Title: Time to go back to school?
Sub-title: Rough economic times are providing Canadians with a perfect excuse to upgrade their skill sets.
In the midst of the of the early 1980s recession, Jon Anderson, lead singer of pop duo Jon & Vangelis, sang lyrics which speak perfectly to what many laid-off Canadians must be feeling today. “I wanna go back to school. I wanna go back to school,” sang Anderson. “Man it’s safer in there. The world outside is so un-cool.”
The early 1980s were rough. The unemployment and mortgage rates both hit double digits, just as the first personal computers were hitting the market, which futurologists foretold hailed as the start of a new “information age.” The Jon and Vangelis song, drawn from the duo’s smash “The Friends of Mr. Cairo” album, epitomized the need many were feeling to upgrade their skills, so they could better compete in the new economy.
Sadly, the late 2000s aren’t proving to be any easier. The information age continues to overwhelm, and not surprisingly, current massive layoffs, (which many believe will be worse than those of the 1980s), are leading many to question whether they should follow Jon & Vangelis’s advice to head back to school, for some major retraining.
Learn more, earn more
The financial advantages of increasing one’s education are by now well established. Last week, Statistics Canada released a survey of national graduates that show the more education that people have, the more employable they tend to be and the more money they tend to make.
For example the median annual earnings among graduates who completed their studies in 2005 (which meant that they generally were at the beginning of their careers and thus still had not reached their peak earnings) and who were working full time in 2007 were $35,000 for college graduates. This increased to $45,000 for bachelor’s graduates, $60,000 for master’s graduates and $65,000 for doctorate graduates. “Earnings rise which each level of education,” conclude the report’s authors.
A key big incentive for beefing up one’s qualifications during a time of recession is that for many Canadians there isn’t much else to do. The country’s unemployment rate recently broke through the 8.0 percent barrier, and many experts are now predicting that it will peak at more than 10.0 percent.
Among younger Canadians, --who are by definition those who would benefit the most from boosting their academic credentials, -- the unemployment rate is well into the double digits. This lack of available jobs means that there are few of what economists call “opportunity costs,” of going to school, because those who do so are unlikely to need to forego major career opportunities.
Does it pay to invest in education?
Older Canadians who have saved up a bit of money have a good incentive to go back to school too. That’s because stock markets, which have been hammered mercilessly during that last two years, have scared away many ordinary investors. Furthermore, government bonds pay near zero real interest rates. In other words there are few good places for Canadians to invest their money - except by using some of it to boost their personal brain power.
That said, despite the fact that many Canadians talk a good game, one item in the Statistics Canada data shows that many are not convinced that investing in education is a good idea - especially if it means that they have to borrow to do so.
For example only half of the 2005 graduating class relied either on government or non-government student loans, (which includes private family and bank loans). That may sound like a lot, but remember that well over 80.0 percent of Canadians borrow money to buy automobiles, which are in many cases, optional non-revenue producing items.
That said, those statistics will almost certainly change during coming years. Those thousands of North American autoworkers who have been downsized during recent months, were almost certainly part of the last generation of unskilled or semi-skilled workers that will reach upper middle class status. To get ahead in today’s and tomorrow’s economies, getting a good education, and keeping it up to date, will be key.
Those who are not convinced, can hopefully at least concede that hitting the school library is probably at more productive than sitting at home and listening to old Jon & Vangelis records.
Peter Diekmeyer is a Montreal-based freelance economics writer.
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