The news couldn’t have been better for Canada, especially for young Canadians. A new Statistics Canada study shows that Canada’s drop out rate was slashed by a third, from 18 per cent to 12 per cent, between 1991 and 1999.

A decade ago, one in every five or six kids dropped out of school before they reached 20. Now less than one in 8 kids drops out.

Canadians should be cheered even more by the remarkable results for Atlantic Canada. Long Canada’s education laggard, Atlantic Canada’s dropout rate plummeted from well above the national rate to well below, at precisely the time the national rate itself was in freefall. Sadly, bad federal policy is likely to turn this note of cheer into dismal tidings over the course of the coming decade, costing all Canadians billions of dollars in additional regional support.

But first, let’s look at the national story. Across Canada a number of factors helped cut the dropout rate. In today’s economy, fewer jobs are available for high school dropouts and rates of pay are relatively lower. So, kids have less immediate incentive to quit school. Jobs are hard to find and the pay is lousy. This situation also tells potential dropouts that the long-term consequences are pretty lousy.

As well, social programs have been cut back, particularly for young, new entrants into welfare. Few kids quit school to collect welfare, but decreased benefits for (or the ineligibility of) young people – often combined with work, educational or training requirements – pushes some dropouts back into school and changes incentives for those at risk of dropping out.

But, what about the even more remarkable story in Atlantic Canada? There, dropout rates have been more than halved, from 22 per cent in 1991to just under 10 per cent in 1999. Put differently, the dropout rate in Atlantic Canada went from almost 20 per cent above the national average to almost 20 per cent below the national average.

This too is related to the reform of a social program – the most massive social program by far in Atlantic Canada, the Employment Insurance system. Beginning in 1994, the system started undergoing a series of reforms, which culminated in a large package of changes in 1996. These changes made the system progressively less generous, particularly for repeat and high-income recipients.

And that made EI less attractive as a way of life, something the program had become in many Atlantic communities. Reform helped change that. In 1987, a remarkable 43 per cent of Atlantic youth between 18 and 29 were on the dole at some point each year. In 1997, only 25 per cent were.

Prior to these reforms, many of us had argued that the system created perverse incentives for youth – in effect, used taxpayer money to bribe kids to leave school early. First were the immediate temptations. Kids could quit school, work for a few weeks, and enjoy the rest of the year with a guaranteed income. All they had to do to collect this money was to stay out of school. The cash stopped coming the day a kid went back.

In the longer-term, kids had incentives to plan for a life in a low-skill seasonal industry, with high seasonal pay and a surefire lay-off notice after a few weeks of work – the perfect recipe for maximizing the government cheque. Kids had no need for any sort of education for this lifestyle, so why not dropout, particularly when the government pays you for dropping out.

Critics of the old system, like myself, argued that reforms would reduce Atlantic dropout rates, and thus ultimately improve the lives of many thousands of young Atlantic Canadians. That seems to have happened.

Unfortunately, intense political pressure from Atlantic Canada led the federal government to un-reform EI in the run-up to the last election, something many see as a blatant vote-buying effort.

Employment Insurance is now the same old program that tempted so many young kids to leave school. I predict that dropout rates in Atlantic Canada will soon once again exceed the national average, and that’s a real tragedy.