University and college education is widely pushed as the best route for young people to pursue. They are constantly told by parents, peers, and society, that if they go to school and get a degree, they will get a good job and be set for life. Whether you believe that to be true or not is a different topic.
Last week, we look at the fact that inflation has finally hit the economy. This week, we want to take a similar approach and look at how the cost of education has continually outpaced inflation drastically.
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Cost of Education
The cost of further education can vary widely depending on which schools are attended and which fields are studied. Overall, however, the cost of attaining further education has risen substantially, especially over the last 30 years.
Depending on the sources you look at, the average annual cost of post-secondary education in Canada is around $19,500. This includes rent, tuition, food, traveling home and to school, books/course material, and extracurriculars. Over the course of 4 years, that would amount to costs of $78,000.
If we want to look just at tuition costs, the average undergrad degree is around $6,500 a year. Other sources say that the average cost was nearly $7,000 going back to 2015. These costs have seen a dramatic increase in the last 20 years. In a study from 2015, it was found that tuition fees had tripled on average from 1993-94 to 2015-16. In addition, government funding went down. Thus, tuition fees as a share of operating revenue for universities increased considerably.
According to Knowledge First Financial, the increase in tuition costs will only continue. In 2022, a 4-year program with residence will average ~$96,000. Based on their projections, by 2040 that is set to increase to $134,166. If they are correct, that is a year-over-year increase of 1.9%. This is pretty reasonable. However, that is likely quite a bit of an understatement if the current trend continues.
Parent Wise Canada, states that the cost of post-secondary education has outpaced inflation by nearly 3 to 1. They also state that university tuition fees have risen more than 40% in the last decade as of 2016. If this is the case and the trend continues, we could see education costs increase anywhere from 3.5%-7.5% year-over-year.
Where are Our Young Canadians Getting the Money to Pay for This?
The majority of the funds seem to come from personal savings, gifts from parents/guardians, student loans, and scholarships and bursaries. A portion of funds also comes from Registered Educational Savings Plans (RESPs). However, the RESP is definitely underutilized.
Even with the variety of sources of funding available, the average person graduates with more than $26,000 in student-related debt. A survey found that 77% of graduates have regrets about student debt.
Change in Cost of Education
Education, like most things in life, increases in price over time. However, as noted above, the amount it increases is substantially more than general inflation.
If we go way back… In 1802, King’s College in Nova Scotia had tuition of 4 British Pounds. That is equivalent to $230 in 2017. Fast forward nearly 80 years, and at Western University in 1881 tuition was $15 and board was $165. As of 2017 that would be worth $250 and $2,690 respectively.
In 1919 the government supplied an endowment of $22 million. Going ahead to 1932, the University of Alberta charged $116 for tuition and $189 for room and board. To put that into perspective, that is $2,070 and $3,372 respectively in today’s dollars.
If we assume average tuition is $6,500 today, the increase from 1932 to today is annualized at 4.63%. For a total increase of the 89 years of 5,503%
All of this is to say that the cost of getting an education has risen substantially. It has continually outpaced inflation and based on projections, it will continue to rise in price. Whether you believe schooling should be free or not, well that’s a different discussion. However, based on basic economic principals the rising prices make sense.
More people continue to flood into universities, thus increasing the demand for education. However, there are only so many spots available, schools to attend and professors to teach. When demand outweighs supply, prices will increase.
Go to School
Attending postsecondary has become a societal norm. Young Canadians are constantly told to go to school, and that it will be the gateway to a good job and set them up for a good life. Based on American data, which we would assume is mirrored in Canada, the amount of people attending 4-year programs has steadily increased.
Looking back at 1940, 5.5% of the US male and 3.8% of the female population completed 4 years of postsecondary. After nearly 80 years of steady increases, in 2019 those figures were 35.4% and 36.6% respectively.
In 2000 there were roughly 1.34 million people enrolled in postsecondary institutions in Canada. in 2019 that number had risen to 2.15 million. That is an increase of 60% in 19 years. To put it into perspective, the population of Canada in 2000 was 30.69 million. This means in 2000 4.37% of the population was attending postsecondary institutes. In 2019, Canada had a population of 37.59 million. That is an increase in the population of 22.5%. Furthermore, 5.72% of the population was attending postsecondary institutes in 2019. It is not hard to see that postsecondary enrollment is increasing substantially faster than population growth.
With demand for education increasing so much, it is not hard to see why the cost in a 20 year period nearly tripled. This would be considered demand-pull inflation. This demand could be heightened now that the general public has been handed even more money via stimulus.
We have a growing supply of qualified people. These people continue to pay more money each year to gain these qualifications. Yet, wages have been fairly stagnant. With the oversupply of qualified people, they are forced to take positions below the level of qualification.
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