University students should target specialized programs

This post was originally published on smallbizadvisor.ca.

The premium on a post-secondary education is falling, says a new CIBC World Markets report.

That’s because too few students are graduating from programs that are in high demand. Many young Canadians are instead entering traditional programs like humanities, and then battling for top jobs in highly competitive job markets.

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“A higher education may be a necessary condition for a good job in Canada, but it is no longer a sufficient condition,” says CIBC deputy chief economist Benjamin Tal, who coauthored the report with CIBC economist Emanuella Enenajor.

Tal adds, “Narrowing employment and earning premiums for higher education mean that, on average, Canada is experiencing an excess supply of post-secondary graduates.”

So far, the report says a post-secondary degree still translates into better wages. For example, those with a Bachelor’s degree earn over 30% more on average than high school graduates, and tacking on a Master’s degree or doctorate adds another 15%.

Read: Educated youth struggle to find good jobs: CIBC

This premium is narrowing given real weekly wages of high school and college graduates rose by 13% this year. That surge compares with only 8% among undergraduate degree holders.

The report adds the unemployment rate among university graduates is now just 1.7% lower than among those with only have a high school education.

The jobless rate premium between those with a Master’s degree or PhD and those with a Bachelor’s degree is now just 0.5% points.

“Across subjects, the biggest bang for buck comes from specialized and professional fields such as medicine, law and engineering,” says Tal. “A look at the dispersion of earnings across fields of study shows there’s a much greater risk of falling into a lower-income category for graduates of humanities and social sciences, with a limited risk for students of health, engineering or business.”

He continues, “Those underperforming sectors comprise just under half of all recent graduates. In other words, Canadian students are continuing to pursue fields where upon graduation, they aren’t getting a relative edge in terms of income prospects.”

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