HESA

Higher Education Strategy Associates

January 21

Classroom Economics (Part 3)

(If you’re just tuning in today, you may want to catch up on Part 1 and Part 2)

Back to our equation: X = aϒ/(b+c), where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning one student sitting in one course for one term), “ϒ” is average compensation per professor, “a” is the overhead required to support each professor, “b” is the government grant per student credit hour, and “c” is the tuition revenue per credit hour.

I noted in Part 1 of this series that most profs don’t actually teach the 235 credit hours our formula implied. Partly that’s because teaching loads aren’t distributed equally.  Imagine a department of ten people, which would need to teach 2350 credit hours in order to cover its costs.  If just two people teach the big intro courses and take on 500 credit hours apiece, the other 8 will be teaching a much more manageable 169 credit hours (5 classes of under 35 students for those teaching 3/2).

Now, while I’m talking about class size, you’ll notice that this concept isn’t actually a factor in our equation – only the total number of credit hours required to be taught.  You can divide ‘em up how you want.  Want to teach 5 courses a year?  Great.  Average class size will be 47.  Want to teach four courses?  No sweat, just take 59 students per class instead.  It’s up to you.

When you hear professors complain about increased class sizes, this is partly what’s going on.  As universities have reduced professors’ teaching loads (to support research, natch) without reducing the number of students, the average number of students per class has risen.  That has nothing to do with underfunding or perfidious administrators; it’s just straight arithmetic.

But there is a way to get around this.  Let’s say a university lowers its normal teaching load from 3/2 to 2/2, as many Canadian institutions have done in the last two decades.  As I note above, there is no necessary financial cost to this: just offer fewer, larger courses.  Problem is, no university that has gone down this path has actually reduced its course offerings by the necessary 20% to make this work.  Somehow, they’re still offering those courses.

That “somehow” is sessional lecturers, or adjuncts if you prefer.  They’ll teach a course for roughly a third of what a full-time prof will.  So their net effect on our equation is to lower the average price of academic labour.  Watch what happens when we reduce teaching loads from 3/2 to 2/2, and give that increment of classes over to adjuncts.

(.8*150,000) + (.2*50,000) = $130,000

X= 2.27($150,000)/($600+$850) = 235

X= 2.27(130,000)/($600+$850) = 195

The alert among you will probably note that the fixed cost nature of “a” means that it would likely rise somewhat as ϒ falls, so this is probably overstating the fall in teaching loads a bit.  But still, this result is pretty awesome.  If you reduce your faculty teaching load, and hand over the difference to lower-paid sessionals, not only do you get more research, but the average teaching load also falls significantly.  Everyone wins!  Well, maybe not the sessionals, but you get what I mean.

This underlines something pretty serious: the financial problems we have lay much more on the left side of the equation than on the right side.  However much you think professors deserve to be paid, there’s an iron triangle of institutional income, salaries, and credit hours that cannot be escaped.  If you can’t increase tuition, and more government money isn’t forthcoming, then you either have to accept higher teaching loads or lower average salaries.  And if wage rollbacks among full-time staff isn’t in the cards, then average costs are going to be reduced through increased casualization.  Period.

Or almost, anyway. To date we’ve focused just on ϒ – but what about “a”?  Can’t we make that coefficient smaller somehow?

Good question.  More tomorrow.

January 20

Classroom Economics (Part 2)

Yesterday, I introduced the equation X = aϒ/(b+c) as a way of setting overall teaching loads. Let’s now use this to understand how funding parameters drive overall teaching loads.

Assume the following starting parameters:

1

 

 

 

 

 

Where a credit hour = 1 student in 1 class for 1 semester.

Here’s the most obvious way it works.  Let’s say the government decides to increase funding by 10%, from $600 to $660 (which would be huge – a far larger move than is conceivable, except say in Newfoundland at the height of the oil boom).  Assuming no other changes – that is, average compensation and overhead remain constant – the 10% increase would mean:

X= 2.27($150,000)/($600+$850) = 235

X= 2.27($150,000)/($660+$850) = 225

In other words, a ten percent increase in funding and a freeze on expenditures would reduce teaching loads by about 4%.  Assuming a professor is teaching 2/2, that’s a decrease of 2.5 students per class.  Why so small?  Because in this scenario (which is pretty close to the current situation in Ontario and Nova Scotia), government funding is only about 40% of operating income.  The size of the funding increase necessary to generate a significant effect on teaching loads and class sizes is enormous.

And of course that’s assuming no changes in other costs.  What happens if we assume a more realistic scenario, one in which average salaries rise 3%, and overhead rises at the same rate?

X= 2.27($154,500)/($660+$850) = 232

In other words, as far as class size is concerned, normal (for Canada anyway) salary increases will eat up about 70% of a 10% increase in government funding.  Or, to put it another way, one would normally expect a 10% increase in government funding to reduce class sizes by a shade over 1%.

Sobering, huh?

OK, let’s now take it from the other direction – how big an income boost would it take to reduce class sizes by 10%?  Well, assuming that salary and other costs are rising by 3%, the entire right side of the equation (b+c) would need to rise by 14.5%.  That would require an increase in government funding of 35%, or an increase in revenues from students of 25% (which could either be achieved through tuition increases, or a really big shift from domestic to international enrolments), or some mix of the two; for instance, a 10% increase in government funds and a 17% increase in student funds.

That’s more than sobering.  That’s into “I really need a drink” territory.  And what makes it worse is that even if you could pull off that kind of revenue increase, ongoing 3% increases in salary and overhead would eat up the entire increase in just three years.

Now, don’t take these exact numbers as gospel.  This example works in a couple of  low-cost programs (Arts, Business, etc.) in Ontario and Nova Scotia (which, to be fair, represent half the country’s student body), but most programs in most provinces are working off a higher denominator than this, and for them it would be less grim than I’m making out here.  Go ahead and play with the formula with data from your own institution and see what happens – it’s revealing.

Nevertheless, the basic problem is the same everywhere.  As long as costs are increasing, you either have to get used to some pretty heroic revenue assumptions (likely involving significant tuition increases) or you have to get used to the idea of ever-higher teaching loads.

So what are the options on cost-cutting?  Tune in tomorrow.

January 19

Classroom Economics (Part 1)

One of the things that continually astonishes me about universities is how few people who work within them actually understand how they are funded, and what the budget drivers really are.  So this week I’m going to walk y’all through a simplified model of how the system really works.

Let’s start by stating what should be – but too often isn’t – the obvious: universities are paid to teach.  They are paid specific amounts to do specific pieces of research through granting councils and other kinds of research funding arrangements, but the core operating budget – made up of government grants and tuition fees – relates nearly entirely to teaching.  This is not in any way to suggest that teaching is all professors should do.  It is, however, to say that their funding depends on teaching.  Want a bigger budget?  Teach more students.

This link is more obvious in some provinces than others.  In places like Ontario and Quebec, which have funding formulae, the link is clear: each student is worth a particular amount of money based on their field and level of study.  In others, like Alberta and British Columbia, where government funding comes as a block, it’s not quite as clear, but the principle is basically the same.

So the issue within the institution is how to get the necessary amount of teaching done.  One way to work out how much teaching is needed is this little formula:

X = aϒ/(b+c)

Where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning a student student sitting in one course for one term – a class with 40 students is 40 credit hours), “ϒ” is average compensation per professor, “a” is the overhead required to support each professor, “b” is the government grant per student credit hour, and “c” is the tuition revenue per credit hour.

Now, let’s plug in a few numbers here.  Average professorial compensation, including benefits, is approaching $150,000 in Canada.  Faculty salaries and benefits are about 44% of total operating budgets, meaning that for every dollar spent on faculty compensation, another $1.27 is spent on other things.  For argument’s sake, let’s say the average income from government is about $6,000 per student (or $600 per credit hour) and average tuition income, including that for international students, is about $8,500 per student (or $850 per credit hour).  These last two figures will vary by field and level of study, and by province, but those numbers are about right for undergraduate Arts in Ontario.

So, what does our equation look like?

X = 2.27*150,000/($600+$850) = 235.

In this simplified world where all students are undergraduate Arts students, at current faculty salary rates and university cost structure, professors on average have to teach 235 credit hours in order to cover their salaries.  If you’re teaching 3/2, that means 5 classes of 47 students each; if you’re teaching 2/2 that means 4 classes of 59 students apiece.

Now, I know what you’re going to say: there’s not actually that many profs teaching that many students.  And that’s true mainly because I’m low-balling the per-student income figure.  Add in graduate students and the per-student income rises because of more government subsidy.  Choose another discipline (Engineering, say), and income rises for the same reason.  But at universities like, say, Wilfrid Laurier, Saint Mary’s, or Lethbridge, which are big on Arts, Science, and Business, and low on professional programs, this is pretty much the equation they are looking at.

More tomorrow.

January 16

Some Interesting New Models of Student Representation

Historically, the development of student movements has been heavily linked with nationalism, anti-colonialism, modernity, and the development of the welfare state (i.e. they were pro all four of those).  However, as higher education has become massified around the world, students have by and large become less concerned with larger social issues, and more concerned with narrower, student-based concerns.  That hasn’t always led to a loss of radicalism (viz. the carré rouge), but it’s broadly true that over time student leadership has become increasingly demure.

Arguably, this trend actually began in Canada.  The Ontario Undergraduate Student Alliance and Canadian Alliance of Student Associations – both formed in the early/mid-90s – were possibly the first student groups anywhere in the world that viewed themselves as interest groups rather than “movements”.  This is an important distinction: interest groups are prepared to act as insiders in order to gain benefits for their members, while movements resist working with insiders for fear of losing “purity”.

But I would argue there are a couple of other student organizations that have taken things considerably further.  The first is the European Students’ Union (ESU), which is a federation of various national unions.  Their focus is to lobby Brussels, which might sound like a pretty easy job since education policy is still mostly decided in individual countries (though of course our own Canadian Federation of Students [CFS] has managed to lobby Ottawa on tuition for 35 years without realizing fees are under provincial jurisdiction).  But by adjusting its work to mirror the rather technocratic work done by the European Commission, the ESU has turned into one of the nerdiest and best-spoken student groups in the world.

Want proof?  ESU talks intelligibly (arguably more so than some national governments) about quality assurance and the role of students in ensuring it (do take a look at their series of publications on the subject).  It also has done a lot of work looking at graduate employability and how to improve it.  This is really good stuff.

But the UK’s National Union of Students has perhaps gone even further in that it seems to have made a strategic decision to become partners with institutions, so as to drive improvements in student experience.  It co-sponsors the National Student Survey (which is kind of a cross between NSSE and the old Globe and Mail) and the Student Engagement Partnership, which acts as a resource for institutional practitioners across the country.  It creates a set of tools for individual member institutions to help students benchmark and improve teaching quality at institutions.  And while I can understand people being upset that NUS has chosen to focus on this stuff rather than lead a fire-and-brimstone attack on the Tory government for fee hikes, the fact remains: this is a really impressive contribution to improving educational quality and the student experience.

Could these kinds of innovations happen here?  I’d say it’s a pretty solid no on the CFS side, where this stuff would look too much like giving in to The Man.  For the non-CASA schools, it’s possible, though unlikely.  Organizations like OUSA and CASA are, for the moment, quite focused on lobbying government on financial issues rather than dealing with institutions.  The real innovator lately has been Students NS, whose members have launched an independent governance review of… themselves.  More self-centred than the UK and European initiatives, perhaps, but still a novel and welcome step to protect students’ interests.

Bon weekend.

January 15

Free Community College in Canada?

As Canadians, we have a tendency to pay an excess amount of attention to developments in the US.  For instance, people are already asking whether the Obama free community college model would work in Canada.  But this is actually two questions.  The first is whether or not someone could make community college free; the second question is whether that someone could be the federal government?

Let’s take the second question first: could the federal government be the ones to do this in Canada?  The answer, pretty clearly, is: no, they couldn’t.  Formally, the Canadian and American constitutions look pretty similar in the way education is clearly a provincial/state responsibility.  But the US has evolved a couple of ways by which the federal government can enter the education system.  The first is by spending big on student aid, and then imposing conditions on the receipt of such aid.  The second is by offering states conditional matched funding to get them to do things.

Could Canada do the same?  Not really.  First of all, the ratio of provincial to federal spending, even including student aid, is nowhere near enough for the feds to get a foot in the door on most policy matters.  Second, the Americans are much more comfortable with notions of asymmetric federalism than we are.  Obama isn’t expecting all states to participate; in Canada, we tend to view these things as all-or-nothing: either everyone is in (or has been paid off via a special deal), or no one is.

Complicating things further is that different provinces and states charge different amounts of tuition.  In the US, Obama has made a small nod to this by saying that states with already low tuition won’t be required to chip in as much – and states are ok with that kind of language.  In Canada, it would be an utter nightmare.  And it’s just not differences in tuition (fees in Ontario are twice what they are in are Newfoundland) or participation rates (college part rates in Ontario are three times what they are in New Brunswick) that make it tough to determine the right amount of compensation.  Quebec already has free college – how on earth could it be compensated under a free community college plan?  You’d almost have to go to a whacking huge lump sum, and try handing over it as a conditional transfer; but since we’ve never had conditional transfers in education, this seems like an unlikely pass.

That still leaves the question of whether individual provinces might take this route.  It’s obviously possible (see: Quebec); in my experience, however, provinces get spooked by talk of “free”.  During my time as a consultant, I’ve suggested the free college idea to two provinces (and no, I’m not telling you which ones), and both times the idea was rejected out-of-hand.

Only one premier has gone on the record on this idea, thus far: Kathleen Wynne.  According to Metro:

She said she is worried this model would actually limit access to post-secondary institutions because “there would be a limited subsidy that would be available and that’s not something I want to do. What I want to do is increase access and I want everyone who’s qualified is to be able to access a college or university or a skilled trade.”

<headdesk>

What utter gibberish.  The most coherent spin you can put on her statement is that she prefers the present policy of giving a crapload of money to upper-middle-class kids in universities, rather than shift the spending-focus to lower-income kids in college.  Sad, but cynical and true.

January 14

Alternatives, Please

Recently, there have been several articles about how university prioritization plans are divisive, or that they are morale-suckers, or that the faculty “don’t support them”.  The most recent case comes out of Wilfrid Laurier.  But why all the fuss? After all, setting priorities happens all the time; it’s part of the business of running an institution.  From one year to the next, investments may be increased in certain areas, there may be cutback in others, or wholly new programs may be introduced.  Nothing unusual there.

Perhaps it’s about context.  Although program prioritization is essentially about resource allocation and organizational strategy, and not necessarily about short-term cuts, it has certainly been used for this purpose at many institutions in Canada.  And to the extent that the perception is “prioritization = cuts”, it’s not exactly an enormous surprise that faculty oppose it.  Turkeys, by and large, don’t vote for Thanksgiving.

But the question is not whether prioritization is bad because it sometimes leads to/accompanies cuts.  The fact is, in Canada, institutional income (i.e. tuition and government grants) is rising more slowly than faculty salary mass, and so cuts are inevitable.  The real question is: are there other methods or processes for dealing with budget compression that faculties would support?

There really aren’t that many ways you can deal with cuts in post-secondary institutions.  One route is simply to share the pain, and cut all units by the same amount.  This was a widely-used tactic in the 1990s, and many people have very negative views about its effects.  There is a perception – at some universities at least – that good units, which should have received investment, were sacrificed to help units that actually weren’t very good.  The desire for a more surgical approach is why some – and not just those in administration – have applauded the prioritization process.

Prioritization is challenging because it attempts to quantify both program quality and relevance.  Ah, but how do you define quality and relevance, ask the skeptics?  Fair point – it’s tricky – but most processes I’ve seen have involved at least some community consultation in developing the relevant indicators with which institutions make decisions.  Provided everyone participates in good faith, it’s a respectable way to proceed – and more to the point, it’s a transparent way to proceed because the evidence on which decisions are made is public (or at least public within the university community – the actual data tends to remain behind a firewall).  Done well, institutions should find themselves stronger, not weaker, for having some priorities.

Now, it’s possible that other strategies exist: ones that involve neither prioritization nor across-the-board cuts (defenders of responsibility-centred budgeting will usually suggest that their methods are pretty useful in this respect).  But what’s notable about the attack on prioritization from groups like the Ontario Confederation of University Faculty Associations (OCUFA) is that it is not accompanied by any other suggestions about how to proceed.  All of this suggests that the fuss is more about the cuts – which are inevitable – than about the method for dealing with them.

This opposition is leading OCUFA to support some very weird things.  Take for instance the excitement with which they point to a piece co-authored by Trent President Leo Groarke, which suggests that prioritization is unnecessary because good administrators don’t need to collect a lot of data to know which parts of the institution aren’t preforming so well.  But Groarke’s argument isn’t one against cutting when and where necessary; it’s an argument that competent administrators should have the freedom to cut without going through the time-consuming rigamarole of collecting and presenting data.

But is that really what people want?  A process that gives administration more discretion, and where the information on which decisions are based is not transparent?

I’d guess the answer is no.  But until someone makes a positive case for a different process by which priorities can be set, it’s hard to be sure.

January 13

Packaging Student Aid

One of the things about student aid that makes it such great fun as a policy area is that it’s as much about framing as it is about actual policy.  For instance, which of the following two policies would you like to have?

a)      A policy where students are asked to bear a huge amount of debt – over $100,000 in some cases for an undergraduate degree – over 25 years, and where three-quarters of students will never repay their loans in full; or:

b)      A policy where graduates are asked to pay a 9% surtax for 25 years, up to a maximum of about $100,000, but much less (possibly even $0) if their earnings are low.

If you’re a regular reader of the Guardian, you’ll probably recognize the first policy as being the one implemented by the Cameron government in 2012, to cover fees in English universities.  That’s the one the progressive types are always pointing at and shouting: “Look!  Students are being horribly indebted AND the government is losing lots of money through the program!  Quelle fiasco!”

But here’s the thing: that second program is also the English loan scheme.  As I’ve explained before, for the three-quarters or so of graduates not expected to pay off their loans in full, the scheme is simply a graduate tax.  It’s not explained that way, but that’s what it is.  It’s a packaging issue.

There’s something similar going on in student aid policy in the United States; namely, the interest in something called “Income Share Agreements”.  It’s been kicking around for awhile (the American Enterprise Institute wrote about it a year ago), but is getting more of a hearing these days because Florida Senator, and potential Presidential candidate, Marco Rubio is now backing it.  It’s basically a Human Capital Contract – someone gives you money today, and you agree to give them a set portion of your income for a set number of years.

If that sounds like a Graduate Tax, that’s because it’s exactly how a graduate tax works – the difference in this case simply being that you’re not giving that money to government, but rather to an individual who has chosen to “invest” in you.  The beneficiary is different, but the flow of funds is precisely the same.  But that difference is enough to get the idea some love from a Tea Party favourite.

And that is to say nothing of our experience in Canada where the CFS, which absolutely hates income-contingent loans, and has done so for years, applauded the introduction of the Repayment Assistance Program (RAP) – which basically makes the Canada Student Loans Program fully income-contingent – because the government simply chose not to call the program “income contingent”.

This all goes to show: in student aid, few people actually look at substance.  The real debate is about the packaging.

January 12

That Obama Free Community College Proposal

I was going to start on a series about growth in non-academic staff numbers today, but the news out of Washington late last week was too spectacular, so I’m bumping it.  Did Obama really say he wanted to make community college free?

Well, yes he did.  But he might not have meant it the way we all heard it.  And whatever happens, it’s unlikely to occur any time soon.

Let’s start with what he actually said (White House fact sheet, here).  He said he would make tuition free for “responsible students” (read: on course to graduate on-time, with a 2.5 GPA) attending community colleges and taking courses towards a 4-year degree, or an occupational training course in an “in-demand” field.  But there were some catches.  Only institutions that adopt “promising and evidence-based” programs to improve graduation rates will qualify.  States also have to agree to participate, kick-in 25% (or thereabouts) of the funding without cutting any other higher education programs, plus adopt a new outcome-based formula-funding system that funds completions rather than enrolments.  It’s not clear how many states will agree to this (nor, indeed, is there much likelihood that a republican congress would agree to those kind of state spending mandates).

There are obviously a whole bunch of questions that weren’t answered in the initial announcement.  The main one was whether Obama meant “free”, or if he actually meant “government would cover the cost”.  That makes a big difference; Pell grants already cover the cost of tuition for nearly half of all community college students.  If that were the standard, it would imply that all of the new money would be going to students currently considered wealthy enough not to need grants.  That would make the new program very similar in distributional consequences to the notionally universal $1,500 refundable tax credit that Bill Clinton introduced in his second term, but which in fact was only available to those receiving less than $1,500 in Pell.

Another question, not raised much in the US, is: if the initiative is in fact successful at increasing the number of students at 2-year institutions (some of whom, to be fair, could simply be people switching from 4-year to 2-year), where are they all going to study?  In many states – California, for example – the systems are already at breaking point.  Who funds the growth required to make this system successful?

A lot of people seem to think that the President really did mean “free tuition” (i.e. no displacement of Pell grants, which are income-based), based on a comment made last week by his spokesman.  But on the other hand, the spokesman also said the program had been costed at $60/billion over ten years, or $6 billion per year, or about $666 per community college student.  Given that average tuition is about $3,800, it’s hard to see how this plan makes sense unless the administration: a) doesn’t expect most states to participate; b) doesn’t think many students will qualify; and, c) doesn’t in fact mean free tuition, but rather just “cover the cost”.  Or maybe the administration threw together a bunch of nonsense numbers that don’t matter.  Regardless, the likelihood of this becoming policy anytime soon is pretty low; it’s value is mainly rhetorical and as a marker for future policy initiatives by future Presidents.

As I said a last year, free tuition in community colleges makes a fair bit of sense.  The main rationale for fees is that: a) there are substantial private benefits, and, b) the clientele is mainly better-off and don’t need all the subsidies.  But those don’t hold true in community colleges the way they do in universities.   So while there might be some better ways to use that amount of money, this is still a generally worthwhile and positive initiative.  Would that a Canadian government could be so bold.

January 09

The Canada Apprentice Loan: Adventures in Federalism

As I noted a few months back when writing about the 50th anniversary of the Canada Student Loans Program, CSLP was at the heart of one of the federation’s key moments in fiscal federalism.  In 1964, Lester Pearson was running into opposition in Quebec on two of his major policy initiatives: the Canada Pension Plan and the Canada Student Loans Program.  A deal on both was eventually struck: any province could “opt-out” of a federal program and receive a compensating “alternative payment”, so long as they ran a program that provided citizens with essentially the same benefits.  The actual clause in the Canada Student Loans Act (stripped of some confusing jargon) reads as follows:

16. (1) Where the government of a province has, at least twelve months before the commencement of a loan year, informed the Minister in writing that a provincial student loan plan will be in operation in that province in that loan year and that [the province does not wish to participate in the CSLP], the Minister shall pay to the province… an alternative amount calculated as provided in this section.

Through to the early 90s, this was the standard way to create new programs in Canada.  If a province wanted out, you simply lopped-off a portion of the program’s budget and handed it to them.  It was only ever Quebec that wanted to do this, but in theory it was available to every province.

Now, along comes the Canada Apprentice Loans, announced in last year’s budget.  They have their own legislation, the Apprentice Loans Act, which became law last year via the budget omnibus legislation. This is a point worth underlining – it means that these loans are administered on a different legal basis than Canada Student Loans.  And what’s immediately apparent when you read the legislation is that not only has the concept of opting-out gone out the window, but it’s turned around, smashed the glass, and done a serious crowbar-job on the frame, too.

Here’s the new wording:

7. The Minister may pay a province the amount that is determined in accordance with the regulations if:

(a) the Minister determines that apprentices registered with the province are unable to enter into agreements for apprentice loans under section 4;

(b) the province has in place a program providing for financial assistance to apprentices; and

(c) the Minister considers that the purpose of the program is substantially similar to the purpose of this Act.

Put simply, provinces do not have the right to opt-out under the new Act.  The minister can choose to setup a deal and give compensation to a province if she/he chooses (which of course was immediately done with Quebec), but it’s a gift of the Minister.  If Alberta set up its own program and asked for treatment similar to Quebec, the Minister would be legally within his rights to tell them to take a long walk off a short pier.

The fact that this passed essentially unnoticed tells you something about the state of our federation.  Even ten years ago, this wording would have made Quebec go ballistic, and probably Alberta as well.  Now: nothing.  And so the government led by the man who drafted the Alberta firewall letter enacts the most centralist piece of new legislation in fifty years.

Kind of fascinating.

January 08

Canada Apprentice Loans: Adventures in Government

I know it’s exceptionally nerdy, but I highly recommend the experience of reading a new law’s regulatory impact statement, for no other reason than to get a taste of the sheer absurdity of government these days.

Take the regulations on the new Apprentice Loan Act. The executive summary on the cost-benefit of the program (scroll down a bit) reads as follows:

The Canada Apprentice Loan (CAL) will cost the Government of Canada (GoC) $74 million over 10 years, from 2014–15 to 2023–24. Benefits include income gains for additional apprentice completers as a result of the CAL. If a 10 percentage point increase in the completion rate due to the CAL were assumed, this would yield income gains of $185 million over 10 years, and net benefits to Canadians of $111 million.

The key word in that sentence is “assumed”. Or, in other words: they plucked some numbers out of the air to make the program look plausible.

To be fair to the folks who wrote this, there’s no good data available as to the likely impact apprentice loans might have on completion. There would be if the government had, at any time in the past six years, evaluated the effect of the Apprenticeship Incentive or Completion Grants, or the Tradesperson’s Tool Deduction. But the government hasn’t done any of this, so “assuming” numbers may have been the only way to go.

Another highly amusing aspect of the regulatory statement is the rationale for the program’s borrowing limit of $4,000/period of technical training. Supposedly, it’s equivalent to an apprentice’s lost earnings during a technical training period, but no source for the figure is given.

In all the largest occupational categories, the usual technical training period is 8 weeks. At a fairly generous estimate of $17/hr and 40 hours per week, the implied loss in gross earnings is about $5,440, with a net earnings loss of between $4,000 and $4,500, depending on what province you’re in. So the estimate is probably right, right?

Wrong. That math only works if you assume the apprentice does not receive EI during technical training. Once EI is factored in, apprentices would need to be making $25/hour in order to be losing $4,000 in wages per technical training period. Let me assure you: apprentices are not making $25/hour.

How could anyone make such errors, you ask? Simple: they aren’t errors. Nobody actually believes these numbers. They’re just made-up after the fact to provide cover for a decision that was made with an eye toward placating constituencies (read: construction companies) rather than addressing a real problem. It’s what happens when policy is made on the fly, and the public service isn’t asked for input until after budget night.

Some of you may read this and think: “Aha! Tory perfidy!” But resist that impulse if you can. Harper’s government is hardly the only one that does this kind of thing: the Ontario Liberals’ 30% Tuition Grant is a far more egregious example of the same process, and a more expensive one too. The OTG costs hundreds of millions of dollars per year, where the Apprentice Loans are projected to cost just $7 million/year (yes, yes, the budget said it would cost $25 million/year – now they’ve decided it will be less).

The real problem is that when Canadian governments of any stripe want to claim they’re “doing something” about education, they simply start writing cheques to learners (or their parents) and Hey, Presto! Problem solved! But the only “problem” this solves is the perception that governments aren’t doing anything about education.  Improving education – actually making a difference in terms of completion rates, or graduate quality, or what have you – that takes work. That takes thought. That requires politicians to concentrate for more than a couple of hours.

Most of all, it requires investments in institutions. And increasingly, governments seem reluctant to make those investments.

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