The best scenario for Canada developed in this report is that the Aboriginal population reaches the 2001 level of non-Aboriginals Canadians for educational attainment by 2017. However, the case where they reach the mid-point between their actual 2001 educational
attainment and that of non-Aboriginals Canadians in 2001 by 2017 is first considered. To do so, the share of the population in each educational group is assumed to reach the mid-point between the non-Aboriginal share in 2001 and the Aboriginal share in 2001. For example, there were 3.72 per cent of Aboriginal Canadians with less than grade 5 in 2001, and 2.13 per cent of non-
Aboriginal Canadians. The assumption is then that by 2017, 2.93 per cent of Aboriginals will be in this category. Another example is the 2001 share of Aboriginal Canadians with a bachelor degree (3.43 per cent) which would increase to 7.12 per cent under this assumption by 2017 because the share of non-Aboriginal Canadians in the bachelor educational category was 10.12 per cent in 2001.
Additional Annual Output Growth Over Base
Scenario 1
Additional Annual Employment Growth Over Base Scenario 1
Additional Annual Productivity Growth Over
Base Scenario 1 1 0.000 0.000 0.000 2 0.045 0.023 0.022 3 0.016 0.012 0.003 4 0.027 0.033 -0.006 5 0.049 0.012 0.036 6 0.064 0.033 0.030 7 0.032 0.025 0.006 8 0.042 0.043 -0.002 9 0.068 0.025 0.042 10 0.081 0.043 0.037
Table 23a: Potential Incremental Contribution of Aboriginal Canadians to Output, Employment and Labour Productivity Growth in Canada Over Base Scenario, in percentage point
Source: Table 23 Scenario Base Scenarios Half the educational gap is eliminated All the educational gap is eliminated
In Scenario 3, average employment income increases only at the average growth rate of 25.5 per cent over the 2001-2017 period while employment rates are maintained constant over the period. Therefore, only educational attainment is changing if compared to Base Scenario 1. Scenario 4 adds the assumption that Aboriginal employment rates reach the 2001 level of non- Aboriginal Canadians by 2017. In Scenario 5, employment rates are kept constant, but instead average employment income at a given level of education increases to the level of the non- Aboriginal population. Finally, Scenario 6 estimates the additional output created if Aboriginal Canadians increase their educational level to the mid-point between the Aboriginal and non- Aboriginal levels in 2001 and if both Aboriginal employment rates and average employment incomes reach parity with non-Aboriginal Canadians in 2017.
i. Total Effect
Under Scenario 3, estimated total GDP is $1,696 billion ($2001) in 2017, increasing at an average of 2.70 per cent per year over the period. Labour productivity is $91,062, with an
average annual growth rate of 1.33 per cent (Table 23). The effect of a partial catch-up in
educational attainment is, in this case, a 0.016 percentage point addition to annual output growth, a 0.012 percentage point addition to annual employment growth and a 0.003 percentage point addition to labour productivity growth (Table 23a). In 2017, the level of GDP would be increased by more than $4 billion (Appendix Table 55). These estimates are obtained by comparing Scenario 3 to Base Scenario 1.
Under Scenario 6, the estimated Canadian GDP is estimated at $1,709 billion ($2001) in 2017, $16.9 billion over the level of Base Scenario 1. It is also increasing at an average 2.75 per cent per year. The labour productivity, for its part, is found to be $91,985 per worker, $429 over the Base Scenario 1, with an average annual increase over the period of 1.36 per cent. The average annual growth of GDP under Scenario 6 is 0.064 percentage point higher than that of the Base Scenario 1. This represents the aggregate effect of all three sources of improvement.
Employment increases 0.033 percentage point faster under Scenario 6 than under Base Scenario 1, with the remaining growth translating into a 0.030 percentage points increase in average annual labour productivity growth (Table 23a). GDP in 2017 would be $16.9 billion larger under Scenario 6 than under Base Scenario 1 (Appendix Table 55).
ii. Effect of Increased Educational Attainment
More relevant to this report is the effect of education alone, and how much of the improvement can directly be attributed to it. It is possible to estimate this single effect by
comparing Scenario 6 to Base Scenario 2 because both scenarios differ only on their assumption about educational attainment. Output growth under Scenario 6 is 0.019 percentage points higher annually than in Base Scenario 2. This increase in average annual GDP growth rate is divided almost equally between employment and labour productivity growth, with the former increasing 0.010 per cent faster each year and the latter increasing 0.008 per cent faster each year compared to Base Scenario 2. In absolute terms, labour productivity per worker in 2017 under Scenario 6 is $113 higher than in Base Scenario 2 and total Canadian output in 2017 is higher by $4.9 billion.
The effect of education on output and productivity is smaller if no improvement in either employment rates or average employment income in a given educational attainment category occurred. In fact, we have already observed this when we compared Scenario 3 to Base Scenario 1. This comparison estimated that GDP would grow at a rate 0.016 percentage points higher per year, employment at a rate 0.012 percentage point higher per year and labour productivity at a rate 0.003 percentage points higher per year. Scenario 3 also projects that productivity will be $46 higher per worker than in the Base Scenario 1 and output higher by $4,2 billion. These estimates are slightly lower than those obtained when comparing Scenario 6 to Base Scenario 2. Yet, in both cases (comparing scenarios 3 and 1 and scenarios 6 and 2), we are comparing
these two comparisons follows from the interaction effect between improved educational attainment and improved labour market outcomes.32
This shows that the effect of education is more important if it is accompanied by improvements in the labour market outcomes of the Aboriginal population. Thus, we can consider that the isolated effect of education in the case where labour market outcomes remain unchanged is a lower-bound estimate while the isolated effect of education when labour market outcomes variables for Aboriginal Canadians to reach parity with that of other Canadians is an upper-bound estimate. Of course, these estimates do not differ dramatically from each other since they both embody only the impact of an increased in educational attainment. A summary of the impact of increased educational attainment is shown in Table 24.