William Watson: Wrong again, pessimists. Children still aren’t doing worse than their parents

With the data Statistics Canada has access to these days, it must be like porn for geeks. For instance, a new StatCan study links people’s census data with their federal tax files to figure out how well or badly recent generations of Canadian labour-market participants have done according to their level of education. No more asking people what their income was last year. You link right to their tax form to find out down to the last penny (or nickel, since we don’t have pennies anymore).

I’m of two minds about just how much federal researchers should know about us. On the one hand, even with stringent safeguards, at least some data seems bound to leak. On the other, micro-studies often produce really interesting results. This new study, by veteran StatCan researcher Marc Frenette, is titled: “Are the career prospects of Canadian postsecondary graduates improving?” In addressing that question it applies all the appropriate academic hedges and qualifiers but its more or less unavoidable answer, given the data it digs up, is “Yes.” It can’t actually predict future outcomes and so, sensibly, doesn’t even try but it does conclude that young Canadians did better in the labour market in the 15 years following 2001 than they did in the 15 years following 1991. And the improvement was greater the higher up the educational ladder you went.

Elementary student studying in classroom. 

That’s interesting for at least a couple of reasons. First, educational attainment was rising over this period. People were coming to the labour market with more and more educational credentials. And yet, despite that increase in their supply, their incomes rose in real terms. Second, though millennial pessimism really took off after 2000, those of us with more grey hair than not can remember fin-de- siècle pessimism too. If anything, the decade in which the idea that children would do worse than their parents began to take root was the 1990s. (The apocalyptic book The End of Work was published in 1995.) But it doesn’t seem to have happened. At least not through 2015, which is when this study ends.

Past results are no indication of future performance, as the prospectuses all say. But of course everyone ignores that: past results are the first thing we look at in trying to guess future performance. The past results reported in this new study are both pretty good and run contrary to what fashionable pessimists were predicting in 2001.

A couple of examples:

— Men with bachelor’s degrees: Such men aged 26–35 in 1991 earned $1,223,383 over the next 15 years — or at least their median earner did. But the median earner among 26-to-35-year-olds in 2001 did even better, earning $1,292,247 in the following decade and a half. That’s $68,864 more. (All dollar figures are in constant 2015 dollars.)

— Women with bachelor’s degrees: The 1991 cohort earned $729,108 but the 2001 cohort made $816,282, or $87,174 more.

— Men with master’s degrees (are we still allowed to say “master”?): 15-year earnings for the 1991 cohort were $1.42 million, rising to $1.57 million for the 2001 cohort, up by an impressive $159,183.

Women with master’s degrees: 1991 cohort: $0.98 million; 2001 cohort: $1.03 million; exact increase: $48,939.

Both men and women with trade certificates and college diplomas also did better 2001–2015 than 1991–2005, though the absolute dollar increases weren’t as great. The biggest improvement of all was by male PhDs, whose median cumulative income rose $213,293 to $1.62 million. Unfortunately, because there weren’t enough female PhDs, StatCan won’t say what happened to their incomes.

The past results reported in this new study run contrary to what fashionable pessimists were predicting in 2001


Could the improvement in incomes between the 1991 and 2001 cohorts just be the result of a better economy on average following 2001? To check on that the study splits post-2001 into its good half before the 2008–09 global recession and its bad half after. It finds that the 2001 cohort still did better, even during the lean years following 2008.

It’s important to keep in mind that all this extra income is pre-tax. With their higher incomes, the more educated pay higher income tax, too. On the other hand, federal income tax rates trended down through the 1990s to 2015, so the tax hit may not have changed much.

In figuring the returns to education, it’s also necessary to consider costs, including tuition. The trend over the last couple of decades has been for tuition to rise, especially in professional programs. Still, increases in cumulative incomes in the high five figures and low six will have been more than enough to cover most fee increases we’ve seen.

Yes, it could be that 2001–15 will turn out to have been the good old days and 2019–34 will be much worse. But many people in 2001 were saying much the same thing. Let’s put their having been wrong into our prediction-machines, too.

Published at Thu, 24 Jan 2019 11:00:49 +0000