I’m a bit bewildered by some of the recent commentary about declining returns to education, most notably last week’s paper from CIBC on the subject. While the actual report was not nearly as stupid as the ream of press coverage that followed it, it still had a few howlers, and definitely lacked critical thinking.
First, the howlers. 1) The returns to Bachelor’s degrees are not declining; they are, in fact, growing at a slightly slower rate than at other levels of education, which isn’t the same thing. 2) The gap between college and university graduates is closing, but it’s because college grads are doing better, not because university grads are doing worse. 3) Yes, the difference in unemployment rates between university and high school graduates is, as the report says, only about 1.5 percentage points (which is down considerably over the last decade or so). But why emphasize that fact when the gap in employment rates – which are presumably much more important, and yet were unmentioned by the report – remains over 12 percentage points? There’s too much cherry-picking of data here for my taste.
But look, here’s the bigger picture: it really shouldn’t be a surprise if graduate wages are stagnating, and there’s one very simple reason for this: there are way more graduates than there used to be. Between the late ‘90s and the late ‘00s, the country went from having 600,000 undergraduates to having 900,000 undergraduates. That’s an extra 75,000-90,000 graduates hitting the labour market every year. That’s a heck of a supply shock.
The surprise, frankly, isn’t that university graduates’ wages aren’t climbing as quickly as those of college and high school graduates. The surprise is that they’re rising at all. This suggests that there is, in fact, enormous labour market demand for the skills provided by university students; if there weren’t wages would have decreased.
I pointed this out on Twitter the day the CIBC paper came out only to learn that for many people – including people who would describe themselves as fiercely progressive – even the hint that relative rates of return might be falling turned them into foaming conservatives with respect to university admissions. Too many students! We need a labour market policy! Etc., etc.
I mean, what exactly did everyone think was going to happen when we allowed enrolment to rise by 50%? That there would be no change in returns? And even if there was a slight fall in returns – who cares? In a democracy, isn’t it better to have 150 people earning good returns than 100 people earning brilliant ones?