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Special Reports - What Difference Does Learning Make to Financial Security?




January 2008

Introduction

The knowledge-based economy is driving a greater-than-ever demand for skills and higher education levels.

The benefits of learning and higher education levels include higher earnings and lower unemployment risks, both of which contribute to individuals´ and families´ financial security.

This short report explores the extent to which financial security is influenced by education.

Please see the Annex for definitions of concepts used in this report.

Contents:

Canadians are achieving ever increasing education levels

Higher education is associated with:

In all provinces and territories, education yields higher earnings

Higher education reduces the risk of experiencing:

Canada compares well to other industrialized countries

Summary

Annex - Some useful definitions

Canadians Are Achieving Ever Increasing Education Levels

Over 40% of Canadian adults had qualifications beyond a high school diploma in 2001:

  • 11% had a trade diploma,
  • 15% had a college diploma,
  • 18% had a university diploma.

As well, more and more Canadians are getting a high school diploma. In 1981, 48% of Canadian adults were without a high-school diploma. In 2001, the proportion had gone down to 31%.


This Chart contains data for Education levels, Canada, various years. Information is available in table below

Source: Statistics Canada, Census, Catalogue no. 97F0017XCB2001002.


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Education levels, Canada, various years (Percentage of the population aged 15 years and over)
No diplomaHigh schoolTradesCollegeUniversity
1981482311910
19913826111213
20013125111518

Higher Earnings

Higher education is associated with higher earnings:

In 2000, those who completed their education with a high school diploma earned on average $4,300 more than those without a high school diploma.

Achieving education beyond high school offered an even greater earnings benefit. On average:

  • a trades or college graduate earned $7,200 more than a high school graduate;
  • a university graduate had earnings nearly double that of a high school graduate ($23,000 more).

This Chart contains data for Earnings, by education level, Canadian dollars, 2000. Information is available in table below

Note: Earnings and employment income are used as synonyms here. Average earnings are shown here.

Source: Statistics Canada, Census, Catalogue no 97F0019XCB2001002.


Warning: This data table may contain very wide content. Horizontal scrolling may be necessary.

Earnings, by education level, Canadian dollars, 2000 (population 15 years and over with employment income)
All levelsNo diplomaHigh schoolTradesCollegeUniversity
31,80021,20025,50032,70032,70048,600

Greater Savings and Assets

Higher earnings lead to greater savings and assets:

In 2005, the median value of net assets among those who completed their education with a high school diploma was $120,000, some $27,000 more than for those without a diploma.

Canadians with post-secondary education enjoyed even higher levels of net assets from their higher earnings:

  • the median net assets among trades and college graduates was $171,000;
  • the median net assets among university graduates was close to $240,000.


[CHART3]

Higher Growth in Earnings

Over the span of a career, higher education means higher growth in earnings:

Over the span of a career, earnings tend to increase with time, peaking around the ages of 50 to 54.

In 2000, growth in average earnings between the ages of 25 and 54 was:

  • 49% for those with a high school diploma,
  • 53% for those with a college diploma,
  • nearly 100% for those with a university diploma.

This growth can be attributed to different career experiences as well as training and learning opportunities.


[CHART4]

Higher Income During Retirement

Higher education also contributes to higher income during retirement:

  • In 2000, the median income for seniors with a post-secondary diploma was higher than the median for all levels of education. For university-educated seniors the median income was close to $40,000.


[CHART5]

  • Seniors with lower levels of education relied more on Old Age Security benefits (OAS/GIS) as a source of income.
  • Seniors with higher levels of education relied more on private pensions.


[CHART6]

In All Provinces and Territories, Education Yields Higher Earnings

  • In 2000, those with a high school diploma earned, on average, anywhere between $900 (Newfoundland) and $12,000 (Nunavut) more than those without a high school diploma.
  • The earnings of a high school graduate were higher than the national average in the Northwest Territories, Nunavut, and Ontario.


[CHART7]

  • Completing post-secondary education (PSE) translated into average earnings that were between $10,700 (Prince Edward Island) and $16,500 (Ontario) higher than the average earnings of those with a high school diploma alone.


[CHART8]

Low Income

Higher education reduces the risk of experiencing low income:

Between 1999 and 2004, 20% of Canadians experienced at least one year of low income.

A lower proportion of Canadians with a post-secondary diploma were likely to experience low income:

  • 17% of trades and college graduates,
  • 11% of university graduates.


[CHART9]

Fewer post-secondary graduates experienced prolonged low income (3 years or more):

  • 11% of Canadians without a diploma,
  • 9% of high school graduates,
  • 5% of trades and college graduates,
  • 3% of university graduates.

Unemployment

Higher education reduces the risk of experiencing unemployment:

Unemployment rates suggest that high school graduates had close to half the risk of being unemployed than individuals without a diploma in 2006.

The unemployment rate was comparatively low among Canadians with post-secondary education:

  • 5.1% for trades and college graduates,
  • 4.0% for university graduates.


[CHART10]

Regardless of Province

Higher education reduces the risks of experiencing low-income and unemployment, regardless of province:

  • In 2006, having a high school diploma reduced the risk of unemployment by 3 (Alberta) to 10 (Prince Edward Island) percentage points, compared to the risk for those without a high school diploma.


[CHART11]

  • Having a post-secondary diploma (PSE), compared to obtaining a high school diploma, was associated with lower unemployment in all provinces. The difference in unemployment rates ranged from 1 (Alberta) to 6 (Newfoundland and Labrador) percentage points.


[CHART12]

Canada Compares Well to Other Industrialized Countries

The Canadian earnings advantage of education compares well to that in other industrialized countries:

  • In 2002, high school graduates earned an average of 1.3 times more than those without a high school diploma. This was similar to the earnings advantage for high school graduates in Italy.


[CHART13]

  • Canadian university graduates, like university graduates in the United Kingdom, earned about 1.7 times more than high school graduates.


[CHART14]

Summary

Higher levels of education contribute to financial security through higher earnings, higher earnings growth, lower job loss risk, greater accumulation of net worth, and higher income in retirement.

For example, Canadians with a post-secondary education enjoy:

  • higher earnings, as much as $23,000 on average more than those with only a high school diploma,
  • higher earnings growth over their careers,
  • up to half the incidence of low income of those with a high school diploma,
  • lower unemployment risks, 
  • higher net assets.

The benefits of education are enjoyed by Canadians across the country.

The earnings advantage of education in Canada is similar to that in other industrialized countries.

Annex - Some Useful Definitions

What do we mean by financial security?

Financial security refers to a situation in which income is sufficient to meet the basic needs of a family or individual. Having a stable and well-paying job contributes to financial security. Having savings and assets also contribute to financial security by providing a source of income in the event of job loss and other unexpected problems.

Other Useful Definitions

  • Diploma: refers to any form of qualification - certificate, diploma and degree.
  • Earnings: refers to income from paid work, also referred to as employment income. The annual gross earnings (yearly earnings before taxes) are presented in this document.
  • Education or education level: refers to completed education with a diploma.
  • High school diploma: includes both high school graduates and individuals who have some post-secondary education but who did not complete the program.
  • Low income: refers to a situation in which the income is lower than a level deemed sufficient to meet basic needs.
  • Net assets: refers to total assets (including savings) minus total debts (termed net worth by Statistics Canada). Assets include RRSPs, employer pension plans, financial assets, non-financial assets (principal residence, vehicles and belongings like major appliances, furniture, valuables and collectibles) and equity in business. To obtain net worth, debts such as mortgages, lines of credit and loans are subtracted from assets.
  • PSE: post-secondary education; refers to education after high-school.
  • Post-secondary diploma: refers to all forms of certification from a trade, vocational, college (including Cegep) or university program.
  • Trade diploma: refers to both trade and vocational education completed.

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