Fast facts
Canada’s post-secondary education system is in crisis, due to provincial and federal government underfunding. It should be treated like the vital sector that it is, deserving of more robust support.
Canada’s post-secondary education system:
Universities and colleges drive local economic growth: For every $100 in economic growth produced by universities, $117 was generated in other industries across the economy. Among colleges, every $100 in growth generated was associated with an increase of $125 elsewhere in the economy. That compares very favourably to an economy-wide impact of $99 for residential construction and conventional oil and gas extraction, and $93 for oil sands extraction.
Universities and colleges are important job creators: Any threat to the stability of post-secondary education directly endangers the livelihoods of hundreds of thousands of people—and can hurt entire communities. Universities and colleges employ twice more than the transport manufacturing industry, nearly four times more than the oil and gas extraction industry, and almost six times more than in the mining industry.
University and college workers create economic demand: In 2024, universities and colleges paid $39 billion to employees—about 70 per cent as much as housing construction.The much-touted oil and gas industry’s worker pay only contributes 1.7 per cent of the total pay pie.
University and college procurement creates demand in other industries: In 2022, the most recent year of available data, universities and colleges spent $16.5 billion on purchases from other industries, including $1.4 billion on gasoline, $1 billion on repair construction services, $895 million on building services like landscaping, $560 million on electricity, $481 million on IT services, and $388 million on prepared meals.
Universities and colleges are solid taxpayers: Post-secondary institutions paid $1.1 billion in taxes on products in 2022, which was mostly federal and provincial sales taxes, but also includes items like fuel taxes and import duties. Additionally, they paid $683 million in taxes on production, such as capital, payroll, land or property taxes. This does not include the income taxes paid by employees of post-secondary institutions.
Universities and colleges produce vital knowledge: In 2023, over $18 billion was spent on research and development activities in Canada’s post-secondary education sector. Despite only making up about two per cent of Canada’s economy, the post-secondary education sector represented over 34 per cent of all research and development, which was much higher than Canada’s peer countries.
The post-secondary education industry is an economic powerhouse. Governments can’t let this vital industry atrophy.
Introduction
Since the start of the trade war, there has been considerable, justified concern over the threats posed to Canada’s economy. A small number of industries, such as oil, gas and manufacturing—the ones people tend to think of as the most important to the “real” economy—tend to dominate public discourse and policy agenda.
There is another threat to a strategically vital economic sector on the horizon: the ongoing collapse of Canada’s post-secondary education system. It is rarely framed this way, but post-secondary education is one of the most important sectors in Canada’s economy, and not just for its irreplaceable role in producing—and attracting—an educated and skilled work force.
Decades of federal and provincial government underfunding, punctuated by the sudden federal cutoff of international student enrolment, has created a financial crisis in post-secondary education that we’ve never seen before. Across the country, universities and colleges face massive funding shortfalls as administrators engage in drastic budget cuts, mass layoffs, and eliminate entire programs, even campuses.
Just like the vital industries threatened by hostile U.S. trade policy, the danger posed to the Canadian economy is severe. Yet the crisis in post-secondary education is self-imposed and completely avoidable. The solution is not complicated: both the federal and provincial governments must provide enough funding for universities and colleges to operate without excessive reliance on student fees.
Universities and colleges are underrated economic engines
How important are universities and colleges to Canada’s economy relative to other high-priority industries?
Throughout this analysis, we compare universities and public colleges—including CEGEPs (Collèges d’enseignement général et professionnel)—to a common group of high-priority industries, using basic measures of economic importance. Selected industries include:
- Fossil fuels, including oil and gas extraction, refineries, and pipelines;
- Housing construction;
- Mining and quarrying;
- Transportation manufacturing, including manufacturing of automobiles, auto parts, airplanes, ships, trains, and other vehicles.
These industries were chosen because they are widely considered to be strategically important to Canada’s economy. Governments prioritize them and provide them with generous financial support. Survey research, done mostly on behalf of industry advocacy groups, shows that most Canadians rate these industries very highly in terms of economic importance and that they express high levels of concern for their future, given the dangers of the U.S.-led trade war.
A natural starting point is to ask, “what is each industry’s share of the economy?”
Figure 1 shows the Gross Domestic Product (GDP) of each industry, which measures the value added by production of goods and services in each sector. Universities and colleges’ economic output was worth $61 billion in 2025, which was 2.15 per cent of Canada’s total gross domestic product. This was just $5 billion behind residential building construction, much more than all oil sands extraction, and almost twice as much as mining or transportation manufacturing.
The post-secondary education sector’s very large contribution to Canada’s economy may surprise some readers, as the scale of economic activity happening at universities and colleges is often under-appreciated.
How do universities and colleges make such a big impact? In short, their economic footprint is large because they are major employers that pay competitive wages to produce high-value services, like research, and are the heart and soul of many communities.
It is common to hear of the “total impact” of an industry throughout the entire economy, which is much larger than just the output of the sector, due to inter-industry linkages and the impact of employees’ own spending on demand in other industries. Industry advocates often use these inflated totals to emphasize the importance of their own industry over others.
A full accounting of the total impact on the economy is beyond the scope here, but post-secondary education performs strongly in this dimension as well. For every $100 in economic growth produced by universities, $117 was generated in other industries across the economy. Among colleges, every $100 in growth generated was associated with an increase of $125 elsewhere in the economy. That compares very favourably to an economy-wide impact of $99 for residential construction and conventional oil and gas extraction, and $93 for oil sands extraction.
Universities and colleges are vital employers
Universities and colleges carry a lot of economic weight because they are very important job creators. Any threat to the stability of post-secondary education directly endangers the livelihoods of hundreds of thousands of people—and can hurt entire communities.
Figure 2 shows the total number of people employed in each industry, whether they were paid employees or self-employed. In total, universities and colleges employed 488,000 people in 2024, which was about 2.3 per cent of total employment in Canada.
Universities and colleges employed fewer people than housing construction, but twice more than in transport manufacturing, nearly four times more than in oil and gas extraction, and almost six times more than in the mining industry. Why? Those other industries are capital intensive, employing fewer workers relative to capital invested in things like machinery or robots.
When a new factory or mine is built, it is typically done with the most advanced labour-saving technology available. This means that jobs in these industries are less plentiful, so they have a smaller impact on the economy—especially at the local level.
Post-secondary education paycheques create economic demand
Universities and colleges are local economic drivers because they are labour-intensive and tend to pay competitive wages, commensurate with a more highly educated work force. Some labour-intensive industries—like retail or food and accommodations—employ many people, but pay very low wages. That leaves low-wage workers with less money to pour back into the local economy.
When governments spend money to support post-secondary education, it does not disappear from the economy. Much of it ends up in the paycheques of people who work in the sector—who then spend, save, and invest that money throughout the economy. This is important, because labour compensation is an essential foundation for consumer demand—and consumer demand drives more than half of Canada’s economy.
Figure 3 displays the total amount of compensation paid to people working in each industry in 2024. That year, universities and colleges paid $39 billion to employees, which was about 2.4 per cent of total compensation paid across Canada. That was about 70 per cent as much as housing construction—another labour-intensive, but high-wage sector—yet much more than all other sectors up for comparison. And what about the much-touted oil and gas industry? Their pay only contributes 1.7 per cent of the total pay pie. Post-secondary education workers contribute more to local economic growth—they’re important drivers of our economy.
While professors may come to mind here, almost half of post-secondary education compensation is paid to non-academic staff. Academic salaries represented only 52 per cent of staff spending by universities and 56 per cent by colleges. Post-secondary education institutions employ workers in a diverse range of occupations, such as administrative and clerical staff, librarians, technicians, IT specialists, food service, caretakers, maintenance jobs, and skilled tradespeople. They all contribute to economic growth.
Universities and colleges are also among the most union-dense workplaces in the country. That means they bargain collectively for better wages and working conditions—and that improves both quality of work and the contribution they make to economic growth.
Procurement links post-secondary to many other industries
Post-secondary education procurement is the next layer of economic importance. Universities and colleges purchase large amounts of goods and services to support their operations, creating demand in other industries throughout the economy. This effect can be especially strong in smaller cities and towns, where universities and colleges play an even larger role in local economic growth.
In Figure 4, it shows the total value of goods and services purchased by the post-secondary education sector in each province in 2022, the most recent year of available data. That year, universities and colleges spent $16.5 billion on purchases from other industries, including $1.4 billion on gasoline, $1 billion on repair construction services, $895 million on building services like landscaping, $560 million on electricity, $481 million on IT services, and $388 million on prepared meals.
When post-secondary education institutions are forced to cut back on services due to government underfunding, they buy less from other industries, which results in a reduction of demand throughout the economy.
Universities and colleges are taxpayers too
The flow of money between post-secondary education and governments is not one way, because universities and colleges pay taxes to all levels of government. Universities and colleges receive some tax breaks because of their public service orientation. However, because the sector employs so many people and makes such large purchases, they still end up paying a fair amount of taxes.
Figure 5 shows the taxes payable—the actual amount owed after tax breaks—for universities and colleges from 2017 to 2022, using the same data source as Figure 4.
Post-secondary institutions paid $1.1 billion in taxes on products in 2022, which was mostly federal and provincial sales taxes, but also includes items like fuel taxes and import duties. Additionally, they paid $683 million in taxes on production, such as capital, payroll, land or property taxes. This does not include the income taxes paid by employees of post-secondary institutions.
Ironically, by undercutting economic activity at universities and colleges through chronic government underfunding, both the provincial and federal governments are depriving public coffers of needed tax revenues to pay for vital goods and services.
Canada depends on post-secondary education for innovation
The irreplaceable role of post-secondary education’s contribution to research and development in Canada cannot be overstated. If the long-term viability of the post-secondary education industry is endangered, this will deeply impact Canada’s capacity for research and innovation—and that impacts our ability to compete on the world stage in a knowledge economy.
Most research and development in industrial economies is performed by businesses in the private sector, simply because they make up most of the economy. Compared to peers, Canada’s business sector is well known for underperforming in innovation. As a result, the post-secondary education sector has had to carry more of the load—a role it has excelled in. Figure 6 displays the share of all research and development done by the post-secondary education sector in each country, comparing Canada to its peers in the G7 in 2023, the most recent year international data is available. That year, over $18 billion was spent on research and development activities in Canada’s post-secondary education sector. Despite only making up about two per cent of Canada’s economy, the post-secondary education sector represented over 34 per cent of all research and development, which was much higher than Canada’s peer countries.
Figure 6 displays the share of all research and development done by the post-secondary education sector in each country, comparing Canada to its peers in the G7 in 2023, the most recent year international data is available. That year, over $18 billion was spent on research and development activities in Canada’s post-secondary education sector. Despite only making up about two per cent of Canada’s economy, the post-secondary education sector represented over 34 per cent of all research and development, which was much higher than Canada’s peer countries.
Post-secondary must be treated like the vital sector it is
Each year, the Canadian government spends billions of dollars on financial support to for-profit companies—big and small—in key sectors of the economy. Such expenditures are often justified in terms of economic growth, jobs, livelihoods, and strategic importance.
Canada’s post-secondary education sector easily ranks among the industries that top the list of government priorities. Yet the level of financial support given by the federal and most provincial governments doesn’t match its importance.
The federal government plays a very minor role as a funder of post-secondary education, which remains the constitutional responsibility of provincial governments—leaving much room for improvement.
In 2024, the most current year data on post-secondary finances was available, the federal government provided about $5.2 billion in direct funding for universities and colleges, which consisted almost entirely of grants and contracts to fund research and development.
The federal government also indirectly supports provincial spending on post-secondary education through the Canada Social Transfer, a major transfer to the provinces to support social spending. Roughly 30 per cent of the transfer is intended to support post-secondary education, though there are no formal requirements on how provinces spend it. The post-secondary share of the transfer would have made approximately $5 billion available to support provincial post-secondary spending in 2024.
Direct and indirect federal support to post-secondary systems in 2024 amounted to $10.2 billion. Relative to the power of the federal government to tax and spend, it is a small amount—representing less than two per cent of total federal spending that year. It also pales in comparison to the very generous support given to large and small businesses, which received a total of over $50 billion in tax credits alone across all industries. The fossil fuel industry alone received tax credits: over $6.3 billion, worth more than the post-secondary portion of the Canada Social Transfer.
The federal government can afford to and must do better to ensure Canada’s post-secondary education system continues to be an economic driver in a self-sufficient Canada. In recent years, the federal government has flexed its staggering spending power in support of certain industries it has deemed strategically important. It is neglecting the importance of the post-secondary education sector. That’s got to change.
