Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

Family Financial Planning Part 1: Managing the Increasingly Expensive Future of Post-Secondary Education

By Christopher J. L. Warner FCSI CFP CIM PFP


As a financial planner of many years, I often worry on behalf of my clients – a little well-focused anxiety may be a strong motivator to produce great work. Even so, an increasingly large proportion of my worry is allocated to the rising costs of post-secondary education. This trend will directly impact my client’s children and/or grandchildren in very meaningful ways.

We know that post-secondary education, while certainly not a panacea, is often critical to personal development and in gaining the necessary skills to compete in the job market. Yet if costs continue to increase as they have been, and we have every indication to think that they will, it will make education far less accessible. Many parents already feel that they are leaving a more challenging world for their children than they themselves grew up in. The open question is: how can they help alleviate some of this burden?

I don’t have children myself, but I do have a wife who not long ago went through medical school. Suffice it to say that I’m more familiar than I would like to be with six-figure education debt – and that’s with the benefit of knowing that, post-residency, she should be earning a much higher income than the typical Canadian family (just $66,800[i] after-tax as of 2020).

But what if we had needed to carry similar amounts of debt just to complete a basic bachelor’s degree? What if we had to carry the psychological strain of six-figure education debt without the possible future benefit of a high-earning career? It takes only a moment’s reflection on this before I notice my cortisol rapidly beginning to rise.

The Challenge Ahead

Unfortunately, it is predictable that, not far into the future, many Canadians will face this challenge – large debt for basic education. Post-secondary tuition and fees have been steadily growing above inflation in Canada for years. Back in 2002, undergraduate tuition and compulsory fees combined were an average of $4,315 per year[i]. In 2021, tuition and fees averaged a total cost of $8,474[ii].

Over 19 years, this represents an annualized increase of 3.6%. Over that same period, inflation (the consumer price index or “CPI) grew by 1.84%[iii]. That means that the direct costs of post-secondary education have grown at double the rate of CPI, costing Canadians a greater share of their wallets each subsequent year.

It is easy to see that, given long enough, a six-figure education debt could become the norm (it already is for our friends down South). Why is this? Well, in fact, there is an economic theory that predicts these rates of rising costs: Baumol’s Cost Disease.

Cost Disease

Cost Disease (or the Baumol Effect) is a sophisticated and multi-faceted economic theory with a substantial amount of literature written about it and would be challenging to unpack in full here. For the purposes of this article, Cost Disease can be summed up as follows:

  • Over time, economies increase their productivity which leads to lower costs on manufactured goods and, subsequently, higher expected standards of living for people within the economy.
  • Conversely, labour-intensive jobs that cannot share similar productivity gains will continue to grow proportionately in relative cost.

To put this in real-world terms: manufactured goods like televisions will get keep getting cheaper whereas services like healthcare or education will keep getting more expensive.

There are potential exceptions that could emerge, such as transformative technological innovations. However, the problem with labour-intensive work is that it rarely can create significant innovation in the same way that manufacturing can. Let us compare some examples.

Televisions & Manufacturing

To produce a saleable good such as a television, a company can utilize business management techniques like mass-production, market consolidation, and supply chain management. Doing so will maximize benefits like economies of scale or lower labour costs to continuously refine a less expensive television for consumers.

Televisions in the 1950s cost about $110 per square inch of screen. By 2017 they were about $1.24 per square inch[iv]. This represents an 89% decrease in cost.

Healthcare & Services

By contrast, when one considers the nature of healthcare, where the “product” is the care of patients, it is hard to see how a similar scale could be applied to enhance efficiency.

Imagine a nurse working in a hospital. They are managing the care of their patients who have varying needs (medical assessments, labs, medication, family support, necessitates of daily living, etc.). Technological improvements here have historically only provided marginal benefits- mainly in the speed of completing patient assessments that require medical equipment. The majority of a nurse’s work involves directly interacting with patients and their families for items of ongoing care.

What this means is: each additional patient assigned to a nurse will limit the nurse’s ability to interact with the rest of their patients. If a nurse has 10 equally complex patients over a 10-hour shift, theoretically the nurse can spend 1 hour each with patients. If instead there are 20 patients, then the theoretical time for care shrinks to 30 mins per patient.

Furthermore, if we set a minimum standard of care for all patients (i.e., “don’t let the patients get sicker or die”) we then must acknowledge that nurses cannot infinitely scale to higher patient loads – more patients simply will require more nurses. And, of course, nurses will expect wages that are competitive with other skilled employment in their regions- otherwise, they would likely find other jobs.

Education & Cost Disease

Education too suffers from similar challenges as healthcare. The “product” in this sector is mainly the effective education of students. Efficacy is rooted in human abilities to both learn and teach. This places natural limits on how efficient education can be since human capacity is not infinite.

Traditional methods for improving manufacturing, such as scale or cost control, do not work as well with education. If the number of students per professor increases, the professor’s ability to interact with each student is diluted and likely lowers the quality of education. If a school hires less qualified, low-cost professors, students will usually learn less than they would from qualified professors compensated at market rates.

Understanding this, we see that increased costs for education are likely to continue to outpace inflation – at least until we can download knowledge directly into our heads ala “The Matrix”.

In my subsequent post in this series, I will discuss how one can estimate the true expected cost of education and then take steps to manage it.




This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required securities commissions.