Is Post-Secondary Education in Canada a Cost-Effective Proposition? Working Paper Series. W-01-9E

This study provides an overview of the return on investment to post-secondary education in Canada, by gender. In it, three time series are developed respectively on the cost-effectiveness of non-university post-secondary diplomas (1981-1996), bachelor's degrees (1989-1996) and university degrees (1981-1996), including bachelor's, master's and doctoral degrees. The method used is based on a calculation of internal rate of return (cost-benefit approach) and is applied to the data from the Consumer Finance Survey. The results as a whole indicate that rates of return to post-secondary education are positive and vary by gender and level of education. The results are also consistent with those of Canadian studies on rate of return to education over a single year. In addition, the analysis indicates that rates of return are sensitive to the state of economic activity, and there is a positive correlation between rates of return and unemployment rates. Lastly, after screening the data to adjust for the effects of the economic cycle, the authors identified a slightly positive trend in rates of return to university degrees. According to their estimates, the trend rates of return increased by approximately one percentage point between 1981 and 1996. The structure of this paper is as follows. Part 2 examines the conceptual questions related to the rate of return to education and considers various definitions. Part 3 discusses the main methods used to measure the rate of return to education. Part 4 provides a brief review of empirical studies on the question. Then the methodological approach, assumptions and basic concepts used are discussed in Part 5, and the authors' findings are set out in Part 6. Lastly, in the conclusion, the authors summarize study highlights and make some suggestions for future research. Two appendixes include: (1) Table of Main Findings; and (2) Technical Aspects. (Contains 12 footnotes, 4 tables, 6 charts, and a bibliography.)