Education Bubble
The class of 2015 faces towering student debt, a wasteland of job prospects and demoralizing dropout rates. Is post-secondary education still worth it?
By Michael Borrelli
Marco DiFronzo, a graduate of both McMaster University and Fanshawe College, is struggling to make ends meet despite his education. 
Alternative education and leadership options, such as the Costa Rica Rainforest Outward Bound program, are proving increasingly popular.
PayPal co-founder and venture capitalist Peter Thiel created a buzz when he warned that higher education was a bad bet.
Spring on Ontario's campuses is usually filled with the heady postgraduate bliss that beckons former students into the 'real world.' Tasks like applying to graduate school, planning vacations or beginning a job hunt can be exciting, if occasionally overwhelming. Unless, of course, you've done it all before.
That déjà vu feeling was top-of-mind as I walked through the Royal Botanical Gardens with my old friend Ryan Smith. Though he holds a degree in political science, Smith has been looking for a "career-type job" since graduation in 2006. So far, he's only found non-permanent work in the service sector.
As a result, this past fall, Smith did something that is becoming increasingly common amongst many post-secondary graduates in Ontario: he went back to school.
"I'm doing a one-year diploma in emergency management," he tells me, "A Bachelor's just isn't good enough anymore. Once you start talking to employers, they want specialties, previous experience, extracurriculars or whatever the latest piece of paper is."
A few sprouts were already peeking tentatively through the soil as we wandered, and their eagerness to see the sun will no doubt help to ensure beautiful convocation photos for the thousands of McMaster University and Mohawk College students who will receive their degrees or diplomas in a few months.
Unfortunately, the unseasonable warmth that foreshadows an early spring around Hamilton Harbour is in stark contrast to the chilly reality awaiting new graduates. Canada's job market is stalled (stagnant), and Statistics Canada reported that unemployment among 15- to 24-year-olds rose to 14.5 percent in January. T he pieces of paper that Smith and his classmates chase, like all credentials awarded by Ontario's universities and colleges, seem like essential tickets to stable jobs in this changing economy. However, as more students and their families pour hard-earned dollars into education and training, they are beginning to ask questions about the rate of return on their investment.
Education
Few would bet the farm on tulips these days, but during the 17th century Dutch Golden Age, these recently introduced flowers captivated a population and ultimately led to the infamous bubble and its predictable, deflating consequences.
Although the socio-economic effects of the tulip mania were limited to a small but wealthy Dutch middle class, North Americans were not so lucky in 2007 when the U.S. housing prices followed a similar trajectory into the gutter. We've been suffering the economic consequences of a burst bubble ever since.
Last spring, an interview with PayPal co-founder and venture capitalist Peter Thiel created a fair amount of buzz when he warned that investing in higher education was starting to look like a bad bet. Thiel told the website TechCrunch that "A true bubble is when something is overvalued and intensely believed. Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo." And in case there was any doubt about his convictions, Thiel also launched a program that would pay 20 students $50,000 a year to leave school and start a company.
Even though the cost of acquiring a credential from an institution like McMaster or Mohawk has increased by more than a third since 1997, study after study has confirmed that a better education yields better paying, more satisfying jobs for graduates.
In addition, the premium that a young person can expect to earn with a post-secondary credential has increased over the past 30 years, says McMaster University Economics professor Martin Dooley. Unfortunately, though, it's not necessarily because those with a degree or diploma are earning a whole lot more than they were 30 years ago.
"The reason," Dooley says, "is that the quality of jobs available to persons with no post-secondary education has really declined, especially for men."
But the question of value is a complex one. In order to get some perspective on whether Ontario's post-secondary education (PSE) system is continuing to provide good value for graduates, perhaps we need a trip to the campus library.
Investment and Rise of Demand
If one thing is clear among all the available research on the subject, it's that Ontarians value education. A 2009 survey of public attitudes towards education conducted by the Ontario Institute for Studies in Education (OISE) found continued, widespread popular support for post-secondary education here. In fact, more than 75 percent of those surveyed thought a post-secondary credential from college, trade school or university was needed to "get along in this society."
That reasoning rings true with Hamilton resident and McMaster graduate Heather Couture. She moved here in 2004 to study Life Sciences and graduated in 2008 with $33,000 in debt.
"Going to university was the thing to do when I was in high school. It was drilled into me and my peers that we wouldn't go anywhere in life without it. My parents were fine with whatever I chose but the pressure from my peers and teachers definitely swayed my decision." Despite the pressure and a debt load she says is "definitely more" than her friends, Couture feels it was all worth it.
"University was a great experience for me. I learned a great deal about myself and completely loved being in an academic environment. I'm currently working in the research field and am finding my education totally applicable."
With the belief that higher education is essential widespread and pregrowing,it's not surprising that enrollment in post-secondary programs has soared over the past decade. According to the Council of Ontario Universities, enrollment in the province's undergraduate programs has risen by 50 percent since 2000 — up to 367,615 full-time students in 2009. College enrollment in the province has also experienced dramatic increases, and sits at nearly 200,000 full-time students, up more than 40 percent from 2000.
An economic rationalist would argue that the number of degree or certificate-seekers in this province will continue to rise as long as the costs of education are outweighed by an accompanying increase in earnings.
This view hasn't gone unnoticed by our leaders either: Ontario governments have invested billions of dollars in expanding access to post-secondary education to meet the ever-exploding demand.
Civic leaders have too: In Hamilton, McMaster University recently finalized plans to construct an $85 million building downtown for the school's Department of Family Medicine and its family residency training program.
This new Health Campus at Bay and Main streets will serve 4,000 students, representing "a combination of existing students at McMaster and some new students," according to Gord Arbeau, McMaster's Director of Public and Community Relations.
Much of the investment and increased enrollment in Ontario's schools dates back to the Harris government and its controversial decision to eliminate the final year of high school. Dubbed the 'Double Cohort,' about half of the graduating class of 2003 finished Grade 12, and the rest had Ontario Academic Credit courses under their belt.
At that time, Anthony Piscitelli was a student politician at Waterloo's Wilfrid Laurier University. Originally from Niagara Falls, Piscitelli's younger brother was one of the 138,585 students who applied to Ontario's universities the year of the Double Cohort, an increase of more than 35,000 from the year before. With the government offering funding for infrastructure, the Double Cohort marked a permanent expansion of Ontario's university system.
"It was one big build that had to get done," Piscitelli says of the frantic preparations for the 2003 incoming class. "Buildings were popping up all over campus. And naturally, once you create the spaces, you have to fill them and keep filling them."
That massive expansion of our post-secondary system has, on the surface, seemed to be a great deal for students. Along with more funded spots at universities and colleges, over time the provincial government has increased the number of loans and grants available to under-represented groups and the economically disadvantaged. But with the benefit of hindsight, researchers are only now seeing the lasting effects of the Double Cohort. For example, this April, University of Ottawa economics professor Louis-Phillipe Morin presented a paper on the longer-term effect that the influx of graduates had in Ontario. Using census data, Morin noted a significant supply shock to the province's labour market: a 5-9 percent depression in the average weekly wages for young workers two years after graduation.
Return on Investment
Findings like this, though, obscure the fact a large body of public and private research shows that education continues to pay. A 2010 Higher Education Quality Council of Ontario (HEQCO) report confirms that holding college or university credentials is a boon to earnings. Over a lifetime, it's estimated that a bachelor's degree holder in Ontario earns more than three quarters of a million dollars more than a high school graduate.
But this strictly economic analysis doesn't account for the increasing costs of legacy debt that accompanies higher education, and its broader effects. Weighed down by paying off student loans for years after graduation, today's young people are facing an uncertain future with far fewer options than their parents.
When evaluating the costs and benefits of the system of higher education in this country, the conversation rarely focuses on longterm debt. In official reports, however, the trend is all too clear. According to the Canada Millennium Scholarship Foundation using 2009 dollars, Canadian undergraduate student debt doubled during the 1990s, reaching $24,706 in 2000. Debt has continued to grow since then, albeit at a slower pace. Average university graduate debt in Ontario was $25,778 in 2009, four percent higher than it was in 2000. Over the same period the rate of students going into debt expanded from 56 percent to 64 percent — that's an additional 6,000 or so university graduates who may have to put off buying a house or starting a family in order to service debt.
Marco DiFronzo, a graduate of both McMaster University and Fanshawe College, knows this reality well. In January, the 28-year-old finished an animation internship in Toronto, then moved back to Hamilton to pursue a temporary work opportunity and take advantage of the lower cost of living.
"With an honours degree in Multimedia, I didn't think building a life would be so difficult," he tells me at a downtown coffee shop. "Now I'm on EI, with student loans, and trying to find a regular paycheque."
Having just borrowed money from his parents in order to make this month's rent, DiFronzo has been spending his time looking for general labour jobs.
"It's not my calling, for sure," he says, "But it'll pay the bills until I find something better, which is the immediate goal."
Unfortunately, this is the scenario playing out across the province, where incomes have stagnated for the past 20 years, and households have racked up an average debt load amounting to 150 percent of disposable income, up from 93 percent a decade back. Worse still, static wages and rising education costs affect poor families much more than their better-off neighbours. A 2011 Canadian Centre for Policy Alternatives report found that the bottom fifth of Ontario's income-earning families must dedicate three and a half years' income to cover the costs of education (tuition, books, housing and living expenses), 30 percent more than a decade ago. Of course, this divergence between incomes and the costs of education cannot continue. Eventually, something has to give.
Effects
Burst bubbles are incredibly disruptive to economies, but more importantly, to communities. Jobs, savings and dreams evaporate; tax-bases dwindle and age-old institutions vanish. Yet for all the wisdom scholars have gained examining these historical case studies in hubris (going back to tulip mania), the lessons never seem to stick.
So this ultimately brings us back to the central question. Is the increasingly high cost of PSE still a safe bet? The answer is as complicated as it is unsatisfying: It depends.
The research offers few surprises. Graduates with professional degrees go on to make much more over the course of their careers, consistent with the meritocratic expectation that the more time you spend training, the more you should make upon graduation.
Field of study is also a major factor in determining employability and income, especially among bachelor's holders. A HEQCO report confirms the stereotype that Ontario's liberal arts grads obtain lower earnings than other degree or certificate holders two years after graduation, while their math and computer-savvy friends do quite well.
The cost to procure a degree varies as well; debt occurs more often and is higher for those in health sciences — a popular field of interest in Hamilton, at both the university and college levels. However, these grads end up earning more.
If there's a lesson to be learned here, it's that you're rarely worse off for having learned something.
