Study: The impact of human capital on provincial standards of living

1951 to 2001

The accumulation of human capital has played a strong role in explaining relative levels of per capita income across the provinces during the past half century, according to a new report.

This report examines the role of human capital as measured by two concepts (the accumulation of literacy skills and university achievement) to explain the relative levels of income per capita in the provinces between 1951 and 2001.

University achievement was measured as the percentage of the working-age population holding a university degree. Literacy test scores were derived from the 2003 International Adult Literacy and Skills Survey. Data were intended to capture the mean literacy level of labour market entrants aged 17 to 25 for each of the provinces.

The report found that the impact of human capital on per capita income was positive and significant, whether human capital was measured by literacy results or the level achieved in university, or both.

It also found that the skills acquired by one extra year of schooling resulted in an increase in per capita income of around 7.3%.

However, literacy skills were no more important than university attainment in explaining these gains in per capita income. This finding contrasted with previous research showing that literacy indicators outperformed schooling indicators on a national basis.

The analysis took into account Canada's large degree of urbanization as well as the impact of certain economic events that shook the growth patterns of certain provinces.

The relative rate of urbanization across the provinces had a positive and highly significant impact on relative income per capita, the report found.

However, the report acknowledged that the analysis did not take into account migration flows that occurred during the 50-year period.

Studying the transfer of human capital across the provinces based on literacy test scores would allow a better understanding of factors determining the migration of skilled labourers, and its impact on converging standards of living from one region to another.

Definitions, data sources and methods: survey number 4406.

The research paper Human Capital and Canadian Provincial Standards of Living (89-552-MIE2006014, free) is now available.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Client Services (1-800-307-3382 or 613-951-7608; fax: 613-951-9040; educationstats@statcan.gc.ca), Culture, Tourism and the Centre for Education Statistics.