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Higher Education Strategy Associates

Author Archives: Alex Usher

December 08

Cluster Theory

Unless you’ve been under a rock for the last twelve months, you’ll have noted that the Government of Canada has become enamoured of “innovation clusters” as a means of raising national productivity levels.  What should we make of this?

For some annoying reason, the Liberals act as if cluster theory is something new rather than something which dates back to the mid-1980s (Michael Porter’s The Wealth of Nations gave the idea its first mass-market outing in 1990; six years later, Saskia Sassen gave us what is probably still the most engaging short book description of cluster formation in Regional Advantage.  In fact what is actually new – in Canada at least – is the idea that the federal government should encourage cluster formation/densification with great huge wads of cash.  $800 million over four years, in fact, according to Liberal manifesto and the 2016 Budget.

There are three reasons to be skeptical about this set of developments.  One is political, the second administrative, and the third is empirical.

The political problem is this: we live in Canada.  There is no way on God’s green earth that doling out money for what amount to economic development (or, say it softly, “industrial policy”) isn’t going to get 100% enmeshed in regional pork-barrelling.  Initially, the Government’s plan was for five clusters (I’ve heard it may now be for as many as eight).  Well, isn’t that convenient – five clusters, five regions.  I mean put away all your crystal balls about what’s going to get funded: It’ll be something Ocean-y in the Atlantic, something aerospace-y in Quebec, ICT-y in Ontario, Energy-y in the Prairies and (probably) life sciences-y in BC.  Whether each of these clusters is equally deserving of, or has the capacity to absorb, public dollars is irrelevant once regional politics comes into play.   Inevitable result is sub-optimal investments

The second issue is an administrative one.  Say you want to spend $150 million (or so) on “a cluster” in a variety of ways which increases research productivity, corporate partnerships, etc., etc.  It’s not just a question of deciding among hundreds of worthy micro-projects within a $150 million budget.  Who actually manages the project?  It’s not like giving money to a university or a hospital – a cluster has no corporate entity.  Occasionally, you get a trade organization that might conceivably act as a co-ordinator of a cluster, like say Communitech in Waterloo, and you could use them to distribute money in a way that made sense regionally.  But i) not every cluster has one of those and ii) even if they do, they’re going to tend to be biased towards established players rather than new ones.  The only alternative is to manage it all from Ottawa, but that’s a frightening prospect for a project that’s meant to improve industry flexibility.

Which brings us to the third, empirical, problem.  I’ve said this before but it bears repeating: a lot of the research on innovation is American, and assumes things like having DARPA around, and being at the technological frontier and having access to lots of venture capital and all that good stuff.  Most countries in the world don’t have that.  In fact, when most countries in the world (including us) think about “clusters” they are thinking about something fundamentally different than what Americans think of when they use that term, because our cluster thinking is designed as much around attracting established foreign companies as it is around developing native entrepreneurial talent.

And here’s a little secret: there are almost no good examples anywhere of clusters having been built on government money.  In fact, to the extent that anyone can work out what it is that makes a great cluster, it’s the presence of one or two industry-leading companies plus one heck of a lot of spin-offs related by disgruntled former employees who want to do their own thing (see especially Steven Klepper’s recent posthumously-published book Experimental Capitalism).  This is actually something most Canadian clusters are really bad at: the OECD Cluster rankings, although now a bit dated, show Canadian clusters generally in the bottom half of clusters across the OECD for new company formation.  Government can do something about this, but it’s not by spending money, it’s about using law and regulation to make sure non-competes are unenforceable.  Surprisingly, given that this is supposed to be a government devoted to evidence-based policy, that issue doesn’t appear to show up at all in our government’s thinking on clusters.

So what are we spending money on, exactly?  And why?  To what end?  Although the government’s had over a year to work on this, it’s really hard to get a sense of what the plan is.  I suspect that a lot of this money will end up in the hands of universities because they know the “apply for government money” game really well and can play to the Minister’s predilection to be photographed in front of a lot of shiny hi-tech gadgetry.

But will any of it have the slightest effect on national productivity?  I have my doubts.

December 06

Alarm Bells in China

So, in the midst of all the handwringing about the world’s major higher education student destinations all losing their damn minds (Trump, Brexit) and the implications this has for higher education internationalization, I think we’re in serious danger of missing a much bigger story going on in China.

Don’t get me wrong.  Trump and Brexit are big stories, but on a global scale what they are going to do is shift mobility patterns a bit.  The precise English language destination countries will change (Canada, Australia, New Zealand and possibly Ireland) but neither event actually changes the underlying demand for quality English-language education.  And as long as demand holds up, internationalization across the globe as a whole will continue on.

But what happens if demand doesn’t hold up?

Now, we’re not at that stage yet.  Among middle class parents in China, there is still a lot of interest in international education, even if everyone’s first choice remains Peking or Tsinghua.  But the government, for a variety of reasons, has been making study overseas harder.  Last year, they have cracked down on the creation of new 2+2 or 3+1 programs, largely to keep corruption at bay (there were several institutions where found to be embezzling money associated with those programs).  In 2014, the government stopped approving new international programs at public high schools.  Last month, a new law banned for-profit schools from using international curriculum until grade 10.  The Minister of Education has called for a ban on “textbooks promoting Western values.”  (see this Economist story for more).  In short, the Chinese government is making it increasingly hard for Chinese parents to prepare their kids for study in foreign universities.

There is a balancing act going on here.  On the one hand, the Communist regime wants to limit potential sources of ideological contamination.  On the other hand, for many Chinese parents – perhaps especially Communist Party members, sending child abroad to study is still part of the “Chinese dream” (Xi’s daughter, for instance, studied at Harvard).  Moving too far, too fast in this direction could set off a lot of urban discontent, which the regime would prefer to avoid if possible.  But at the same time, the direction is unmistakable and we do not know how far the government intends to go.  If western values in textbooks are undesirable, at what point do individuals educated in the west at institutions steeped in western values also become undesirable?  If it becomes unpatriotic to hire foreign graduates – what then?

Now, I’m not even sure something of that magnitude would shut off the taps: lord knows there are a lot of people in China (again, including Communist Party members) who view having a child studying or working overseas as a pretty good insurance policy if things start to go sour in China.  So you could still imagine a big Chinese market for international education-cum-immigration.  But it might be more difficult to get those kids up to speed to get into a western university.

In that eventuality – and it’s one I definitely think all universities should be prepared for – attracting Chinese students is going require one to mean pursuing one of both of the following strategies.  First: attracting students at an earlier age (perhaps 14 or 15) and putting them through local Canadian high schools.  For wealthier families that means bringing mothers over as well; for everyone else, it would be interesting to for universities and school boards to jointly create some communal living arrangements (including student life personnel) to help Chinese students succeed.  Second: for students who stay in China through to the gaokao (i.e. age 18) and then decided that they wish to try study abroad, there is going to be an increase need for pathways providers to help students get through what will amount to a bridge year.  I suspect my colleagues at IDP and Navitas will be busy over the next few years.

In short: yes, Trump and Brexit represent big short-term opportunities for countries like Canada, Australia and New Zealand because they divert demand.  But there remains a long-term threat to internationalization in that the Chinese Communist Party may move to actively suppress demand.  Keep your eye on the ball.

 

December 05

A Wish List for Budget 2017

A few days ago someone asked me what my wish list would be for the federal 2017 budget.  The science/innovation part of my answer will take a couple of posts to summarize (I’ll start addressing some of the issues related to the Science and Innovation Agendas over the next few days); but today I thought I’d give you my thoughts on the student aid part of the equation.

Briefly, I have three wishes.  They are, in order:

1)      Implement the promise on Aboriginal student funding.  In the Liberals’ 2015 manifesto, there was a promise to increase funding to the Post-secondary Student Support Program (the program which provides funding to bands across the country to send their members to post-secondary education) by $50 million per year.  For whatever reason (I explored this a bit back here), the Liberals chose not to implement that promise in the last budget.  Now, there is lots not to like about this program, and lots of ways it could be improved.  But the funding challenges for First Nations students are real, and we shouldn’t give them short shrift because of a desire to wonk around with program design first.  Fulfill the promise, increase spending on PSSSP by $50 million, wonk later.

2)      Increase Aid Limits for Mature Students.  Canada has a not-very-stellar record of adults getting training.  Part of it has to do with the way we support them while they are in school.  Provincial training programs usually cover programs of less than a year in length, and they tend to provide decent (though not lavish) support for living expenses.  If the program’s longer than a year then you tend to get pushed to provincial/federal student aid programs where the basic assumption is that everyone lives like an 18 year-old.  That’s wrong. People who return to education from the labour market tend to have houses or live on their own in digs considerably above the student norm.  They have credit card debt, they have cars.  Yet student loan rules basically says they need to chuck all that an find a roommate to live with.

 There’s a way to fix this.  As far as calculating student resources, we already have a two-tier system: less four years out of secondary school (or less than two years in the labour market, we assume parents are contributing to a student’s cost of attendance.  After that, we don’t, and students become eligible for more money.  There is no reason we could not do the same for calculating student resources, giving older students higher allowances (and higher aid limits).  I wouldn’t stick the dividing line at four years: I’d probably put the line at doctoral studies or three consecutive years in the labour market or something like that.  But either way: if we want to encourage more adults to return to school, something like this is necessary.

 3)      Improve Repayment Assistance.  As I noted last week , over the income range from the mid-$30,000s to $50,000 and at average levels of indebtedness, Canadian student loan borrowers are paying more on a monthly basis than loan borrowers anywhere else in the world (I didn’t actually include the whole word in that post, but trust me the five countries I did show are the ones you need to care about as debt tends to be higher there than in other jurisdictions).  There’s a simple solution here: tweak the Repayment Assistance Program (RAP) to limit the amount borrowers have to repay to 15% of income rather than 20% over the repayment threshold of $25,000.  For borrowers making less than $25,000 this will make no difference (they still pay zero), and for borrowers making over about $50,000 it won’t change anything either (which is fine because by an large they’re quite capable of repaying loans), but in-between (which is the income-range where most borrowers are for the first couple of years after leaving school) it would make a big difference.

Over to the folks in the Langevin Block.

December 02

Added Thoughts on Faculty Salaries

Back on Tuesday, I published some data on faculty salaries, which always gets people’ attention.  I’d like to address some of the feedback I received and make a couple of additional points.  The comments mostly converged on two areas: the appropriateness of the comparisons to the US and the interpretation of the reason for the rise in Canadian salaries.

First, the US comparisons.  Some questioned the appropriateness of the dollar conversion factor.  I used Statscan’s published US-Canada PPP figure for the start of the academic year for the most recent year for which data was available.  Some suggested I should have used current values (wouldn’t have changed much) or that I should have used exchange rates, which actually would have made Canadian salaries look even higher, as in September 2014 the dollar was at 91 cents.  I think on the whole, since most salary gets used to purchase goods in one’s home market, PPP was the right choice.  Some also questioned whether the AAUP’s public doctoral category, which contains 156 institutions, was the right comparator for the U-13 (that is, the U-15 minus Laval and Montreal, where data was not available), given the diversity of institutions it covers.  There is some truth to this: I think on our U-13 is probably a slightly more elite group than its American competitor.  It’s possible that if I’d added, say, SFU, Guelph, Carleton, Concordia and Memorial, the comparison would be a little closer.  But then I’d probably (rightly) be criticized for arbitrarily including certain institutions.  So I’m prepared to take the rap on that because I’m not sure what other comparator I could reasonably have used.

One point on which I should make a mea culpa is that the way average salaries for “all ranks” was calculated for Canadian and American profs is slightly different.  The American figures include salaries for “no rank” professors (i.e. professors at institutions which do not have ranks, not sessionals) and visiting professors while the Canadian ones do not.  This probably depresses the American figures slightly compared to the Canadian ones.  Not by much, but it’s a caveat I should have noted.

The second area where I received questions and comments is with respect to what caused the run-up in average salaries.  One person suggested comparing average wage gains in the population (inflation + 0.3%) to those of professors (inflation +2.5%) was unfair because the former churned whereas the latter did not; in a similar vein, one person suggested the problem was related to hiring, or lack thereof.  If only more new staff had been hired, the argument went, the average would have decreased.

With respect, this is point-missing on a fairly large scale.  Universities hire based on what they can afford from their total budget, not to hit some arbitrary target on individual salaries.  And if their largest single expense is growing at more than twice the rate of inflation year after year, then they aren’t going to hire a whole lot of new staff (for the record, over the five years at the 38 institutions examined, the number of full professors increased by 9%, the number of associate profs increased by 15%, and the number of assistant profs dropped by 22% for a total gain in size of 3%).

The root cause here is simple.  Professors no longer have to retire at 65 and an increasing proportion of them are electing to remain on the payroll.  That means an increasing number of professors are earning very high salaries.  All full professors in Canada are in the top 5% of wage distribution in the country (threshold = $102,300), and a non-negligible proportion are in the top 1% (threshold = $191,000 which is right about the *average* wage of full professors at the University of Toronto).  Yet they continue to receive annual wage increases of 4% or more – meaning annual increments of $5,000 apiece and up (imagine what that kind of money would mean for grad students).  It’s not just that this crowds out money for other purposes; it also makes institutions really wary about hiring new staff.  Both of these factors contribute, quite understandably, to increasing casualization of staff – though again, note, total full-time staff complements are actually up 3% over the last five years.

But the question of course is: what can be done about it?  The most obvious thing would be to do more to rein in salaries at the top – putting hard ceilings on full professors’ salaries after a certain number of years.  Since faculty unions are always going on about the need to rejuvenate the profession and the travails of young faculty, it would be worth taking them at their word and seeing if they’re prepared to negotiate something that would help achieve that aim.  A more stringent approach would be to make rank progression more difficult.  That wouldn’t have much effect in the short-term because people would continue to get annual progression raises, but over the long run, doing something like capping the number of full professors at 30% of total faculty would do a lot to rein in costs because it would restrict the number of people getting to the highest pay ladders.

We have, through union power and a Charter ruling on retirement, got to a point where we are spending a lot of extra money every year on staff with almost all of it going to existing staff who are already among the country’s best paid workers, and very little going to hire new staff.  It is within the power of both institutions and unions to change this, if they want to.  But first we have to recognize the problem and discuss it honestly.  The question is whether the will exists to do so.

December 01

Important Changes to Canada Student Loans

The last federal budget made one large signal improvement to student assistance: the abolition of the education tax credit, and the re-investment of that money into an improved Canada Student Grant. Less remarked upon was a promise to simplify need assessment. Now the details of that effort are emerging, and they are pretty interesting.

The change has to do with the student contribution rules. In the Canadian student aid system, various forms of student income and assets are considered “resources” and the more resources you have, the less need you have and the less aid you can claim. If you have no resources at all you can usually get maximum aid, but as resources rise, aid is effectively clawed back. Different forms of income have traditionally been assessed in different ways – summer earnings were clawed back at one rate, in-study earnings were clawed back at another. Personal savings in one’s one name (as opposed to RESPs) were clawed back effectively at 100%, as were scholarships (subject to an exemption of $3000). All these different clawback rates were confusing, they required students to provide a lot of data (student aid forms would be a great deal simpler without all this) and – in theory at least – they discouraged work.

The new CSLP need assessment system aims to correct all of this. Instead of assessing all these different sources of income, under the news students will simply be required to make a flat personal contribution of between $1,500 and $3,000, based on family income (Crown wards, students with disabilities, students with dependents, indigenous students will see this requirement waived and not be required to produce even the minimum resources). Any income they earn above that level – whether through work or scholarships or what have you – will be theirs to keep; there will be no further clawback on that income. This of course also provides a lot of scope to simplify student aid forms.

What will the impact of this be? Well, it’s a two-sided coin. On the one hand, there is no doubt that students will have more income at their disposal and that should help with issues of retention and student poverty. At the same time, a reduction in assessed resources will mean an increased in assessed need which in turn will drive higher borrowing. Ceteris paribus, that means higher student debt, although presumably the increase in Canada Student Grants will offset this somewhat. That’s not necessarily bad – as I’ve shown before , student loan burdens are currently a lot smaller than they were fifteen years ago thanks to lower taxes and interest rates. As a result, it’s likely most borrowers would be able to shoulder more debt. But it’s a trade-off: more money today will mean more burden tomorrow.

There are some other changes worth noting as well. The most important – and from a personal point of view the most satisfying – has to do with required spousal contributions. Eleven years ago I wrote a piece called I Love You Brad But You Reduce My Student Loan Eligibility, which outlined the absolutely ludicrous expectations re: spousal contributions embedded in the Canada Student Loans Program. At the time, the clawback was effectively 80% on all income over $12,000 which was – and I am using the technical term here – totally bananas. It effectively cut off anyone with a working partner from student assistance. As of next year, the threshold for contributions will be raised substantially (the exact level has not yet been fixed but my impression is that is probably in the $30,000 range) and expected contributions will only amount to 10% of marginal income over that level. That’s excellent news: it’s going to put much more financial resources at in the hands of adult learners in married or common-law relationships. Similarly, CSLP plans to cease treating money obtained by First Nations students through the Post-Secondary Student Support Program (PSSSP) as a resource – thus giving those students access to much more money as well.

Overall, this is the biggest change to need assessment since the introduction of the Canada Student Financial Assistance Act in 1994. But there is a catch to all this: because student loans are a joint federal-provincial responsibility, for these changes to work smoothly both federal and provincial governments have to agree to assess things similarly. But these changes cost money and provinces don’t have much of it. Ontario and Alberta have already essentially adopted the flat contribution policy, but it’s not clear either will accept the rest of the package, although I have a hard time imagining Ontario not doing so. The others, though: there is at least a chance that some will choose not to go along with the deal, and stick to the current system of need assessment (in program jargon, this is called “dual assessment”). In such provinces, there will be no simplification of the student aid form because the province will still require the various pieces of information about different types of income. And dual assessment makes it harder, not simpler, to explain aid awards. But since Ontario and Alberta make up something close to 75% of the Canada Student Loans Program, the feds may not be that fussed by other provinces not making the leap.

In any case: the Canada Student Loans Program is making things a lot easier for students and that is to be applauded. It might not work out quite as well as it could because of some legitimate difficulties provinces face in following suit. But overall: this is really good news. Kudos to those in Ottawa (and Gatineau) for making it happen.

November 30

Comparing International Student Loan Repayment Plans

People talk a lot about student debt and the burden it places on recent graduates.  Not surprisingly, different countries come to different policy conclusions about how this burden should be dealt with.  Today’s column examines how various countries choose to deal with this issue.

What I am going to do today is compare expected loan repayments under five different student loan regimes: Canada, the US, the UK, Australian and New Zealand.  This obviously does not fully examine the issue of loan “burdens” – to do that properly would require information on average debt and average post-graduate income which I suppose I could find but can’t be bothered to do just at the moment.  But it’s still a revealing exercise.

First, a brief description of the loan repayment schemes.  Canada and the Unites States have very similar systems, in that they are technically “mortgage-style” loan systems (you pay them down as you would a home mortgage, in equal installments), but which have “income-sensitive” features to help lower-income borrowers.  In Canada, that means the Repayment Assistance Program (RAP), which requires no repayment if income is below $25,000 and restricts payments to a maximum of 20% of income over that threshold.  In the US it is called PAYE (Pay-As-You-Earn) or REPAYE (don’t ask), which requires no payment if “adjusted gross income” (meaning income minus certain allowable deductions, roughly equivalent to line 260 on a Canadian tax form,) is less than 150% of the poverty line, which in practice means US$17,820 for a single individual.  Repayments are restricted to 10% of income above that level.  In both countries what that means is that repayment is directly tied to income until the point where payments rise above what they would be on a mortgage-style arrangement, at which point borrowers switch into the mortgage system.

The other three systems are income-contingent, meaning repayment is geared exclusively to income regardless of the size of the outstanding debt.  In the UK, the repayment threshold is £21,000 and borrowers repay 9% of their income above this level.  In New Zealand, the repayment threshold is NZ$19,084, and borrowers repay 12% of their income above this level.  Australia is more complicated: borrowers pay nothing until income passes $54,869, but then one pays an escalating percentage, starting at 4%, of one’s entire income (not just the bit above the threshold) as income rises above this.  For those interested, the contributions table is here.

For this comparison, I assume that the Canadian and American subjects each have outstanding loans of $25,000 (in local currency) which are eligible for income-based repayment. As noted above, size of debt is irrelevant for the other three examples.  I have converted everything into Canadian dollars at purchasing power parity using the July 2016 Big Mac Index (C$1=NZ$1=A$.958=$US.84=£.496).

With all that out of the way, Figure 1 shows how much student loan borrowers are expected to repay per month under each of the five systems.

 Figure 1: Required Monthly Repayment on Student Loans, by Income Level, in C$ at PPP, Selected Countries

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The essential natures of each country’s program can be seen in this graph.  Canada and the US start out as upwardly-sloping lines but then plateau, which reflects their common nature as a blend of income-based and mortgage-style lending.  Payments in the US system rise more gently because of the different repayment maximum (10% vs 20%) and plateau at a lower level because of lower interest rates.  The New Zealand and UK patterns are simple upwardly-sloping curves.  Australia’s curve is notable not just because it is at zero for a long period but also because it jumps quickly at the point of the threshold.  In the social science literature, this is what they call a “step-function”, and it’s not a great idea because it means at the point of the threshold, individuals actually become significantly worse off (in this case, by $193 per month) by earning one extra dollar.

At low levels of borrower income, Canada, the United States and New Zealand all look quite similar in that they require borrowers to begin repayment at much lower levels of income ($20-25,000) than in either the UK ($43,000) or Australia ($57,000).  At income levels between $20,000 and $34,000, New Zealand demands the highest levels of repayment.  Between $34,000 and $50,000 (the part of the income curve where most recent graduates can be found), Canada has the highest repayment requirements; above $50,000 it’s New Zealand again. Between $25,000 and $75,000 it is definitely advantageous to be in Australia or the UK as these have the lowest payments.  However, by $80,000 repayments in the US system are the lowest and if we were to extend the chart out to $85,000 then we would see repayments in Australia and the UK exceed the Canadian level.

A final point: the Canadian system imposes the highest costs on students in precisely the income-range where most recent graduates fall.  We could do more for them here; specifically, if we reduced the maximum repayment rate to 15% from 20%, we would kink the curve in such a way that monthly repayments would never be higher than they are in New Zealand.  Something to think about for the next budget, perhaps.

 

November 29

Faculty Salary Data

We haven’t looked at Faculty salary data in awhile.  Time for a gander.

Let’s compare data from the years 2009-2010 and 2014-15: a nice round five years.  The data for 2009-2010 is from the old Statistics Canada UCASS survey, discontinued but recently revived; the 2014-14 data is from the National Faculty Data Pool, an organization set up by Canadian Universities to keep the UCASS going after it was defunded.  I have restricted the sample to the 38 institutions which appear in both datasets.  A few institutions chose not to participate in the NFDP exercise, most significantly Montreal, Laval, Sherbrooke, UNBC, Winnipeg, Brandon, St. FX, Cape Breton and Mount Saint Vincent; Victoria is excluded because its data is not available from 2009-10.  On the whole, these missing institutions tend to have lower salaries than other universities in Canada, and as a result, the national averages that arise from this exercise are going to be somewhat higher than a true national average.   So, focus on the change over time (which is very accurate, for institutions accounting for over 80% of professors across the country) and not the averages.

Got that?  OK, good.  On to figure 1, which shows average change in professorial salaries by rank.  For purposes of comparability, the 2009-10 data is shown in 2014-equivalent dollars.

Figure 1: Average Canadian Professorial Salaries by Rank, 2009-10 and 2014-15, in constant 2014 dollars

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So, what we see here is that across all ranks, faculty salaries for tenured and tenure-track professors have increased faster than inflation since 2009-10.  The increase was largest for both full and associate profs at just over 5%, while for assistant professors the figure is just 1.1%.  However, the average rise in real salaries across all ranks is a whopping 12.4% over five years – or roughly 2.3% per year on top of inflation (for comparison: economy wide, average wage rates over the same four years rose by just 1.5% or 0.3% per year).  How is this possible?  Simple: the professoriate is aging, and a greater fraction of professors are now in the upper (and better-paid) ranks than was the case five years ago.  Progression Through the Ranks makes a huge difference.

Now, let’s compare Canadian salaries to American ones, using the annual American Association of University Professors’ Annual Report on the Economic Status of the Profession for 2014-15.  This is tricky for three reasons.  The first is the problem of differing exchange rates; I deal with this by using 2014 Purchasing Power Parity value ($1C = $0.85 US).  The second is that the US has a much wider variety of institutions which get included in their national statistics: at the top end there are a lot of very rich private universities and at the bottom there are a lot of institutions which are what we would call community colleges, neither of which are included in the Canadian data.  To deal with this I chose to compare professors at public doctoral institution in the US only with professors at 13 research-intensive universities in Canada for which the National Faculty Data Pool has data (i.e. U-15 minus Montreal and Laval).

The third and trickiest issue is how to account for the fact that American salaries cover 9 months of work while Canadian ones are for 12, with Americans free to top up their salary by up to 2 months’ worth of their regular salary (2/9 = 22%) with money from research grants (these are sometime called “summer salary”.  To show a range of possible comparators, I show 9-month US base salaries, 12-month salaries for those with summer salary, and a weighted average of the two, based on data from the National Research Council’s Assessment from Research-Doctorate Programs in the United States suggesting that 69% of academic staff at research institutions hold research grants.  Note that no data exists as to how often grant money gets used from summer salary; for lack of data I assume here that everyone who receives a grant takes the maximum two months, which almost certainly results in an overestimate for US salaries, so caveat emptor, etc.

With that in mind, Figure 2 provides the comparison of salaries across professors at public research universities in Canada and the US.

Figure 2: Canadian vs. US Professorial Salaries at Public Doctoral/Research Universities by Rank, 2014-15, in Canadian $ at PPP.

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The quick conclusion from figure 2 is that base salaries in Canada are higher than those in the US, but that much of this goes away once research dollars are included, especially for full professors.  However, across all ranks, Canadian professors at research universities not only have higher average salaries ($144,153) than American ones ($127,298), and that this result remains true even if we look only at American professors with research grants ($134,879).

Now on to figure 3 where we look at changes in salaries over the past five years.  I’ve again restricted the comparison to research/doctoral universities, but for fun I’ve included US privates.

Figure 3: Real Change in Salaries, in Canadian at Public Doctoral/Research Universities by Rank, 2009-10 to 2014-15, Canada vs. US

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Across all ranks at doctoral/research universities, Canadian research university professors’ salaries rose 13.3% after inflation.  For US privates, the equivalent was 2.9% and at US publics it was negative 0.8%.  At each individual rank, the differences are smaller (and in fact at the assistant professor level, rises in Canadian salaries are smaller than in the US).  Why the difference?  Well, mainly, it’s that in the two countries we are seeing two completely different demographic shifts.  In the US, a decreasing percentage of professors are of “full” status, whereas in Canada it is increasing.  Their lower ranks are growing, ours are shrinking.

I would just remind everyone that these stonking increases in compensation are occurring at a period which the Canadian Association of University Teachers (CAUT) continues to refer to as one of “austerity”.  I therefore propose that CAUT get on the phone to their counterparts in Greece and explain this fascinating model of austerity in which the average professor is receiving annual raises equal to 1.5 to 2.5% above inflation, year after year.  I bet they’d really get a kick out of it.

November 28

Canadian Enrollment Data, 2014-15

Statistics Canada published the 2014-15 enrollment data last week and I thought I would give you a bit of an overview.  The data is based on snapshots of enrollment taken in the fall, so we’re talking a 24-month lag here (most other OECD countries can do this in 12-18 months), but this is Statscan so just be glad you’re getting any data at all.

The headline news is that enrollment in 2014-15 was up – barely – from 2.048 million to 2.055 million students (i.e. by 7,000 students), which puts enrollment at an all-time high. As a percentage of the Canadian population, students are thus now 5.8% of the Canadian population.  Just to put that into perspective: that’s roughly the population of Saskatchewan and Nova Scotia combined.  if students were a province, they would be the country’s fifth-largest.  Students make up roughly the same proportion of the population that works in education, law, social services and government services occupations combined, or roughly 5.5 times the number of individuals employed in natural resource occupations.

Figure 1: Enrollment by Level and Intensity, 1994-95 and 2004-05

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But while enrollment increased at both universities and colleges, there are some interesting dynamics if you poke around a bit under the hood.  The main one is that part-time enrollment fell substantially for the second year in a row at universities and third at colleges.  Full-time and part-time enrollments are going in completely different directions at the moment.

Figure 2: Changes in Full- and Part-time student enrollments, 2010-11 to 2014-15 (2010-11 = 100)

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The other really interesting trend in enrollments has to do with international students.  Over the past five years, total full-time enrollment at colleges and universities has increased by 126,000.  48% of that increase is accounted for by international enrollments.  Or, to put that another way: domestic student enrollment has increased by about 5%, but international student enrollment has increased by 56%.  These figures are shown below in figure 3.  Apologies for lines not being distinct, but that’s a factor of the trends being almost identical in both the college and university sectors.

Figure 3: Changes in Domestic and International Full- time enrollments, 2010-11 to 2014-15 (2010-11 = 100)

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That last graph is especially important when you think about institutional finances.  Assuming (at a high level of generality) that tuition income from international students is about three times what it is for domestic students, that implies that over 75% of the increase in tuition revenue over the period 2010-11 to 2014-15 comes from international students.   I’ll try to get into more detail on this at some point before Christmas, but by my back-of-the-envelope reckoning that makes international student fees responsible for almost exactly 50% of total increase in operating funds over those five years.

Let that sink in for a bit.  Fifty percent.

There are a lot of implications to that number.

November 25

The Australian Experiment in Cutting Red Tape

One thing everybody hates is red tape – especially pointless reporting requirements which take up time, money and deliver little to no value.  Of late, Canadian universities have been talking more and more about various types of reporting burden and how they’d really like being freed from some of it.  For those interested in this subject, it’s instructive to see how the issue has been handled in Australia.

The peak university body in Australia (called – appropriately – Universities Australia) began the drumbeat on this issue about six years ago.  They commissioned an independent third party (self-interested note to university associations: 3rd party investigations give your policy positions credibility!) to provide an authoritative report on Universities’ reporting requirements.  The report went into exhaustive detail in terms of how much staff time and IT resources institutions devote to each of 18 separate data reports required by the commonwealth government.  What they found was that the median Australian institution was spending 2,000 days of staff time and $800-900,000 per year on these reports, roughly a third of which went on collecting data on research publications.

Now, that may not sound like much.  But that’s only data going to the federal ministry responsible for higher education.  It did not include reporting costs related to quality assurance bodies and submissions to the national higher education regulator(s).  It did not include the costs of research assessment exercises (and certainly didn’t count the cost of applying to various funding agencies for money, which is a whole other nightmare story in and of itself).  It did not count regulation related to state governments (Australia is a federation but in contrast to Canada, higher education is mostly but not exclusively a federal responsibility), or anything relating to its required reporting to the charities commission, reporting on government compacts (similar to Ontario’s MYAs), health agencies, the Australian Bureau of Statistics, professional registration bodies….the list goes on.

The point here is not that institutions should be free of reporting requirements.  If we want transparency and good system stewardship, we need institutions to be providing a lot of data – in many cases much more data than they currently provide.  The point is that nobody is co-ordinating those data requests and making any effort to reduce overlap.  If you’re getting data/reporting requests from a dozen or more different bodies, it would be useful if those bodies spoke to each other once in awhile.  Also, as a general principle, or keep regulatory requests to what is absolutely needed rather than what regulators might just like to know (appallingly, the Government of Ontario last year attached a rider to a childcare bill gave itself the right to take any piece of data held by an Ontario university or college, including physical and mental health records, something which in my line of work is known as “as far away from good practice as humanly possible”).

There were, I think, two key suggestions which came out of this exercise. One was that they government should be required to post a comprehensive annual list and timetable of institutional reporting.  This was less for the universities’ benefit than the government’s: it helps to be actively reminded about other people’s reporting burdens.  The second was a very sensible suggestion about how a streamlining of requirements could be handled by the creation of a national central data repository.  The design of this system is shown in the figure below.

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This is similar in spirit to the way North American universities have created “common data sets” in reaction to requests for information from rankers and guide-book makers; where it differs is that it brings data customers into the heart of the data collection process, and it explicitly requires them to put data out into statistical reports for public consumption.  In other words, part of the quid pro quo for more streamlined reporting is more transparent reporting.  Which is a lesson I think Canadian institutions should take to heart.

The results of this were mixed.  The government held its own hearings on regulation which led to significant cuts to the main higher education regulator, TEQSA, which left the university somewhat relieved (they got a much lighter-touch regulator as a result) and somewhat horrified (while they liked a light touch for themselves, they were panicked at the prospect of light touch regulation for the country’s many private providers).  As for the report commissioned by Universities Australia, while the Government responded to the review in a very positive manner  very little in terms of concrete change seems to have happened.

Still, these reports change the tone of the discussion around higher education at least for a time.  It would be useful to try something similar here – especially in Ontario.

November 24

Who’s More International?

We sometimes think about international higher education as being “a market”. This is not quite true: it’s actually several markets.

Back in the day, international education was mostly about graduate students; specifically, at the doctoral level. Students did their “basic” education at home and then went abroad to get research experience or simply emigrate and become part of the host country’s scientific structure. Nobody sought these students for their money; to the contrary these students were usually getting paid in some way by their host institution. They were not cash cows they did (and still do) contribute significantly to their institutions in other ways, primarily as laboratory workhorses.

In this market, the United States was long the champion since its institutions were the world’s best and could attract top students from all over the world. In absolute terms, it is still the largest importer of doctoral students. But in percentage terms, many other countries have surpassed it. Most of them, like Switzerland, are pretty small and small absolute numbers of international students nevertheless make up a huge proportion of the student body (in this case, 55%). The UK and France, however, are both relatively large markets, and despite their size they now lead the US in terms of percentage of doctoral students who are international (42 and 40% vs 35%). Canada, at 27%, is at right about the OECD average.

Figure 1: International Students at Doctoral Level as Percentage of Total
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Let’s turn now to Master’s students, who most definitely *are* cash-cows. Master’s programs are short degrees, mainly acquired for professional purposes and thus people are prepared to pay a premium for good ones. The biggest market here are for fields like business, engineering and some social sciences. Education could be a very big market for international Master’s but tends not to be  because few countries (or institutions, for that matter) seem to have worked out the secret for international programs in what is, after all a highly regulated profession. In any case, this market segment is where Australia and the UK absolutely dominate, with 40 and 37% of their students being international. Again, Canada is a little bit better than the OECD average (14% vs. 12%).

Figure 2: International Students at Master’s Level as Percentage of Total
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Figure 3 turns to the market which is largest in absolute terms: undergraduate students. Percentages here tend to be smaller because domestic undergraduate numbers are so large, but we’re still talking about international student numbers in the millions here. The leader here is – no, that’s not a misprint – Austria at 19% (roughly half of them come from Germany – for a brief explainer see here). Other countries at the top will look familiar (Great Britain, New Zealand, Australia) and Canada doesn’t look to bad, at 8% (which strikes me as a little low) compared to an OECD average of 5%. What’s most interesting to me is the US number: just 3%. That’s a country which – in better days anyway – has an enormous amount of room to grow its international enrollment and if it hadn’t just committed an act of immense self-harm would have be a formidable competitor for Canada for years to come.

Figure 3: International Students at Bachelor’s Level as Percentage of Total

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Finally, let’s look at sub-baccalaureate credentials, or as OECD calls them, “short-cycle” programs. These are always a little bit complicated to compare because countries’ non-university higher education institutions and credentials are so different. Many countries (e.g. Germany) do not even have short-cycle higher education (they have non-university institutions, but they still give out Bachelor’s degrees). In Canada, obviously, the term refers to diplomas and certificates given out by community colleges. And Canada does reasonably well here: 9% of students are international, compared to 5% across OECD as a whole. But look at New Zealand: 24% of their college-equivalent enrollments are made up of international. Some of those will be going to their Institutes of Technology (which in general are really quite excellent), but some of this will also be students from various Polynesian nations coming to attend one of the Maori Wānanga.
Figure 4: International Students in Short-Cycle Programs as Percentage of Total

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Now if you look across all these categories, two countries stand out as doing really well without being either of the “usual suspects” like Australia or the UK. One is Switzerland, which is quite understandable. It’s a small nation with a few really highly-ranked universities (especially ETH Zurich), is bordered by three of the biggest countries in the EU (Germany, France, Italy), and it provides higher education in each of their national languages. The more surprising one is New Zealand, which is small, has good higher education but no world-leading institutions, and is located in the middle of nowhere (or, at least, 5000 miles from the nearest country which is a net exporter of students). Yet they seem to be able to attract very significant (for them, anyway) numbers of international students in all the main higher education niches. That’s impressive. Canadians have traditionally focused on what countries like Australia and the UK are doing in international higher education because of their past track record. But on present evidence, it’s the Kiwis we should all be watching, and in particular their very savvy export promotion agency Education New Zealand.

Wellington, anyone?

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