Section 2: Ontario in an international context

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Table 2.1 reminds us that, on average, it pays to get a postsecondary education. By far, the group that is most represented in the highest earnings category (more than two times the national median employment income) in Ontario in 2006 are university graduates, 36% of whom were in the highest earnings category, while 16% were in the lowest earnings category (at or below half of the national median employment income in 2006). Conversely, workers who had less than a high school education were much more likely to be in the lowest earnings category (36%) in 2006 than in the highest earnings group (7%).

Results are broadly similar at the Canada-level, with some exceptions — university graduates in Ontario were more likely to be in the highest earnings category (36%) compared to the Canada level (32%). Overall, in fact, the earnings distributions tended to be higher in Ontario than at the Canada level for individuals with less than high school, high school completion and trades, college and university.

Table 2.1 Percentage distribution of the 25 to 64 year-old population, by educational attainment and earnings level, Ontario and Canada, 2006

Nevertheless, according to the latest issue of the Organization for Economic Cooperation and Development (OECD) publication Education at a Glance (OECD 2008) the percentage of university-educated workers who earned at or below half the national median employment income was higher in Canada in 2006 than in most, if not all, OECD countries. The same findings apply to the province of Ontario (Chart 2.1).¹

Data from Statistics Canada's Survey of Labour and Income Dynamics (SLID) show that, at the Canada level, 18% of university graduates and 23% of college graduates aged 25 to 64 earned less than half of the national median employment income in 2006. This meant that these workers' annual earnings were less than $16,917 in 2006 before taxes and transfers. Since the population of Ontario comprises nearly 40% of the population of Canada, it is perhaps not surprising that very similar proportions of university and college graduates in Ontario, at 16% and 24%, respectively, reported earning less than half of the national median employment income in 2006.

Chart 2.1 Percentage of university and college graduates, aged 25 to 64, with earnings at or below less than half of the national median employment income, Ontario, Canada and OECD countries, (2006 or latest available year)

The OECD suggests that these differences in the earnings distribution can be partly attributed to institutional arrangements in each country. Thus, countries that are more highly unionized and where wages are set in a more centralized manner tend to have less dispersion in earnings (OECD 2008). In addition, the OECD suggests that differences in the availability of training systems for adult learners in different countries could partly explain the differences in earnings.

The OECD also reports the proportion of 25 to 64 year-olds with earnings at or below half the national median by educational attainment and gender (Table 2.2). Canada, followed closely by Ontario, ranks highest in terms of the percentage of both male and female university graduates earning at or below the national median employment income. Ontario, followed closely by Canada, ranks highest on this indicator for college graduates.

Table 2.2 Proportion of the 25-to-64-year-old population at or below half of the median level of earnings by educational attainment and gender (2006 or latest available year)

In most countries, the gender gap in earnings is smaller for university graduates than for college graduates. This is the case for Ontario where the gap between the percentage of male and female university graduates in the lowest earnings category was 8.2 percentage points in 2006. This places Ontario ahead of Canada (at 7.4 percentage points) and ranks Ontario seventh highest of twenty-four countries with respect to the gender gap for university graduates. This gender gap is higher in Austria, Switzerland, Germany, New Zealand, the United States and Australia. At 13.8 percentage points, Canada ranks seventh, followed by Ontario, at 13.1 percentage points, in terms of the gender gap for college graduates. That gap is also higher in Switzerland, Germany, New Zealand, Australia and the United States.

There are many reasons why similarly-educated workers may have different returns in the labour market and some of these are explored later in the report. One of the most obvious ones is related to the strength of an individual's attachment to the labour market, with full-time, full-year workers being much less likely to be in a low-earnings situation than workers employed on a part-time or part-year basis. The next chapter reviews the recent literature on earnings differentials associated with education in order to identify possible explanations for differences in earnings levels across individuals.

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Note

1. Some comparisons cannot be made directly with countries who excluded part-time and part-year workers (Czech Republic, Hungary, Luxembourg, Poland and Portugal).