a knowledge society needs a highly polyvalent and educated citizenry. The era of only a privileged elite having access to a university education is thankfully long gone. That post-secondary education is accessible to all Canadians who want to pursue it is a tremendous foundation, a public good that we need to build upon. Moreover, our competitive advantage is eroding. Thirty years ago, Canada was a leader among OECD countries in university attainment rates. For example, for adults aged 55 to 64, Canada ranks fourth in the OECD. But by 2010, university attainment rates for the 25 to 34 age cohort put Canada 15th among OECD countries.

What about Tal and Enenajor’s argument that students are making bad economic decisions by opting for degrees in the humanities or social sciences? Once again, their own evidence doesn’t seem to bear this out. There is in fact a great deal of economic value to a university education in the humanities and social sciences. Tal and Enenajor show that for a woman with a bachelor’s degree in the humanities, the average return on investment is 10% - undoubtedly a better financial return than most portfolios. In the social sciences the return on investment is even higher.

These statistics are necessarily backward-looking, analyzing the earnings of past graduates in these fields. The future may be even brighter than the past as employers in high-wage areas such as finance and management recognize that humanities and social science graduates possess the nimbleness, curiousity, critical thought and creative insight needed in the workplace. While the 2008 recession has hit some sectors very hard, and overall youth unemployment remains historically high, the number of jobs for university graduates has continued to grow. Since July 2008 there have been 700,000 net new jobs for university graduates, compared to 320,000 net new jobs for college and trades graduates, while a total of 640,000 jobs have been lost for high school graduates.

Tal and Enenajor’s key conclusions are wrong. There is not an excess supply of post-secondary graduates. And social sciences and humanities education is not an irrational evidence-free choice: a liberal arts education continues to offer a vibrant and relevant foundation for its graduates. Social science and humanities graduates are equipped for new-generation jobs in Canadian firms, both existing and emerging. This will benefit both Canada and the graduates’ own quality of life.  

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