Education and productivity
TheStar.com – opinion/editorialopinion
Published On Fri Sep 02 2011. Martin Connell and Roger Martin
As our children head back to school next week, we are reminded that our investments in their education will have a big impact on Canada’s future prosperity. If we want higher living standards, we need more of our youth graduating from university and college.
More educated workers are more productive and more innovative. They earn more money and pay more taxes. Post-secondary education is one of the most effective antidotes to poverty and the attendant social costs.
We’re encouraged by Canada’s rising post-secondary enrolment. However, even with the various types of assistance (loans, debt forgiveness, tax credits) available, the gap continues to grow between those who can afford higher education and those who can’t. Among students with an A+ high-school average, there is a 10 per cent gap in university participation between high- and low-income groups. Most of the gap stems from low-income students’ persistently lower rate of applying to university; their actual acceptance rates match higher-income counterparts. We’re not capitalizing on available talent and we’re shortchanging our prosperity as a result.
We all lose when individual Canadians fall short of their skills potential. The days of securing a well-paying job with a high-school diploma are over. And the economic return on investment from educating young people cannot be matched by educating adults later in life.
The rising cost of post-secondary education is a very real deterrent to applications from low-income youth. Meanwhile, student aid comes out of the foggy bottom of a box of obscure financial tools. Students from low-income families are stuck in a vicious circle: funding is only available after a student has been accepted to university or college, but many don’t apply because they fear the costs and underestimate the benefits. The result is wasted human potential.
In order for Canada to remain competitive, we must raise the educational aspirations and expectations of low-income youth. Helping them save for education from a young age can do that.
The resources needed to effect this outcome already exist, but they are not reaching a very large proportion of those who could benefit. The Canada Learning Bond is a federal program that contributes up to $2,000 into education savings accounts (RESPs) for low-income children. It is available to any child born since 2004 whose family’s net income is below $40,000. Although no family contribution is required, over 90 per cent of families who secure the bond find ways to contribute more to the RESP — on average, more money than the bond itself. This seems surprising given eligible parents’ incomes, but is quite understandable given the priority parents place on higher education for their children.
And yet, only one in five children eligible for the bond is actually benefiting from it. More than a million eligible Canadian children don’t receive the benefit because their parents don’t know about the bond or how to start an RESP.
The Omega Foundation’s SmartSAVER program is exploring ways to improve Canada Learning Bond enrolment. We find that lack of promotion and general red tape limit the spread of the program — not lack of need or interest.
Each child motivated by the Canada Learning Bond to pursue university will earn, on average, over $800,000 more during a working life than someone who ends their education with a high-school diploma. A third of this will go right back into government coffers in the form of higher income taxes. Solid returns on a $2,000 investment. And this doesn’t count the avoided costs of social supports for those left behind or the greater productivity and innovation from the Canadian businesses that will employ them.
This kind of return is too significant to be left to chance. Enrolment in the Canada Learning Bond should be automatic and should cover all eligible children. The federal government could combine enrolment with other tax credits or benefits. Provinces should hasten to enrol eligible children as, at even moderate levels of increased post-secondary participation, they would realize billions of dollars in long-term economic benefits and tax revenues at no cost to their treasuries.
As a farmer plants in springtime for a summer harvest, Canada must plant the seeds of higher education to grow a more productive workforce. Starting education savings for low-income Canadian children is an investment that will help drive our future prosperity.
Increasing productivity starts at birth. It starts with the Canada Learning Bond.
Martin Connell is chairman of the Omega Foundation and Roger Martin is dean of the Rotman School of Management and chairman of the Institute for Competitiveness & Prosperity
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