HESA

Higher Education Strategy Associates

Category Archives: employment

September 03

What The Heck Did You THINK Was Going to Happen?

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?

Yeesh.

August 12

The Neo-Soviet View of Education and the Labour Market

Recently, I had a conversation with someone in the trucking industry who argued that the phenomenon of Arts grads working minimum wage jobs while trucking companies were having problems hiring people at $30/hour was prima facie evidence for a “skills mismatch” for which the education system was responsible.  Seriously.  Turns out that a lot of people – including a hell of a lot of people in government from all political stripes – seem to think that a “skills mismatch” is what happens any time some jobs in certain fields aren’t getting filled at current wages.  The idea that people might be making decisions based on personal preferences doesn’t seem to occur to them; and the concept that wages might need to rise in order to overcome these preferences (with all the time alone on the road, and hours not compensated due to loading delays, etc, $30/hr simply isn’t enough, but an extra $5/hour might do the trick) definitely doesn’t occur to them.  Rather, say these folks, it is the preferences themselves which must change – and government (and schools and universities) is responsible for changing them.

Take, for instance, this recent piece from BC tech entrepreneur Ryan Holmes.  It is legendarily incoherent, but I’m told it represents the views of much of the tech sector, so it’s worth a read.  We’re falling behind the US in tech, it says, because of a brain drain.  All our best are heading south (we’re not told why, but presumably pay is an issue, no?).  We could import people to staff our tech sector instead, but this, we are told, is just a temporary fix.  (Why this is so when Silicon Valley’s success is almost entirely down to immigration is not explained).  No, the real solution is to train more people for tech jobs, and the barrier to this is that we don’t spend enough time in high school explaining to them how great tech careers are, etc etc.

If tech careers are so great, why is it up to government to sell them to students?   (“selling” may be too polite a term – Holmes wants governments to “funnel” students into engineering programs, which suggests a more directive approach.)  Maybe the problem is that while tech is naturally attractive for some, for many others it seems brutal, unstable and intimidating.  That doesn’t mean they won’t consider it – but it does mean that at current compensation levels, fewer people than the tech industry considers optimal think it would be a good fit for them.

If this were a market economy, we’d just tell businesses to raise the damn wage levels and see what happens.  But this is Canada, and our business community apparently doesn’t believe in the price mechanism as far as labour is concerned.  Instead, we blame government and schools for not sufficiently manipulating the supply of labour to favour specific industries.

Oy.  Come back Gosplan, all is forgiven.

August 06

Correlation and Causation in Technical Education

Stop me if you’ve heard this one before:

“In many Northern and Central European countries, including Switzerland and Germany, there are robust apprenticeship programs. In both of those countries, youth unemployment is very low compared to Canada and the U.S.”

Or this:

“As the economy changes, however, it is increasingly clear that this is the polytechnic moment… in the recent recession, youth unemployment was lower in countries with strong vocational training programs.”

There are three propositions here.  One is that Canada’s apprenticeship/vocational training/polytechnics systems are weaker than those in what for the sake of brevity I will call Germanic Central Europe (GCE).  Another is that unemployment is lower in GCE than it is in Canada.  Finally, it is heavily implied that there is some sort of causal relationship at work here; that GCEs have lower unemployment rates because of their educational systems.

Let’s take those three in turn.    It is certainly true that GCE countries have more apprentices than we do. But the term “apprenticeship” means something different over there.  As I pointed out back here, the reason places like Germany have more apprentices is because their set of apprenticeable trades is much wider than ours.  If you limit the analysis to just skilled trades, Canada’s apprentice numbers actually look about the same as Germany’s (our completion rates are much lower – but that’s a less sexy story).

As for “vocational education” and “polytechnics” (terms that are not synonyms): Canada already has the largest non-university tertiary system on the planet.   True, we don’t have a lot of “polytechnics”, but the recent trend in GCE has been to turn these institutions into degree-granting “Universities of Applied Science” with professional rather than vocational orientations.  So yes, GCEs’ technical education systems are different from ours.  But their sources of strength aren’t necessarily in “vocational” training the way we define it.

With respect to unemployment rates, it’s quite true that unemployment among 15-24 year-olds in places like Germany (8.1%), Austria (8.7%) and Switzerland (2.8%) are lower than in Canada (13.6%).  But youth unemployment can’t be examined in isolation: it is a function of overall economic conditionsThe ratios of youth unemployment to overall unemployment tell a different story: Canada’s rate is 1.92, Austria’s 1.85, Germany’s 1.53 and Switzerland’s a freakish 1.04.  Austria’s purported advantage, at least, disappears completely on this more sensible comparison

Finally, the issue of causation.  Dial things back about twelve years; Germany had the same “dual” system of apprenticeships, but unemployment rates were twice what they are now.  If apprenticeships “cause” low unemployment now, did they also “cause” high unemployment twelve years ago?  Obviously not.  Claiming causation in one period but not another looks like cherry-picking.

In short, it’s good to invest in top-notch technical education, but be wary of over-ambitious claims made about its impacts.

July 05

Today’s Statscan Youth Jobs Report

Hi there.  Just a slight deviation from the summer publication schedule to bring you some perspective on the youth employment numbers coming out of StatsCan today.

Unless something has gone seriously gaga in the youth labour market in the past few weeks, today’s Labour Force Survey release will say that slightly over 70% of students aged 20-24 are employed and that unemployment among these students is in the 7-9% range. That sounds pretty good; the problem is that StatsCan’s definition of unemployment doesn’t even vaguely correspond to how students see the issue.

The basic problem is that StatsCan defines someone as being “out of the labour force” if they are in full-time studies; as a result, students taking summer courses are excluded from the calculation.  But in fact, as our own 2012 survey of summer employment showed, over 70% of summer students are also either working or looking for a job; among this group, unemployment typically runs at between 20 and 30% (last year, the figure was 29%; this year, it is 23%).  Indeed, one reason many students take summer courses in the first place is precisely because their jobs search was unsuccessful!  

Although our full annual employment report won’t be out for a bit, I want to provide you with some statistics on one other labour issue currently generating a lot of attention: unpaid internships.  Our preliminary examination of the data suggests that 5.4% of students are in some kind of internship or practicum this summer.  Of these, roughly half are educationally-related (e.g. mandated practicums in teaching or social work), meaning that about 2.7% of all students (or about 27,000 across the country) are in unpaid internships this summer.  That’s a long way below the 100-300K estimates one sees in the press these days, but it’s not inconsistent with those numbers since a) those larger figures represent internship positions across an entire year rather than positions at any one time, and b) our survey looks only at current university students and does not include either college students or recent graduates. 

Lastly, a key point about these unpaid internships: they’re mostly part-time affairs.  The median unpaid internship is just a 14 hours per week commitment; as a result, fully half of the students with unpaid internships are able to gain an income by working either full- or part-time. 

Have a good weekend, and be wary of overly rosy LFS statistics.

June 04

Some Insights Into Medium-term Education Outcomes

As I noted yesterday, Canada is unnecessarily bad at looking at medium-term outcomes of education. The only place where we have data on university graduates even five years out is in BC, and they publish the data in such a weird format (seriously: check it out) that no one really explores them.

It could be worse. In 2005, Statscan, did a 5-year follow-up of the class of 2000 and elected not to publish any results relating to employment or income. *Facepalm*, as the kids say.

However, because I have nothing better to do, I have put together three interesting figures on how graduates fare between years 2 and 5, in select disciplines (chosen because of sample size). It’s all courtesy of that same BC data on the graduating class of 2004. I won’t bore you with employment both at 2 and 5 years, it’s uniformly quite low. Let’s start instead by looking at incomes five years out. It turns out that while some disciplines do have precarious earnings in the first two years after graduation, median incomes rise across all fields by 35% between years 2 and 5 (that’s more than 10% per year, if you’re counting). Just for comparison, the median earnings among all Canadian workers in 2009 was $46,500. So, even in the “soft” disciplines, the ones that allegedly leave people without valuable skills like English and History, graduates five years out show median incomes above the national average.

Figure 1 – Median incomes, 2 and 5 years out, BC class of 2004, selected disciplines

Ah, you say: but are they using their skills? Aren’t they, perhaps, underemployed? Well, not really. Figure 2 shows the percentage who are in jobs which have been classified by the National Occupation Classification system as either being managerial or requiring university education. In the three disciplines where that percentage is lowest after 2 years (Biology, English, and Business) the rates of employment in high-skilled jobs jumps by 50-65% in the following three years. Five years out, the difference between history grads and computer science grads is only five percentage points.

Figure 2 – Percentage of graduates in jobs classified as “Management” or “Skill Level A” by NOC, 2 and 5 years out, BC class of 2004, selected disciplines

What’s perhaps most interesting is how graduates feel about how their education changes over time (figure 3). Across the board, graduates five years out feel less satisfied with their education and are less likely to say they’d do the same program again that they did at two. But while there’s a generalized malaise among students, the regret factor is clearly a lot higher in arts and science programs than it is in professional ones.

Figure 3 – Percentage-point change in graduates indicating satisfaction with program and indicating they would take same program again, 2 and 5 years out, BC class of 2004, selected disciplines


Anyways, that’s just what one bored dude can do with available data on a crappy 12-hour flight. Imagine if governments actually wanted to improve data and analysis in this area! Possibilities: limitless.

June 03

A Better Way to Track Graduates

The real problem Canada has with respect to the whole “does-education-pay” debate is data. It’s not that we don’t have people collecting data – we do, lots of them. The problem is that they’re all collecting data over time frames so short as to be largely meaningless.

The gold standard used to be the National Graduate Survey, which surveyed every fifth graduating class two and five years out. Now the 2-year survey is a year behind schedule and the 5-year follow-up has been discontinued. That’s right, folks – at the start of the recession, when Statscan took a look at their suite of surveys and decided which ones to can and which ones to keep, they decided that the one on medium-term educational outcomes was among the least policy-relevant and canned it. You know, so they could keep funding their monthly poultry storage reports .

For about a decade now, a number of provinces (all except MB, SK and NL) have started collecting data too; indeed, they have been doing so on a biannual basis, which is much better than Statscan could ever manage. However, most only track them out to 24 months, so the issue of long-term outcomes is still unaddressed. BC is the only province which does 5-year reports, and they’re quite interesting (more about them tomorrow).

The long-term outcomes of degrees and programs clearly matter a great deal. So why can’t we measure them? Cost, mainly. Anything further out that about 24 months is expensive to do well (BC’s 5-year response rates are disappointing, for instance), and so – penny-wise pound-foolish nation that we are – we don’t do it.

But there actually is a very cost-effective way to do this; namely, to link student records to tax records. Virginia, Tennessee and Arkansas have already linked their grads’ data to unemployment records and others seem poised to follow. In Canada, we could quite easily do the same thing by having Statistics Canada link its Post-Secondary Student Information System (PSIS) to the T1 family file. Instantly, with no new data collection expenses, you’d have income data by institution, program of study – what have you – as many years out as you like. As always with Big Data, there are some privacy concerns, but frankly none of them are very convincing, certainly not compared with the major public policy gains available.

Linking administrative databases is cheaper, faster and more accurate than what we do now. Why we haven’t moved to this system already is one of the biggest mysteries in Canadian higher education policy.

May 21

Post-Graduation Employment

The meme on “underperforming universities” these days revolves around the idea that specific fields of study – usually Bachelor’s degrees in the humanities – do not lead to good jobs.  But this depends in no small measure on what one means by a “good job”, and over what time frame one chooses to measure success.

The graph below shows data from Ontario, six months after graduation.  Between 2003-2007, the employment rate of graduates in the labour market (i.e. excluding those who chose to study) bounced around between 92 and 94%.  In 2009, the rate fell by about 7%, to roughly 86%, more or less equally across all disciplines. Some fields of study were consistently below the average – specifically, fine arts, physical sciences (which seems to include biological sciences), and engineering.  Some fields of study were well above the average, notably education and nursing.  Humanities and social sciences ended up half way between the two.

Employment Rates of Ontario Graduates Six Months After Graduation in Selected Fields of Study, 2003-2009

 

 

 

 

 

 

 

 

 

 

 

 

The science figure is especially interesting, isn’t it?  Makes you wonder why there’s an S in STEM.

Now, some of you will surely be scratching your heads at this point.  Aren’t STEM graduates supposed to be in high demand?  How are both getting beat by Arts grads? Three quick answers. The first is that these figures exclude people who have gone back to school (unhelpfully, the Ontario data doesn’t tell you how big a number this is).  Two is that Engineers may take longer for a job search because they are secure in the knowledge that their eventual job will pay pretty well (see below) – the pattern we see after six months is also the pattern after twenty-four, as the chart below describes. And three is that the picture does change a bit after two years.

Employment Rates of Ontario Graduates Two Years After Graduation in Selected Fields of Study, 2003-2009

 

 

 

 

 

 

 

 

 

 

 

 

The classes of 2003 and 2005 had 2-year employment rates of about 96.5%.  That fell to about 95% for the class of 2007, and 93% for the class of 2009.  The fall was concentrated in education, humanities, social science, fine arts, and physical sciences; other disciplines saw less change.

Finally, there is the issue of income.  Here you see the real knock on studying in the humanities;  it’s not that they don’t get jobs – it’s that they end up in some jobs that don’t pay well.  Now, their incomes do increase about twice as fast as others between six months and two years (in the midst of a recession, they jump, on average, by 21%), but they start from a lower base.  An interesting point here, which I have made before, is that the difference in outcomes between students in the sciences and the social sciences is negligible.

Income of Ontario University Graduates Six Months and Two Years Out, Selected Fields of Study, Class of 2009

 

 

 

 

 

 

 

 

 

 

 

 

Clearly, jobs aren’t the issue – students of all stripes find work soon enough.  The issue is the rate of return.  We should focus on that.

May 06

The Changing Employment Picture: Old vs. Young?

I was playing around with CANSIM data on the weekend, when I saw something quite interesting regarding employment rates by age.  Check this out:

Figure 1 Employment Rates by Age Group

 

 

 

 

 

 

 

 

 

 

 

 

Although it’s common-talk to say that we’re still in hard times, in fact, employment rates among the core working-age population are near an all-time high – 81.6% is the highest rate on record, apart from 2007 and 2008; it’s a full eight percentage points ahead of where we were in the recession of the early eighties, and six percentage points ahead of where we were in the recession of the early 1990s.

Among youth, it’s not quite the same story.  Youth employment rates are a bit hard to interpret because their engagement with the labour force is attenuated by their attachment to the education system.  The drop in employment rates for 20-24 year olds has a bit more to do with a drop in the student employment rate than the graduate employment rate – but regardless, news isn’t great on this front.  Nothing fundamental has changed in the relationship between youth unemployment rates and core working-age unemployment rates, when compared with the recession of the 1990s (see Figure 2); however, it is taking longer for the youth labor market to rebound than it is for the rest of the labour market.

Figure 2 – Unemployment Rates by Age Group

 

 

 

 

 

 

 

 

 

 

 

 

But look at that first graph again.  What’s absolutely stunning is what’s going on in the 55-64 age group.  Until the mid-90s, their employment rates were falling, regardless of the economic cycle, as people took retirement earlier (I blame London Life).  But since 1996, the employment rate has been rising by a percentage point per year, and this at a time when the number of people in that age group is exploding.  There are currently – hold onto your hats – nearly 1.7 million more employed Canadians aged 55-64 than there were in 1996.  That’s equivalent to the entire population of Nova Scotia and New Brunswick.

You don’t have to buy into the lump-of-labour fallacy, but you have to think that the change in labour market composition is having some kind of effect on the ability of young people to get a foot into the labour market.  Had older workers continued retiring at the rate they were in the 1990s, workers aged 25-54 would have moved into senior jobs faster, and youth unemployment would almost certainly be lower than it currently is.

Overall, this is good news: more older workers lowers the burden of the demographic transition we are currently undergoing.  But in the short term, it may be keeping young workers from sharing in the modest upswing we’re currently enjoying.

April 15

A Tool To Strengthen the Economy

A persistent sore point within higher education is the complaint that politicians want higher education to be, “more geared to the needs of the economy” – the implication of this being that higher education is a public good in and of itself, which should hold itself above mere utilitarian concerns.

This is a puzzling argument.  The arrival of state funding in the early nineteenth century was explicitly predicated on higher education being used as a tool to help strengthen the economy of the state.  This fact was as true in Europe (e.g. the rise of chemistry in German universities to assist the rise of the German chemical industry) as it was in North America (the Morrill Acts, the rise of A&M universities, etc).

Critics of this notion point to a period from the late 1950s through to the early 1970s, when a different logic seemed to apply.  Higher education was expanding very quickly then, and so too did the humanities and social sciences.  Lots of new public money went into these disciplines with nary a word about the “needs of the economy”.  From this, some conclude that this was a more enlightened era to which we should return.

Unfortunately, this argument is perfectly wrong.  The reason that the “needs of the economy” argument wasn’t used against social sciences and the humanities back then wasn’t because the rules of the game changed; it was because, for a brief moment, degrees in social sciences and humanities were actually in high demand.

Think about it:  what was the #1 growth industry in the 60s and 70s?  Government.  And which field of study did civil servants traditionally have?  Humanities and (to a lesser extent) social sciences.  Partly that was for class reasons (Sir Humphrey’s degree was in classics, for instance), but partly it’s because broad training in human understanding and critical thinking actually does matter in at least some parts of government.  But notions of society are less class-ridden today, government is no longer growing, and even within government the increasing complexities of modern regulation has led them to prefer specialists over generalists.    As a result, these fields of study don’t have the same labour market cachet that they used to.

It’s not that students in these subjects don’t go on to good things – they do (albeit, increasingly, a dose of grad or professional school is necessary to get them there).  But other areas of study seem to get graduates established in the labour market more quickly, and hence get the glory in a Humboldtian system.

Throughout the last 200 years, publicly funded universities have always had to deliver economically-relevant goods to their paymasters.  The rules never changed; only the labour market did.

March 28

Enough with the Youth Declinism, Already

Can we please just stop with the “Generation Y are screwed” meme, already?  It’s utterly without foundation.

Last week, the Canadian Press ran an article about a poll, which said that, due to inflated housing prices, 72% of Canadians aged 19-33 were pessimistic about ever owning a house.   This sounds terrible – until you look at the actual data.

Census data shows that, in 2006, home ownership among 20-29 year olds was, in fact, at an all-time high.  True, the Teranet House Price Index does show that average house prices went up 40% since 2006, but that’s been offset by 5-year mortgage rates declining during that same period, from about 5.75% to 3%.  The result: although average housing costs have risen 40%, the cost of servicing a loan for an average house has only risen 6% (or, slower than inflation as a whole) since 2006.

Another big piece of youth declinism came via Rob Carrick of The Globe, who began his piece, “Young Adults really do Have it Tougher”, with the sensational claim that, “people aged 20-24 are 41% worse-off financially than their counterparts were in 1976”.

Here’s what the actual data looks like, going back to 1976.

Average and Median Incomes, 20-24 year-olds, Canada, in Real 2010 Dollars

 

 

 

 

 

 

 

 

 

 

 

 

It is indeed true that today’s students have it worse than those from 1976.  But since all that change effectively happened prior to 1992, it’s also true that students today are no worse off than they were 20 years ago.

So what happened in the 80s that changed youth incomes so much?  It’s not that employment rates have fallen; they’ve bounced around a fairly narrow range, in the high 60s and low 70s, for pretty much the entire past 40 years.  But when we look at hours worked, the puzzle solves itself nicely.

Average Hours Worked, 15-24 Year-Olds, Canada

 

 

 

 

 

 

 

 

 

 

 

 

Average overall hours worked dropped from 35 hours-per-week, to 28 hours-per-week – or, by roughly 20%. In 1976, among 15-24 year olds (Cansim doesn’t break it down to 5-year blocks, unfortunately), over half were working 40 or more hours per week; in 2010, less than 35% were.

And why did working hours fall?  The obvious answer is that PSE attendance in that age bracket nearly doubled in the period from 1976 to 1992, which left people with fewer hours available for paid work.  According to The Globe, this large increase in access now has to be re-interpreted as a disaster for young people, because enrolment curtailed their income in the short-term.  Yeesh.

For those of you still convinced there’s a generational crisis going on, have a look at this data from the Labour Force Survey.

Average Hourly Wage Rate by Job Status, 15-24 Year-Olds, Canada, in 2012 Dollars

 

 

 

 

 

 

 

 

 

 

 

 

A prize for anyone who can turn that graph into a convincing tale of generational woe.

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