Going back for more studies after high school is still proving a path to better earnings for students in the years after graduation, but a new Royal Bank of Canada analysis shows the returns on investment aren’t paying off like they once did.
A report from RBC economists Rachel Battaglia and Abbey Xu released Monday compared the average median income five years on for 2017 graduates with the tuition levels in their final year of study.
After adjusting for inflation, tuition rose 12 per cent between 2012 and 2017 for undergraduate students, compared to a jump of four per cent in median incomes for grads from 2017 to 2022.
The gap widens by more than eight per cent among degrees such as architecture and engineering, Battaglia and Xu noted.
Engineering grads in 2012 were earning a median of 12.3 times the rate of the final year of tuition five years later, while 2017 grads were raking in more than 10 times the annual costs of tuition in their last year.
The report noted that despite the relative declines, university degree holders continue to earn higher wages than those with lower educational attainment.
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“It’s worth noting that median incomes for engineering graduates are still among the highest of undergraduate degree holders—and (relative to final year tuition) provide a more generous return to tuition investment than most programs,” the report said.
Those with a bachelor’s degree or higher had a median income in 2021 of $61,600, up 44 per cent from the overall median income in the sample analyzed by RBC and more than double the earnings of those with a high school or equivalent diploma.
But there’s a more narrow gap in the steps between high school and university degrees.
Those with a university certificate or diploma — lower than a bachelor’s degree — earned a median of $45,2000 in 2021, compared with incomes of $45,200 for those with apprenticeships or trades certificates and $44,800 among those with college or CEGEP degrees.
“This slight difference speaks to the competitive earning potential of apprenticeship and skilled trades programs,” Battaglia and Xu noted.
The trends between tuition costs and median income may chart differently for future cohorts, however, given tuition caps instituted in multiple provinces.
Ontario’s 10 per cent cut on tuition in 2019 followed by a freezing of tuition for domestic students is the most aggressive of such measures. British Columbia and Nova Scotia also have instituted two per cent caps on some tuition hikes.
Battaglia and Xu noted that international students have faced rising fees in recent years that are not subject to such caps, which put them in a “more challenging position” when it comes to their tuition and wage growth.
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