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Ok, I said I wouldn’t write over the summer unless someone of importance said something titanically stupid. Andrew Adonis, architect of former UK Prime Minister Tony Blair’s education policies crossed that line on Friday with a – yes – titanically stupid column about tuition fees, so here I am.
First, some background. Prior to 1998, the UK had a free tuition system. From 1998 to 2006 it had a system of varying tuition fees – £1,000 if your family made over £30,000 per year, and then a sliding scale down to zero if family income fell below £20,000. From 2006 to 2012, it was a flat £3,000 (rising with inflation) accompanied by the (re)-introduction of means-based grants for living costs. Loans were available to all to cover fees, meaning no one need pay a cent up-front (“free at the point of delivery” in the UK parlance), and said loans were recovered via the tax system as in Australia and New Zealand. Required repayment rates were a modest 9% of income above the threshold, which started at £10K in 1998 and rose to £15K in 2006. Loans not repaid within a given time frame were to be forgiven.
(If you’re trying to work out what those numbers mean in Canadian dollars, for most of the past 15 years PPP equivalent has been pretty close to £1 =C$1.70, so just multiply everything in this piece by 1.7 and you’ve got it).
Shortly after the 2006 went into effect, the bottom fell out of financial markets, and one of the worst-hit countries was the UK. Anticipating that major reductions in public spending were going to be necessary, then-PM Gordon Brown convened a commission to look at university finances and tuition fees which, conveniently, would not report until after the 2010 election. The resulting Browne (not the PM, another guy) Review became the basis for the post-election Tory-Liberal coalition government’s policy of i) reducing government funding to universities by over 40%, including a total elimination of per-student subsidies for teaching in the social sciences and humanities and ii) allowing universities to raise fees to up to an eye-watering £9,000 per year.
What this meant was that between loans for tuition and loans for living costs in in ludicrously-pricey London, “debt” for a three-year degree could quite easily end up at over £50,000. But to “compensate”, loans were made more generous with the repayment threshold jumped from £15,000 to £21,000 while retaining the debt forgiveness policy. In other words, the government increased student debt massively while simultaneously it harder to recover (see here for a comparison of repayment burdens in UK vs. other countries).
The results of this were predictable. Though student “debts” rose enormously, these debts were in some sense purely nominal; most predictions showed that something like three-quarters of graduates would never repay the debts and hence the government would assume their balances. What most students were signing on to was therefore not a loan but a marginal tax of 9% on income over £21,000 lasting 30 years; that is, a so-called graduate tax. The problem was that no one knew in advance whether they were signing on for a graduate tax or a loan – that would only become apparent a decade or two into one’s working career. Oh, and government would eventually end up picking up about half the total cost of loans.
Remarkably, this proved unpopular among students. So much so that Labour leader Jeremy Corbyn’s pledge to abolish fees altogether – a move which while wiping away some obvious policy lunacy would also be a massive gift to the future wealthy – was widely credited with a big upswing in the youth vote which in turn was widely credited with denying Agent Teresa May a majority in last month’s election’s, despite the fact that Corbyn’s stance on Europe and Brexit is diametrically opposed to theirs. And now that Corbyn no longer looks vulnerable to an internal coup, various Blairite Labour types are now busy re-writing the history of the last two decades to justify a 180 on a fees policy they either wrote or agreed with in spirit.
Which is where this Andrew Adonis article in last Friday’s Guardian comes in. Adonis helped draft the ’98 and ’06 fee policy changes, and he would surely have agreed with the direction (if not the full extent) of the post-Browne Review changes. Yet now, apparently, fees must be abolished. Why? Because the beautiful Labour vision, in which allowing tuition fees to rise “up to” £3,000 (up to £9,000 post-Browne) would create a functioning market in which institutions would compete like mad and multiple price-quality points would emerge was stymied by evil university vice-chancellors (i.e. Presidents) who “formed a cartel” in which all of them charged the maximum, thus stifling competition.
This is a strange and bewildering argument for two reasons. First, in none of the three fee hikes was quality-enhancing competition a primary policy goal. System expansion (and to a lesser extent, increasing per-student resources) was the primary goal in ’98 and ‘06; income maintenance in the face of swingeing public cutbacks was the goal in ’12. The policies succeeded very well in both instance without damaging access for lower-income students. Inter-institutional competition might have been a secondary goal in 2006 and a rationalization (though not a rationale) in ’12, but never the central aim. To advocate dismantling policies because they didn’t meet some secondary goal is…bizarre.
Second, and more importantly, WHAT IN GOD’S NAME DID YOU THINK WAS GOING TO HAPPEN WHEN THE FEE CAP WAS LIFTED? Higher education is a Veblen good, for God’s sake: in the absence of obvious measures of quality (rankings notwithstanding), consumers tend to judge the quality of education on things like cost and so cost and demand are not negatively correlated – in fact in some ways, higher costs drive higher demand (look at George Washington University’s fee policy and admission rates over the past couple of decades if you don’t believe me). For Adonis’ competitive fantasy to have taken place, there would have had to have been institutions eager to signal that they might have lower quality by pricing significantly below the rest of the herd -and what university would want to do that? Perhaps Adonis should name the institutions that he thought should have adopted a Walmart pricing policy.
Now to be fair, Adonis is hardly alone in his delusions about higher education competition. England is one of those rare places where the term “neo-liberal higher education policy” actually makes some kind of sense. There is a touching faith among policy makers there that a genuinely functioning competitive market is just one set of transparency tools around the corner. League tables and key information sets didn’t create a functioning market in which quality is rewarded with greater pricing power? Well, then, we’ll create the Teaching Excellence Framework (TEF), in which government will decide what quality is, and create a fee regime which will gradually create differentiated pricing by fiat. Take that, Thorstein Veblen!
But the difference between Adonis and the TEF crowd is that the latter isn’t trying to roll back two decades of policy to ingratiate themselves with Jeremy Corbyn. They aren’t running away from a policy which has been mostly effective just because they’ve suddenly realized students don’t like fees and debt (which of course is nonsense – they don’t pay up-front fees and for the most part they sign up to a 9% graduate tax/contribution not “debt” per se).
Does English fee policy need changing? Of course. The 2012 changes and subsequent amendments were as dumb as a bag of hammers. But it’s a hell of a leap from that to “time to abolish tuition”, at least for someone with pretensions to being taken seriously in policy debates. If that’s not something Adonis aspires to any more, that’s his business. But the fact that this step is being considered seriously not just by Labour but by Tories as well should be worrying to everyone. It means reasonable policy making is being thrown out the window for reasons of currying short-term favour with specific voter demographics.
In this policy field as in so many others, England appears to be losing its mind.
To Tokyo, where the ruling Liberal Democrats are considering adopting a proposal from a small right-wing party (Nippon Ishin no Kai – roughly, Japan Restoration Party) to enshrine a constitutional right to free tuition. This is not, it is safe to say, because of any principled attachment to accessible education – the party opposed free secondary education (which the Democratic Party implemented during its brief, mostly hapless, stint in government which ended five years ago) as recently as a couple of years ago, calling it “an unprincipled policy to buy votes”.
So what’s behind Shinzo Abe’s new ploy? Two things. First, Prime Minister Abe’s attempts to kick-start Japan’s long-stalled economy have had only middling success. Free tuition would in effect be another Keynesian stimulus, freeing lots of family savings to be spent on other things. Now, technically that doesn’t require a constitutional change, but some observers think Abe would not be able to get a free-tuition proposal worth 5 trillion Yen (C$60 billion) through a normal budgetary approval process; a constitutional amendment would make the spending automatic, thus circumventing the budget process.
But the bigger reason is much more Machiavellian. Abe’s fondest political wish is to alter the Japanese Constitution, written in 1945 by US occupying forces, to remove Article 9, which bans Japan from having armed forces. Though Abe himself if popular, this proposal is not: since World War II the Japanese have become about as peacefully-minded nation as one can imagine. And so, Abe is trying to tie a constitutional amendment on free-tuition to a constitutional amendment on the armed forces to sweeten the deal.
A couple of points here. First, this would be a policy reversal on a massive scale. As R. Taggart Murphy noted back here Japan deliberately kept tuition, along with land values, high in the postwar period as a form of industrial policy (note: if you are interested in Japan and not reading R. Taggart Murphy, especially his magnificent book Japan: The Shackles of the Past, you’re doing it wrong). High savings meant low interest rates, which gave Japanese industrialists access to cheap capital, which in turn gave them a big manufacturing cost advantage, and Japan rode this to economic success in the 1960s. Basically, short term pain for long term gain. Now, Abe wants to reverse this process.
The bigger question, though – and not one I have seen discussed anywhere in the Japanese press – is how on earth one implements a free tuition promise in a country where somewhere between 75 and 80% of all students attend private universities. Making tuition free at national (public) universities is a cinch, but – as Chile discovered a couple of years ago – trying to do the same with private universities without outright nationalization is kind of difficult. Fees vary from one institution to another: how would each be compensated in a consistent manner?
There’s something similar going on the other side of the Sea of Japan, where new Korean President Moon Jae-in has promised to halve tuition fees. This isn’t the first time Koreans have heard such a pledge. In 2011, months of student protests forced then-President Lee Myung-bak to make a similar pledge; however, in the end nothing was done and fees stayed the same (fee levels in Korea are similar to those in Canada). But again, it’s not entirely clear how once can effectively deliver on a fee-reduction pledge in a system which is dominated by private universities without partial or outright nationalization, which seems unlikely.
If I had to guess, I’d say Korea’s the likelier to implement policy change because a) I don’t think Article 9 is going anywhere, free tuition or no and b) the Korean government is just a lot better at getting stuff done. But we’ll see. Two stories to watch, for sure.
Springtime brings with it two certainties: 1) massive, irritating weekend traffic jams in Toronto as the city grants permits to close down Yonge street for a parade to virtually any group of yahoos, thus making it impossible to go from the cities east to west ends and 2) provincial budgets. And with that, it’s time for my annual roundup of provincial budgets (click on the year for previous analyses – 2016 2015 2014 2013. It’s not as bad as last year but it’s still kind of depressing.
Before we jump in, I need to remind everyone about some caveats on this data. What is being compared here is announced spending in provincial budgets from year-to-year. But what gets allocated and what gets spent are two different things. Quebec in particular has a habit of delivering mid-year cuts to institutions; on the flip side, Nova Scotia somehow spent 15% more than budgeted on its universities. Also, not all money goes to institutions as operating funding: this year, Newfoundland cut operating budgets slightly but threw in a big whack of cash for capital spending at College of the North Atlantic, so technically government post-secondary spending is up there this year.
One small difference this year from previous years: the figures for Ontario exclude capital expenditures. Anyone who has a problem with that, tell the provincial government to publish its detailed spending estimates at the same time it delivers the budget like every other damn province.
This year’s budgets are a pretty mixed bunch. Overall, provincial allocations after inflation fell by $13 million nationally – or just about .06%. But in individual provinces the spread was between +4% (Nova Scotia) and -7% (Saskatchewan). Amazing but true: two of the three provinces with the biggest gains were ones in which an election was/is being held this spring.
Figure 1: 1-Year change in Provincial Transfers to Post-Secondary Institutions, 2016-17 to 2017-18, in constant $2017
Now, this probably wouldn’t be such a big deal if it hadn’t come on the heels of a string of weak budgets for post-secondary education. One year is neither here nor there: it’s the cumulative effect which matters. Here’s the cumulative change over the past six years:
Figure 2: 6-year Change in Provincial Transfers to Post-Secondary Institutions, 2011-12 to 2017-18, in constant $2017
Nationally, provinces are collectively providing 1% less to universities in inflation-adjusted dollars in 2017-18 than they were in 2011-12. Apart from the NDP governments in Manitoba and Alberta, it’s really only Quebec which has bothered to keep its post-secondary funding ahead of inflation. Out east, it’s mostly been a disaster – New Brunswick universities are down 9% over the last six years (not the end of the world because of concomitant enrolment declines), and a whopping 21% in Newfoundland.
The story is different on the student aid front, because a few provinces have made some big moves this year. Ontario and New Brunswick have introduced their “free tuition” guarantees, thus resulting in some significant increases in SFA funding, while Quebec is spending its alternative payment bonanza from the Canada Student Loans Program changes (long story short: under the 1964 opt-out agreement which permitted the creation of the Canada Student Loans Program, every time CSLP spends more, it has to send a larger cheque to Quebec). On the other side, there’s Newfoundland, which has cut it’s student aid budget by a whopping 78%. This appears to be because the province is now flouting federal student aid rules and making students max out their federal loans before accessing provincial aid, rather than splitting the load 60-40 as other provinces do.
Figure 3: 1-Year change in Provincial Student Financial Aid Expenditures, 2016-17 to 2017-18, in constant $2017
And here’s the multi-year picture, which shows a 46% increase in student aid over the past six years, from $1.9 billion to just under $2.8 billion. But there are huge variations across provinces. In Ontario, aid is up 83% over six years (and OSAP now constitutes over half of all provincial student aid spending), while Saskatchewan is down by half and Newfoundland by 86%, mostly in the present year. The one province where there is an asterisk here is Alberta, where there was a change in reporting in 2013-2014; the actual growth is probably substantially closer to zero than to the 73% shown here.
Figure 4: 6-Year change in Provincial Student Financial Aid Expenditures, 2016-17 to 2017-18, in constant $2017
So the overall narrative is still more or less the same it’s been for the past few years. On the whole provincial governments seem a whole lot happier spending money on students than they do on institutions. Over the long run that’s not healthy, and needs to change.
Every couple of years, the Canadian Federation of Students (CFS) produces a “research paper” to provide a new “evidence-based” spin to back up its eternal demand for free tuition. Last month, they put out a new version, this one entitled The Political Economy of Student Debt in Canada. The theme this time is lightly-recycled Piketty: Canada’s main problems are inequality and rising indebtedness; if we eliminate tuition, that’ll strike a blow against both so wa-hey! The word “neoliberal” appears frequently.
This is all fine. It’s Lobbying 101 to link your own issues to those of the ruling government’s agenda in order to increase the likelihood that they’ll get picked up. Inequality is certainly a theme of this decade, as is the constant media drumbeat of ever-rising household debt (though for reasons that pass understanding they never match up statistics about rising debt with equivalent statistics about rising assets).
But there is a problem here. To make the analogy stick you’d have to be able to prove that student debt, like household debt, is rising rapidly when in fact it’s not. Data from the National Graduates Survey (NGS) suggest that student indebtedness has been more or less stable since 2000; the more recent/timely (but less accurate) Canadian Undergraduate Survey Consortium data (see here and here) actually suggests it has decreased a bit since 2000. And it is certainly the case that student loan burdens – that is, the percentage of after-tax income devoted to paying student debt – has decreased substantially over the last decade and a half, due mainly to falling taxes and lower interest rates. Average student loan debt – that is, the amount of debt owed by students at the time of graduation – may in fact perhaps the one type of personal debt which isn’t increasing.
So imagine my surprise when I saw this graph in the middle of the research paper, purporting to show that student debt has increase 40% in real terms since 1999:
Where on earth does this data come from? Well, it’s not the NGS and it’s not any survey of graduating students. Rather, it’s from the once-triennial, now quadrennial Survey of Financial Security (SFS), which measures student debt in an entirely different way.
Both NGS and the CUSC try to measure the average debt at the point of graduation. NGS does it by asking graduates two years after graduation how much debt they left school with; CUSC asks students a couple of months before they graduate how much debt they have. SFS is not a survey of graduates; it’s a survey of 20,000 or so Canadian households. And when it reports debt, it does so i) by measuring outstanding debt, not debt at the time of graduation and ii) be measuring household debt, not individual debt. So if your household contains multiple individuals with student debt (whether as roommates or in a family relationship), SFS will combine the debt of all individuals. The second factor will definitely tend to inflate the amount of debt reported; the first is more ambiguous because on the one hand it is including both borrowers who graduated recently and those who graduated many years ago (which one would think would lower the average figure because the latter have been in repayment for many years), but on the other will tend to exclude those who graduated with lower debt because they will often have paid it off and hence be excluded from the statistic (thus raising average debt somewhat).
Also, because it measures outstanding debt rather than debt at graduation, it will tend to lag trends in student aid. That is, even after student debt at graduation stops rising, outstanding student debt will continue to rise as earlier cohort of (less indebted) graduates repay their loans and later cohorts of (more indebted) graduates take their place in the ranks of “those with outstanding student debt”. So it’s not really a big surprise that outstanding household student debt rose in the 2000s, because that’s the natural corollary of rising student debt at graduation in the 1990s (which, unlike rising student debt in the 2000s was actually a thing).
The point here is not that the data used is “fake”: the data itself is real. But to make their point about “rising student debt” the CFS’ report writers have used a quite different definition of student debt than that used by literally every other PSE stakeholder, indeed different to any definition of student debt CFS has ever used. And they have done so without mentioning that they have used an alternative definition. This is not an innocent oversight. The person or persons who authored this document clearly know their way around Statistics Canada data; anyone with that level of knowledge also understands that if you say “student debt has risen 40% since 1999”, people will understand that to mean “individual debt at graduation”, not “outstanding household debt amongst the entire population”. It’s a deliberate deception to further a politically convenient narrative.
Student debt, as that term is commonly understood, has not risen by 40% in real dollars since 1999. On the contrary, student debt levels are broadly stable and repayment burdens are much reduced over the past decade and a half. Using torqued, cherry-picked statistics to try to convince the public that the reverse is happening is pretty poor form.
I’ve been reading Benjamin Tromly’s excellent book Making the Soviet Intelligentsia: Universities and Intellectual Life under Stalin and Khrushchev. It’s full of fascinating tidbits with surprising relevance to higher education dilemmas of the here and now. To wit:
1) Access is mostly about cultural capital.
There were times and places where communists waged war on the educated, because the educated were by definition bourgeois. In China during the cultural revolution, or in places like Poland and East Germany after WWII, admission to higher education was effectively restricted to the children of “politically reliable classes”, meaning workers and peasants (if you wondered why urban Chinese parents are so OK with the punishing gaokao system, it’s because however insane and sadistic it seems, it’s better than what came before it).
But in the postwar Soviet Union, things were very different. Because of the purges of the 1930s, a whole class of replacement white-collar functionaries had emerged, loyal to Stalin, and he wanted to reward them. This he did by going entirely the opposite direction to his east European satellite regimes and making access to higher education purely about academic “merit” as measured by exams and the like. The result? By 1952, in a regime with free tuition and universal stipends for students, roughly 80% of students had social origin in the professional classes (i.e. party employees, engineers, scientists, teachers and doctors). The children of workers and farmers, who made up the overwhelming majority of the country’s population, had to make do with just the other 20%.
2) The middle-class will pull whatever strings necessary to maintain their kids’ class position.
Khrushchev was not especially happy about the development of a hereditary intelligentsia, which made itself out to morally superior because of its extra years of education. Basically, he felt students were putting on airs and needed to be reminded that all that training they were receiving was in order to serve the working class, not to stand above it. And so, in 1958, he tried to shake things up by slapping a requirement on university admissions that reserved 80 per cent of places to individuals who has spent two years in gainful employment. This, he felt, would transform the student body and make it more at one with the toiling masses.
This has some predictably disastrous effects on admissions, as making people spend two years out of school before taking entrance exams tends to have fairly calamitous effects on exam results. But while the measure did give a big leg up to the children of workers and peasants (their numbers at universities doubled after the change, though many dropped out soon afterwards due to inadequate preparation), what was interesting was how far the Moscow/Leningrad elites would go to try to rig the system in their children’s favour. Some would try to get their children into two year “mental labor” jobs such as working as a lab assistant; others would find ways to falsify their children’s “production records”. Eventually the policy was reversed because the hard science disciplines argued the new system was undermining their ability to recruit the best and brightest. But in the meantime, the intelligentsia managed to keep their share of enrolments above 50%, which was definitely not what Khrushchev wanted.
3) Institutional prestige is not a function of neo-liberalism.
We sometimes hear about how rankings and institutional prestige are all a product of induced competition, neo-liberalism, yadda yadda. Take one look at the accounts of Soviet students and you’ll know that’s nonsense. Prestige hierarchies exist everywhere, and in the mid-century Soviet Union, everyone knew that the place to study was Lomonosov Moscow State University, end of story.
Remember Joseph Fiennes’ final monologue in Enemy at the Gates? “In this world, even a Soviet one, there will always be rich and poor. Rich in gifts, poor in gifts…”. It’s true of universities too. Pecking orders exist regardless of regime type.
4) The graduate labour market is about self-actualization
One of the big selling points of the Soviet higher education system was the claim that “all graduates received a job at the end of their studies”. To the ears of western students from the 1970s onwards, who faced the potential of unemployment or underemployment after graduation, that sounded pretty good.
Except that it didn’t to Soviet students. A lot of those “guaranteed” jobs either took students a long way from their studies they loved (“I trained to be a nuclear scientist and now you want me to teach secondary school?”) or the big cities they loved (“I’m being sent to which Siberian oblast”?) or both. And failure to accept the job that was assigned was – in theory at least – punishable by imprisonment.
Yet despite the threat of punishment, Soviet students found a way to evade the rules. Getting married (preferably to someone from Moscow) was a good way to avoid being sent to the provinces. Many simply deserted their posts and found work elsewhere. And some – get this – enrolled in grad school to avoid a job they didn’t want (would never happen here of course).
The point here being: people have dreams for themselves, and these rarely match up neatly with the labour market, whether that market is free or planned. There’s no system in the world that can satisfy everyone; at some point, all systems have to disappoint at least some people. But that doesn’t mean they will take their disappointment lying down. Dreams are tough to kill.
A few weeks ago I presented yet more evidence about why free tuition was mostly a subsidy for the rich and was unlikely, on its own, to do very much with respect to equalizing access (scroll through here and here if you really want to read me on this subject, though I imagine most of you are pretty familiar with my spiel by now). Someone asked me: “why don’t people like the Canadian Center for Policy Alternatives (CCPA), the Canadian Association of University Teachers (CAUT) and the Canadian Federation of Students (CFS) get this? Surely they can read the evidence, why would they persist in touting a solution which is manifestly regressive”?
There are two possible answers to this question. One is that in fact they have not read the evidence. It exists, and they know it exists, but just haven’t read it. As long as they don’t read the work which falsifies their notions, they can continue to hold these notions. To paraphrase Upton Sinclair “It is difficult to get a man to read something, when his salary depends upon his not reading it”.
I actually got confirmation of this the other day on Twitter. I was trying to get CCPA’s chief economist David MacDonald to explain why CCPA holds diametrically opposed positions on universal electricity subsidies (bad because they go disproportionately to the rich) and PSE subsidies (awesome, because they benefit the poor – which actually they don’t always, but that’s their story and they are sticking to it). Basically, his two lines of defense were “it’s a public good” and “it doesn’t matter if most benefits go to rich because if we make education cheaper more poor students will go”. The first, even if you assume he meant “there are positive externalities to higher education spending” (which is true) rather than “it fits economists’ description of a public good” (utterly false), is not a 100% sensible rationale as it arguably also applies to electricity to some degree (i.e. “there are positive externalities to people not freezing to death in their homes”). But the second is ridiculous. We know for a fact that tuition levels have almost nothing to do with access rates in part because targeted student aid actually works. So I pushed him on it. “Have you really read nothing about access problems in zero-tuition jurisdictions? I asked. Have you never looked at the rather substantive literature on finances and access”? No reply. Which, I think, tells you what you need to know. People like David MacDonald and the CCPA simply do not want to know. But that’s only half an answer: why don’t they want to know? If they know that free tuition is ineffective as a remedy and regressive in distributional outcomes, why support it? What other agenda is at play?
Well, a few years ago, when I was at a small event on Chile looking at the issue of tuition, I finally came to understand this problem. A colleague and I were asking our Chilean counterparts: why do you want to make tuition free? You must know it will make very little difference in access to higher education. To which one of our counterparts replied: the point is to get rid of the market. The market must not decide in higher education.”
And so it is in Canada, I think. The anti-tuition people are not fundamentally pro-access (though that is how they rationalize their position), so much as they are pro-state. I suspect it’s partly due to a left-ideological stance which generally favours greater state involvement across the economy, but also partly to a naïve view about what would happen inside universities if the need to satisfy the market ever disappeared. Such as: that public money would magically replace private money and continue to grow at a pace vastly outstripping inflation forever after. Such as: nasty private sector Board member would be replaced by bureaucrats or more sympathetic public appointments or – better yet – make academics a majority on governing boards. And magically, contrary to every bit of evidence from continental Europe, government running 100% publicly-funded universities would be less intrusive and meddling in institutional affairs than they currently are.
Once you realize that the free tuition argument is really a government vs. market argument and not a “how do we best equalize opportunities argument”, it becomes perfectly clear why evidence on the efficacy of tuition in promoting access doesn’t faze the usual suspects. They don’t actually care about access. They care about resisting the market. The access stuff is just sheep’s clothing.
Readers may remember that about this time last year, I was giving the Government of New Brunswick a bit of stick for a botched student aid roll-out. Today I am pleased to give credit where it is due, and congratulate the folks in Fredericton for fixing the problem and developing a much better student aid system.
Let’s go back 12 months to pick up the story. In February 2016, the Ontario government had come up with a fabulous new system which basically made a promise of grants equal to or greater than average tuition for students from low to mid-family incomes. At family incomes above that, students received a declining amount of money out to about $110,000 at which point the grant flattens to a little under $2,000 (a remnant of the government’s ludicrous “30% tuition rebate” from 2011) and then falls to zero a little over $160,000. With a bit of clumsiness this eventually, sort of, got branded as “free tuition for low- and middle-income students, which it isn’t, quite, but close enough for advertising. Cue what is seen to be a major policy success.
It was such a success that New Brunswick decided to copy it later last spring. Like Ontario, they built on the change to Canada Student Grants and eliminated some of their own tax credits (including the egregiously wasteful graduate tax rebate) to fund a “Tuition Access Bursary”, which guaranteed a grant equal to tuition (up to a maximum of $10,000, which was more generous than Ontario) for students from families making under $60,000. Which is great, right? Well, yes, except the problem is, there was no phase-out for the grant. At $59,999 in family income, there you were raking in $6500 or so in grants and at $60,001 you got $1200 in grants (the federal middle-income grant) and that’s not great social policy. Making it worse was the fact that families in that $60K to $70K would also be losing a lot of money in tax credits that both the federal and provincial governments were ending in order to pay for this new benefit; my back-of-the envelope calculation was that in this range, parents were going to be about $1,200 worse off as a result of the change.
In any case, because I and others pointed out this flaw, the government after a brief period of defensive blustering decided it was best to go back to the drawing board and revisit the formula. They did so and last week came up with a new “Tuition Relief for the Middle Class”, which basically involved taking a sliding declining scale of grants for families earning between $60-100,000 onto the existing Tuition Access Bursary (which has been renamed the “Free Tuition Program”). Arguably, the New Brunswick program is now somewhat better than the Ontario program because 1) it’s not just “grants up to “average” tuition”, a caveat which I suspect is going to leave a lot of people slightly cheesed off when the program starts and 2) It still manages not to subsidize people up to that absurdly high $160K + threshold that Ontario insists on maintaining. Ontario gets points for making its aid portable, though – New Brunswick’s program is only available to students who study in-province, which I think is a shame.
The announcement – which you know, hey guys, it’s a good news story! – was marred somewhat by some media sniping about how the number of beneficiaries is about 30% short of what was estimated last year. To me this is neither here nor there: government cost estimates on year 1 of a new program are often a matter of throwing numbers at a dartboard. The good news is that there is still money to either raise the entry threshold for the Free Tuition Program or (better still) expand the debt relief program or top up the amount of money available to high-need mature students and parents through the New Brunswick Bursary Program.
Now, all we need for this to be perfect is for New Brunswick to come up with a smart, credible monitoring program to examine the effects of these changes on participation over the next few years.
(New Brunswick folk: that’s on the way, right guys? Right? Well, you know where to find me if you need a hand…)
Anyways, as I say, credit where it is due. Well done, New Brunswick.
As contestants start to jump into the federal NDP leadership race, it’s only a matter of time before someone starts promising free tuition to all across the land. Now, I’m not going to rehash why free tuition is both regressive and undesirable (though if you really want to take a gander through the archives on free tuition, have a look here). But I do think I can do some public service by talking about federalism and higher education, or rather: what the feds can and cannot do in this sphere.
The entire Canadian constitution is based around a compromise on education dating from 1864. Upper Canada came to the Quebec conference with one overriding aim: representation by population in Parliament, so that their superior population would give them the most seats in Parliament. Lower Canada agreed if and only if a second, local, and equal tier of government was created which would have jurisdiction over education and health, because over-their-dead-bodies were a bunch of (mostly) Orangemen going to get their hands on a hallowed set of (mostly) French catholic institutions.
There’s nothing in there that stops Ottawa’s ability to give money to individuals for the purpose of education. This is why, despite all the sturm und drang, Quebec never put up a legal fight to the Canada Millennium Scholarship Foundation: Ottawa can give cash to whoever it wants, whenever it wants. But when it comes to dealing with institutions, their ability to direct money to areas of provincial jurisdiction is subject to provincial veto. The provinces accept (with limits, in Quebec’s case) that the feds can flow money to institutions for the purposes of academic research. Hence the Canadian Foundation for Innovation. They do not accept that it can send money to institutions for operating purposes.
(Historical footnote: there was a period where nine out of ten of them were prepared to accept this. Back in the mid-1950s, there was a ruse in which the federal government handed tens of millions of dollars every year (a lot back then) to Universities Canada – then known as the National Conference of Canadian Universities and Colleges – which it would then distribute to institutions. In theory this was a canny work-around to the constitution. In practice, it stalled because Duplessis blew a gasket and told Quebec universities that if they touched a dime of that money, he’d take it out of their provincial funding. Pierre Elliott Trudeau then wrote a wonderful article in la Cite called “Federal Grants to Universities” explaining why Duplessis was 100% right and St. Laurent was in kookooland, constitutionally speaking. It’s a great article, read it if you can. Anyway, this arrangement lasted into the 1960s, when the feds got out of this arrangement and moved into per-capita grants instead. And that door is now shut: there is no going back through it.)
Politically, there is a fantasy shared by some on the political left that the federal government can simply re-acquire policy leadership in the post-secondary field by passing an act of Parliament and adding great wodges of cash to existing transfers… with strings attached. I’ve previously (here) torn a strip off the idea of a federal Post-Secondary Education Act, but let me focus here specifically on the idea that a generalized fiscal transfer could actually affect tuition fees. Let’s just imagine how that discussion would go.
Ottawa: we want to give each of you money so that you bring your tuition fees to zero. Quebec and Newfoundland, your fees are about $3000, so we’ll give you that per student…
Ontario: Our fees are $7500 a student or so. Fork it over.
Quebec and Newfoundland: Hold it.
I could go on here about the nuances of fiscal federalism, but basically that’s the problem in a nutshell (for my American readers: in some less disastrous timeline, Hillary Clinton is facing exactly this problem as she attempts to implement her free tuition promise for public universities). There are ways the federal government could bribe provinces into lowering tuition. In fact, something like that actually happened in Nova Scotia as a result of the NDP-Liberal budget deal in the minority Parliament of 2005. But you wouldn’t necessarily get them to lower by an equal amount, and you definitely wouldn’t get them to go to zero because they have vastly different starting points.
So, here’s the quick heads-up to all prospective New Democrat leadership candidates: even if it wanted to, the Government of Canada has no sensible way to eliminate tuition nationally. If you do manage to form a government, this will be broken promise #1. So don’t promise it. Instead, think about ways to support students which don’t involve tuition. There is a whole whack of things you could do with student assistance instead. And the best part is: if you use student aid as a tool instead of tuition, you can channel aid to those who actually need it most.
With the Republicans in control of both Congress and the White house for at least the next two years, the fight for “free tuition” is moving to the state level. And so to New York, where Governor Cuomo has proposed a form of “free tuition” for anyone attending the City University of New York (CUNY) or the State University of New York (SUNY) and whose family earns less than $125,000. So what does this mean exactly?
Well, to be clear, it’s not the same kind of free tuition Hillary Clinton was offering back in the election campaign. (There are many kinds of free tuition, as I noted back here; refresh your memory, if you like). Clinton was offering – with scant details – a vision where with enough federal funds, states and their public university systems would agree to stop charging tuition fees to students from families below $125,000 in income (or, roughly, 80% of the student population. That idea was always a little bit pie-in-the-sky: the impracticalities of it were well covered by Kevin Carey at the time. What Cuomo is offering instead is a top-up plan to make tuition “net free”. Basically, he’s going to offer students below the cut-off line whatever amount of grants it takes to equal the amount they pay in tuition. This payment, to be known as an ‘Excelsior Scholarship” (really), is thus equivalent to tuition minus any grants the student is already receiving from the federal or state governments via the Pell grant system.
Now, you might be saying to yourself: hey, that kind of sounds like the Ontario model. That’s good, isn’t it? To which the answer is: yes, it is a lot like the Ontario model. It’s income-targeted net free tuition. Except a) in some respects it’s going to be more like New Brunswick, with a big step-function (link to: ) at $125,001 instead of a nice smooth slope of benefits like Ontario and b) the threshold for getting full benefits is ludicrously high and has perverse consequences.
What do I mean by perverse consequences? Well, the thing is that for students at the low-income level of the spectrum, federal and state grants already equal tuition. So literally none of the money involved here is going to help them. The biggest winners in the Cuomo proposal are precisely those people who get no grants right now – basically from families with about $80K and up in family income. And yet these are the people who have the least trouble going to college right now.
The question here is: if you have a couple of hundred million dollars to spend, why would you give it to a group of people who have no issue attending in the first place? Why not put money where it will be most effective? Columbia University’s Judith Scott-Clayton suggests there’s good evidence that money going to institutions creates better access outcomes than simply limiting the price.
Even Chile, once very keen on full “gratuidad”, has belatedly come around to this realization. For budgetary reasons, the government was forced to limit its recent introduction of “free” tuition to students from families in the bottom six deciles of income. This summer, the Chilean Treasury Department published cost estimates for the program. In its present state the fully-phased in cost of the program will be 607 billion pesos (about $1.25 billion Canadian, or about $950M American). Adding each of the next four deciles raises the price by about 350 billion, or 58%. That is to say, free tuition for everyone would cost over 2 trillion pesos, or over three times as much as it costs for the bottom six deciles. That difference is equal to 1.5% of GDP. And what would be the purpose of spending all that money? The very fact that it costs so much is a reflection of the fact that participation from these groups is already so high they don’t really need government help. What kind of socialist government prioritizes handing over 1.5% of GDP to families in the top four income deciles?
In short, while targeted free tuition makes a great deal of sense, it really does need to be targeted. If targeting weakens, the program becomes more expensive and less effective. New York’s plan, clearly, suffers from insufficient targeting. Ontario’s plan has it about right. But beware: the Premier occasionally muses about extending the plan to higher income groups and there’s certainly a chance such an idea will make it into the policy conversation as the provincial election approaches. That way madness and much wasted public funding lies.
It’s tough to be in government these days: prolonged slow growth means it’s difficult to keep increasing spending at a rate at which citizens have become accustomed. Instead, with rising costs and little appetite to raise taxes or fees, governing often seems to be one long exercise in nickel-and-diming. Higher education – in most of Canada at least – has felt some of this, but in truth has been insulated more than most other parts of the public service.
But the key role of government should not simply be to find ways to cut: it should be about increasing the effectiveness of public expenditures. And in particular, making sure public expenditures are designed in such a way as to promote and not hinder growth. That’s why, if there was one place in Canada I wish I could be an Advanced Education Minister right now, it’s Manitoba. Because, as I explain in a new paper HESA is releasing today, Manitoba has a boatload of poorly-performing expenditures in higher education tax credits that could be re-purposed into areas which could really help the province.
Here’s the scoop: Manitoba has two tax credits – the Education Amount Tax Credit and the Tuition Fee Income Tax Rebate – which are neither particularly effective nor have many defenders within the higher education sector. The former tax credit is a hold-over from the Diefenbaker era which all provinces (except Quebec) got stuck with in their portfolios when the provinces moved from a tax-on-tax to a tax-on-income system back in 2000. In the past 12 months, the federal government, the province of Ontario and the Government of New Brunswick have all eliminated this tax credit because it was neither progressive nor efficient, and funneled that money back to student assistance. The latter tax credit is effectively a tuition rebate for students who stay in the province, which is batty and wasteful for number of reasons I’ve previously outlined here. In any case, it is demonstrably too small to achieve its intended goal of convincing students who would otherwise not live in the province to live in the province. The result is this money is a windfall gain to graduates, paying them to do something they were going to do anyways. The elimination of these two tax measures could yield approximately $67 million per year in savings which could be spent more productively elsewhere within the higher education sector.
$67 million is a lot in Manitoba higher education. Taking that money away from unproductive tax credits could fund a whole lot of new, useful investments. These include:
- Adding $14 million/year to provincial student assistance fund. Spent correctly, this would be enough to fund an Ontario-like “free tuition” guarantee to low- and middle-class Manitobans even if tuition fees were allowed to rise by a third (which, given how low tuition is in Manitoba, is probably a not a bad idea).
- Investing $12 million/year to increasing supports to Indigenous students and expanding community delivery of programming in or near First Nations communities
- Supporting the expansion of work-integrated learning at Manitoba universities and colleges with the creation of a dedicated $15 million/year fund.
- Redressing a long-standing imbalance in post-secondary spending by increasing the number of seats in non-Metro Manitoba with a $15 million/year investment.
- Creating an $11 million/year employer-driven “quick response training fund” to make it easier for employers with expanding businesses to access bespoke training.
In sum, for the price of two badly-designed tax credits, Manitoba could make real investments in access, both in terms of financial aid and providing spaces in under-served areas, increase support to Indigenous students and communities, improve the quality of education and provide more funds for employer-led training that could help relieve skills bottlenecks for investors. How could you pass this up? Who wouldn’t do this?
Over to you, Manitoba.