The Economic Impact of Improving the High School Graduation Rate among Indigenous Students - August 2021

A detailed analysis of the potential benefit of increasing Indigenous high school graduation rates to the provincial average on Saskatchewan’s economy and labour force.

Executive Summary

Introduction

The purpose of this study is to present the potential benefit of increasing Indigenous high school graduation rates to the provincial average on Saskatchewan’s economy and labour force. As of the 2019 school year, the 3-year graduation rate for Indigenous youth sat at 43.4%, below the average rate for Saskatchewan (77.3%). Close this gap could significantly improve the province’s economic situation through increasing employment, labour income, and filling impending job vacancies. This study is being conducted and presented on behalf of Trend Line Saskatchewan.

Key Takeaways 

An increase in Indigenous graduation rates could: 

• Add 6,594 new positions to total employment annually;
• Increase total labour income by $326.5 million annually; and,
• Generate an extra $1.5 billion in gross economic activity, including $811.3 million in Gross Domestic Product (GDP) each year.

This analysis presents results based on standard methodologies for estimating economic contributions for sub-national geographies. Results are the sum of direct, indirect, and induced impacts of higher graduation rates for Indigenous youth. 

All impacts are considered relative to a Base Case: No rise in graduation rates. Results below include direct, indirect, and induced impacts of an increase of Indigenous graduation rates. Direct impact is the total initial increase in economic output from students graduating high school and entering either post-secondary education and then entering employment or entering the employed labour force directly. Indirect impact is the secondary impact that includes spending and employment from industries supporting new direct employment. Induced impact is the additional impact from changes in household spending as industries add labour in response to higher levels of demand for output.

Gross Output measures total expenditures on local goods and services as well as payments to labour and business profits. Gross output is the total value of goods and services produced by an industry and includes intermediate inputs that are foreign and domestically-produced goods and services used by an industry in the production of its gross output. Value added is the difference between gross output and intermediate inputs and represents the value of labour and capital used in producing gross output. The sum of value added across all industries is equal to gross domestic product for the economy.

GDP measures net economic activity within a prescribed geographic area. It represents the payments made to final factors of production: labour, unincorporated business profits, and other operating surplus (corporate profits, interest income, inventory valuation adjustments, and capital consumption allowances). Gross domestic product excludes the value of intermediate goods and services used in production. Labour income includes wages, salaries, and employer contributions to pensions and benefit packages. 

Employment impacts are measured in positions and contain a mix of full and part-time positions. Employment results are rounded to the nearest whole number, and as such, columns sums may not necessarily add to the table total.

Table 1: Total Provincial Impacts: Closing the Graduation Gap 

According to the Saskatchewan Teacher’s Federation, for the 2019 school year (the latest available), the Indigenous three-year graduation rate in Saskatchewan was 43.4%, which is 33.9% lower than the provincial average rate of 77.3%. By closing the three-year graduation rate gap, Saskatchewan could potentially see 5,546 more students graduating, as well as 3,716 more students enrolling into a post-secondary institution. Saskatchewan could see 3,625 new direct positions, 1,151 indirect positions, and 1,818 induced positions, totaling 6,594 new employees annually, and also creating $1.5 billion in gross output, $811.3M in GDP, and $326.5 M in total labour outcome.

The exact population of Indigenous youth enrolled in high school was not available. Instead, the population of Indigenous youth aged 15-19 was employed. The calculations for the possible number of new students and graduates have been rounded to the nearest whole number. 

With 16,755 in the 15-19 age group identifying as Indigenous in the 2016 census (the latest data available) and the latest (2019) Indigenous high school graduation rate of 43.4%, 7,422 can be expected to graduate high school. Application of the provincial average high school graduation rate of 77.4% would yield 12,968 Indigenous high school graduates; an increment of 5,546 per year. Of these, 3,716 can be expected to attend post- secondary education (annual Saskatchewan High School graduates divided by annual first year post secondary enrollment, or 67%). 

Indigenous post-secondary graduate rates are based on Post-Secondary Education Attainment, Assembly of First Nations (2018) of 47%.

Indigenous high school graduates from post-secondary education were allocated across the provincial employment mix by industry after adjusting for employment rates for post-secondary graduates.

According to the 2016 Census, Saskatchewan employment rates by educational attainment are below:

• No high school diploma - 36.8%
• High school diploma - 61.4%
• University certificate - 74.2%
• Bachelor's degree - 74.5%
• Beyond bachelors (PhD, Masters, etc.) - 73.3%

Indigenous students not graduating high school are not included in new employment, as these are not considered incremental beyond current high school graduation rates.

Based on the above assumptions, closing the high school graduation rate results in 3,625 new Indigenous individuals employed each and every year.

Annual new direct employment by industry is outlined in the table below. These exclude indirect and induced employment impacts.

Table2: New Employment by Industry 

In all cases, economic model inputs were gross output per employee times new employment by industry: the 3,625 new employees allocated by industry, as above.

The results below are direct, indirect, and induced impacts for the employment expansion resulting from increased economic output and associated spending in the local economy. All impacts are considered relative to the Base Case: no increase in Indigenous high school graduation rates.

• Direct impact is the total initial output per employee impact. 
• Indirect impact is the secondary impact that includes inter-industry transactions: purchases of inputs from supporting industries. 
• Induced impact is the additional impact from changes in household spending as industries add labour in response to higher levels of demand for output. 
• Gross output measures total expenditures on local goods and services as well as payments to labour and business profits. 
• Gross domestic product (GDP) is included in gross output and measures net economic activity within a prescribed geographic area.  It represents the payments made to final factors of production: labour, unincorporated business profits, and other operating surplus (corporate profits, interest income, inventory valuation adjustments, and capital consumption allowances) and excludes the value of intermediate goods and services used in production. 
• Direct, indirect, and induced employment impacts are measured in positions. 
• Labour income includes wages, salaries, and employer contributions to pensions and benefit packages. 

Economic model results are shown in the table below.

Table 2: Direct, Indirect, and Induced Saskatchewan impacts – Rise in Graduation Rates

Impacts by industry of an increase in graduation rates are outlined in Table 3. The bulk of direct activity occurs within the construction, retail, and government sectors (including public health and education). Indirect impacts occur largely within the finance, insurance, real-estate, and lending and business, and professional services. Induced impacts, which represent the additional impacts of consumer spending of wages earned, is concentrated heavily within the retail trade and service industries.

Table 3: Impacts by Industry – Total

Employment: measured in positions.

Three Year Graduation Rate: the percent of students who complete schooling within three years of beginning grade 10.

Final Demand: sum of personal expenditure, government purchases of goods and services, business and government investment, and net exports.

GDP at factor cost: measure of net economic activity within a prescribed geographic area.  It represents the payments made to final factors of production: labour, unincorporated business profits, and other operating surplus (corporate profits, interest income, inventory valuation adjustments, and capital consumption allowances).  GDP at factor cost excludes the value of intermediate goods and services used in production.

GDP at basic prices: GDP at factor cost plus indirect taxes on products.

Gross Output: total expenditures on local goods and services as well as payments to labour and business profits.  Gross output includes double counting because it includes the value of inputs used in production rather than net value added alone.

Direct Impact: total project expenditure, usually construction or operating outlays.

Indirect Impact: the secondary impact that includes inter-industry transactions, purchases of inputs from supporting industries.

Induced Impact: the additional impact from changes in household spending as industries modify labour input requirements in response to altered levels of demand for output.

Industry outputs are calculated as (I-D(I-μ-α-β)B)^-1 D((I-μ-α-β)e*+(I-μ-β)Xd+(I-μ)Xr)=X

Where:

I = an identity matrix of industry-by-industry dimension.

D = a matrix of coefficients representing commodity output proportions.

B= a matrix of coefficients representing commodity input proportions (technical coefficients) by industry.

μ = a diagonal matrix whose elements represent the ratio of imports to use.

α = a diagonal matrix whose elements represent the ratio of government production to use.

β = a diagonal matrix whose elements represent the ratio of inventory withdrawals to use. 

e* = final demand categories of consumption, government purchases of goods and services, business and government investment, and inventory additions.

Xd = final demand category of domestic exports.

Xr = final demand category of re-exports.

Employment is calculated as a fixed number of positions per dollar of industry output.

Statistics Canada. 2018. Saskatchewan [Province] (table). Aboriginal Population Profile. 2016 Census. Statistics Canada Catalogue

Statistics Canada. Table 14-10-0020-01 Unemployment rate, participation rate and employment rate by educational attainment, annual

Saskatchewan First Nations. (2018, January 9). Education & Children. Saskatchewan First Nations Regional Dashboard. http://skfn.ca/education-children/. 

Advanced Education Annual Report (2019-2020), Saskatchewan Teachers Federation

Post-Secondary Education Attainment, Assembly of First Nations (2018).