HESA

Higher Education Strategy Associates

May 23

A Rare Piece of Good Policy in Quebec

So, although it wasn’t widely noticed at the time, one really excellent piece of policy came out of the crap-fest that was the Quebec Education Summit, a couple of weeks ago; it’s a policy that deserves a great deal of wider study and emulation.  For the first time in Canadian history, a government managed to get rid of a crappy tax credit, and use it to improve targeted, needs-based subsidies.

Here’s what happened. The PQ, during its naked bid to win the affections of students in the run-up to the 2012 election, promised students that not only would they rescind the tuition hike imposed by the Liberal government, but they would also uphold the generous new student aid package the Liberals offered as a sweetener.  But of course, that meant spending double – so they needed a new form of revenue, at a time when the provincial budget was under pressure.

Enter the tax credits.

Now, if you’ve at all been following student aid over the last decade, you’ll know that Canada went tax-credit crazy around about 1998.  Mostly, it was a federal thing – a way for the feds to get money to parents for education, without the tedious mucking about of negotiating deals with provinces.  But some provinces went along for the ride, too. In any case, the value of education tax credits rapidly surpassed the combined value of grants and loan remission.

Total Value of Education Tax Credits vs. Grants & Remission, Canada, 1990-91 to 2009-10, in Billions of 2010 Dollars

 

 

 

 

 

 

 

 

 

 

 

 

Why does this matter?  Because tax credits are given out without regard to income or need.  And since kids from better-off backgrounds are more likely to go to PSE, tax credit expenditure, on aggregate, mostly ends up in the hands of people from the top 2 income quartiles.  Grants, on the other hand, are more likely to end up in the hands of people from the bottom 2 quartiles (the reason they don’t end up there entirely is because a lot kids from richer backgrounds get quite a lot of aid once they turn 22, and become “independent” students).

Distribution of Benefits by Income Quartile, for Selected Student Assistance Measures

 

 

 

 

 

 

 

 

 

 

 

 

Source: Usher, A (2004) Who Gets What? The Distribution of Government Subsidies for Postsecondary Education in Canada. Toronto: Educational Policy Institute.   

Now, over the past decade, a number of groups have recommended replacing tax credits with grants of some kind – even the CFS, who bizarrely denounce tax credits as regressive, even though they have EXACTLY the same re-distributive consequences as the tuition cuts which the CFS backs so fervently (consistency is not their strong suit).  Almost everyone – bar Michael Ignatieff – ignored these calls, essentially on the grounds that  Canadians wouldn’t stand for what would amount to a tax hike.

Well, now the PQ has proved them wrong.  A government has converted a regressive universal program into a targeted progressive one, to no opposition whatsoever, even in a highly-taxed province.  Policy-makers in the rest of the country should take note.

May 22

Bad Arguments for Basic Research

Last week’s announcement that the NRC was “open for business” has, if nothing else, revealed how shockingly weak most of the arguments are in favour of “basic” research.

Opponents of the NRC move have basically taken one of two rhetorical tacks.  The first is to present the switch in NRC mandate as the equivalent of the government abandoning basic science.  This is a bit off, frankly, considering that the government spends billions of dollars on SSHRC, NSERC, CIHR, etc.  Even if you’re passionate about basic research, there are still valid questions to be answered about why we should be paying billions of dollars a year to government departments doing basic research when the granting councils fund universities to ostensibly do the same thing.

The second argument is to say that government shouldn’t support applied science, because: a) it’s corporate welfare, and b) all breakthroughs ultimately rely on basic science, and so we should fund that exclusively.  It seems as though those who take this line have never heard of Germany’s Fraunhofer Institute, a publicly funded agency in Germany which does nothing but conduct applied research of direct utility to private enterprises.  It’s generally seen as a successful and useful complement to the government’s investments in basic science through the Max Planck Institute, and to my knowledge, Germany has never been accused of being anti-science for creating and funding Fraunhofer.

Another point here: the benefits of “basic” research leak across national borders. Very little of the upstream basic research that drives our economy is Canadian in origin.  So while it’s vitally important that someone, somewhere, puts a lot of money down on risky, non-applied research, individual countries can – and probably should – make some different decisions on basic vs. applied research based on local conditions.

The relative benefit of a marginal dollar investment in applied research vs. basic research depends on the kind of economy a country has, the pattern of firm size, and receptor capacity for research.  It’s not an easy thing to measure accurately – and I’m not suggesting that the current government has based its decision on anything so empirical – but it’s simply not intellectually honest to claim that one is always a better investment than the other.

Opposition to the NRC change is clearly – and probably justifiably – coloured by a more general irritation at a host of this government’s other policies on science and knowledge (Experimental Lakes, long-form census, etc).  But that’s still no excuse for this farrago of flimsy argumentation.  Rational policy-making requires us to engage in something more than juvenile, binary discussions about what kind of research is “best”.

May 21

Post-Graduation Employment

The meme on “underperforming universities” these days revolves around the idea that specific fields of study – usually Bachelor’s degrees in the humanities – do not lead to good jobs.  But this depends in no small measure on what one means by a “good job”, and over what time frame one chooses to measure success.

The graph below shows data from Ontario, six months after graduation.  Between 2003-2007, the employment rate of graduates in the labour market (i.e. excluding those who chose to study) bounced around between 92 and 94%.  In 2009, the rate fell by about 7%, to roughly 86%, more or less equally across all disciplines. Some fields of study were consistently below the average – specifically, fine arts, physical sciences (which seems to include biological sciences), and engineering.  Some fields of study were well above the average, notably education and nursing.  Humanities and social sciences ended up half way between the two.

Employment Rates of Ontario Graduates Six Months After Graduation in Selected Fields of Study, 2003-2009

 

 

 

 

 

 

 

 

 

 

 

 

The science figure is especially interesting, isn’t it?  Makes you wonder why there’s an S in STEM.

Now, some of you will surely be scratching your heads at this point.  Aren’t STEM graduates supposed to be in high demand?  How are both getting beat by Arts grads? Three quick answers. The first is that these figures exclude people who have gone back to school (unhelpfully, the Ontario data doesn’t tell you how big a number this is).  Two is that Engineers may take longer for a job search because they are secure in the knowledge that their eventual job will pay pretty well (see below) – the pattern we see after six months is also the pattern after twenty-four, as the chart below describes. And three is that the picture does change a bit after two years.

Employment Rates of Ontario Graduates Two Years After Graduation in Selected Fields of Study, 2003-2009

 

 

 

 

 

 

 

 

 

 

 

 

The classes of 2003 and 2005 had 2-year employment rates of about 96.5%.  That fell to about 95% for the class of 2007, and 93% for the class of 2009.  The fall was concentrated in education, humanities, social science, fine arts, and physical sciences; other disciplines saw less change.

Finally, there is the issue of income.  Here you see the real knock on studying in the humanities;  it’s not that they don’t get jobs – it’s that they end up in some jobs that don’t pay well.  Now, their incomes do increase about twice as fast as others between six months and two years (in the midst of a recession, they jump, on average, by 21%), but they start from a lower base.  An interesting point here, which I have made before, is that the difference in outcomes between students in the sciences and the social sciences is negligible.

Income of Ontario University Graduates Six Months and Two Years Out, Selected Fields of Study, Class of 2009

 

 

 

 

 

 

 

 

 

 

 

 

Clearly, jobs aren’t the issue – students of all stripes find work soon enough.  The issue is the rate of return.  We should focus on that.

May 17

Trying to Have it Both Ways

Everyone should check out this story from the Guardian on Tuesday, which nicely encapsulates the way universities have rhetorically boxed themselves in on the student experience.

Some background: in late 2010, the UK government decided to cut operating grants to universities by 41%, and to allow tuition fees at universities in England and Wales to rise to £9,000 (+150% or so).  Even though the policy change hasn’t had a huge effect on access, students are clearly now paying a lot more for essentially the same experience.  Last week, one student consumer group published a report showing exactly how little has changed: despite the massive fee rise, students are only getting an extra 18 minutes a week of contact time with professors.

This brings us to the story I’ve linked to at the beginning of this post, in which Universities UK CEO, Nicola Dandridge, dismissed the findings about the 18 extra minutes by saying, “It is misleading to make a crude assumption that time spent in lectures and seminars can be equated with university course quality”.

Hmm.

Hmmmmmm.

I get the point Dandridge is trying to make – it’s not just course hours that matters, but also teacher quality, infrastructure, curriculum, etc.  But would she have said the same thing if the journalist had been asking about MOOCs vs. traditional universities?  Not in a million years.  Unless you’re employed by a university that owns shares in EdX, the standard response is that “MOOCs are a great product for some, but most students still want the irreplaceable experience of being in a classroom with a great teacher”.

Universities can’t simultaneously say, “the in-class experience is brilliant and irreplaceable”, and “it really doesn’t matter how many contact hours you have”.  That’s called “trying to have it both ways”.

It’s absolutely true, of course, that the way learning occurs at universities is only partly dependent on what happens in classrooms; a lot of the benefits of university learning comes from the serendipity that occurs when you cram lots of young, curious people into the same physical space for four years, and let them rip.  And MOOCs are low on serendipity.

The problem is that we don’t know much about measuring serendipity (which is why we fall back on measures like class time and contact hours), and where we do have an inkling, universities often avoid presenting this information (at least in a format accessible to outsiders).  And yet, when it comes to undergraduate education, this very serendipity provides universities their genuinely unique value proposition – it’s what they can do that no one else does.

If universities genuinely want to prove value, they need to focus on measuring serendipity, and working relentlessly to increase it.  That’s their UVP.  That’s the ballgame.

May 16

Think Big?

With all the chat recently about reducing unit costs through ever-larger instructional units (e.g. MOOCs), it occurred to me that the world already has a lot of models for this.  They just aren’t in the developed world.

University World News recently carried a very interesting article regarding a new higher education master plan in Nigeria.  One of the plan’s key elements is to construct a half-dozen “mega-universities” – each with 100-150,000 students – to soak up the rising demand for higher education.  On the one hand, this plan is self-evidently mad: large Nigerian universities are already a violent and lawless mess, plagued with cults such as the Black Axe and the Supreme Vikings (I wrote about them a couple of years ago: here); surely these new, even larger campuses will face even bigger gang problems.  On the other hand, you can sort of see where Nigeria’s coming from on this.  Thanks to some truly staggering levels of corruption, the ability of Nigeria to use public funds to meet demand for higher education is quite small – currently just $1.4 billion to cover expenses at 33 federal universities.  So the solution is simple – go big, and keep unit costs low.  Just like MOOCs.

Actually, the way access has been increased in much of the developing world is through strategies like this.  The world’s largest universities are Open Universities – Indira Gandhi in India (3.5 million), and Anadolu in Turkey (2 million).   The largest residential schools are ones with multiple constituent campuses.  The reigning world champion here is Islamic Azad University in Iran – a private school with 350 locations, 1.5 million students, and a very significant endowment of contested legality (I don’t buy the $200 billion number, but it’s substantial nonetheless).

What about single-campus institutions?  On the Indian subcontinent, there are a handful (e.g. Delhi, Pune) which boast enrolments of 400K plus, but most of those students are not residential – rather, they study at a college somewhere, and simply take the Delhi or Pune exams.  For really big schools, you need to go to places like the University of Buenos Aires (300K plus) or UNAM in Mexico City (250K plus).  The University of Cairo, at about 150K, is the biggest in Africa; it’s also generally considered the continent’s best school outside of South Africa, which may explain Nigeria’s attraction to the model.

William Gibson once said that the future is already here; it’s just unevenly distributed.  So it is.   These mega-institutions can provide some lessons about the perils and promises of uber-massification through mega-universities.  We probably shouldn’t ignore them just because they’re happening offline and in poor countries.

May 15

Revisiting the Looming Labour Shortage Theory (Part 2)

Yesterday, we saw that if one replaces a steady-state assumption about the work-habits of older workers, with a graph that extends recent trends in employment for that age demographic into the near future, then total employment projections rise by 2.1 million over 20 years, more or less wiping out the whole “future labour shortage” theory.

Future Employment Rates, Based on Different Assumptions About Employment Rates Among Workers Over 55

 

 

 

 

 

 

 

 

 

 

 

 

So what are the implications of this?

The first is to avoid complacency.  There’s no guarantee that the number of employed older workers will in fact continue to grow. Thus, it’s important to keep removing barriers to continued participation in the labour force, making it as easy as possible for this figure to rise.

The second implication is that the argument for raising immigration quotas might not be as strong as it’s sometimes made out to be.  If there is no labour shortage, there is less need to import labour.  This is not to say we should decrease immigration (the projections in that chart assume steady-state policy of 250,000 immigrants per year) – and there are certainly arguments for increasing immigration that are not strictly related to meeting labour shortages (increasing the pool of entrepreneurial potential, for instance).   But the idea that we’re going to need ever larger numbers of guest-workers to deal with labour shortages is probably overblown.

The third is that, paradoxically, if more older workers stay on, the average skill level in the economy (as measured by credentials) will fall, as older workers tend to have fewer credentials than younger cohorts.  The effect of this shouldn’t be exaggerated; there’s more to skills than credentials, and older workers who stay on are disproportionately likely to have advanced education themselves.  But it does suggest several very important policy directions, as far as education is concerned.

For starters, Canadian policymakers will need to develop better continuing education programs, in order to help older workers keep their skills sharp, and their credentials up-to-date.  As any number of OECD reports will tell you, education and training among adults is not a Canadian forte; changing this is therefore a real and urgent priority.

Another policy issue worth bearing in mind is that, whatever the future labour market situation turns out to be, the best insurance against a future skills shortage is to ensure that our shrinking pool of young people get the best possible educational foundation from which to start their careers.  This means raising standards in primary and secondary education; it means wider access to a post-secondary education system which produces curious, innovative, and energetic graduates; and it especially means an extra effort to raise educational attainment among historically under-represented groups, such as our First Nations.

Rising educational standards, broadened access, and better adult education.  That’s the trifecta we need to focus on.

May 14

Revisiting the Looming Labour Shortage Theory

Various bits of labour market paranoia have been driving PSE policy lately.  The “skills shortage” is one – even if the case for its actual existence is pretty weak.  Another, though, is the broader idea that we’re about to hit a major labour shortage as boomer retirements… well, boom.  Time to explore that idea a bit.

At the heart of the labour market shortage meme – popularized mainly by Rick Miner in papers such as, People Without Jobs, Jobs Without People, and Jobs of the Future – is the uncontroversial point that the core-working age population (25-54 year-olds) is shrinking as a percentage of the overall population.  As a result, even as population increases, there will be fewer potential workers, hence causing labour shortages, hence leading wages to rise and (though nobody says this part) sending productivity growth into the trash can.  Scary stuff.

But it’s worth examining in more detail how Miner developed his scenario.  To derive labour market demand, he used 2006 HRSDC data on employment growth to arrive at both a 2011 baseline and a 2015 projection, and then assumed that subsequent growth would continue at a pace roughly equal to HRSDC’s 2011-15 projection (0.8% per year).  To derive labor market supply, he applied “current” (the base year is unclear) rates of participation by age group, and applied them forward to 2031.  These estimates produced a potential demand of 21.1 million jobs, and a supply (using his “medium estimates”) of about 18.4 million – a deficit of 2.7 million jobs.

But are constant labour market participation rates realistic?  If labour markets tighten, won’t supply adjust?  Miner seems to make this assumption – not because he thinks it’s true, but because he wants to highlight the scale of the coming transition.  As I showed back here (and as Miner himself notes) we have already seen a shift in the employment pattern of older workers: since 2000, employment rates have been rising 1 percentage point per year among 55-64 year olds, and 0.5 points per year among the over 65s.  And there’s no obvious reason those can’t continue; even if the current rate of growth lasted twenty years, our post-55 employment rates would still be behind the current rates of New Zealand and Iceland.

So, what happens if you replace the no-change projection with one based on employment rates continuing to increase at their post-2000 rate?  Check this out:

Future Employment Rates, Based on Different Assumptions About Employment Rates Among Workers Over 55

 

 

 

 

 

 

 

 

 

 

 

 

That’s a 2.2 million job gap between the two projections – enough to entirely wipe out Miner’s projected shortage.

To be clear, this projection is no better than Miner’s – we’re both just straight-lining different aspects of current reality.  But it does show that the whole “looming labour shortage” meme depends heavily on initial assumptions.

Tomorrow, we’ll look at the policy implications of this.

May 13

The Universitas 21 National Rankings: a Spotlight on Canada

Though it made very little news in Canada when released in Vancouver last week, Universitas 21 Network (of which UBC and McGill are members) published the second edition of their Rankings of National Higher Education Systems.  There’s nothing really new in the 2013 ranking: the methodology is largely unchanged (there was a small redistribution of indicator weightings), as are the results – the top ten remains the same, and Canada stays 4th overall.  But it’s still an opportunity to reflect on what the data tells us about Canadian higher education in an international context.

The U21 rankings consist of 22 indicators in four broad categories: financial resources, “environment” (a mishmash of gender, transparency, and regulatory quality issues), “connectivity” (international students, research collaboration, webometrics), and “ouput” (mostly research, with some student and graduate measures thrown in).  Overall, about 50% of the indicators relate directly or indirectly to research.

So, how did Canada do in each of those categories?  The most important result is that we came second (behind the US) on the resources category.  Ponder that for a moment.  Second.  In the entire world.  This is something to bring up next time you hear any of the usual suspects talk about “underfunding”.

In the environment category, Canada came 30th, just behind China.  Seriously.  The knock seems to be that we don’t have enough private institutions, or a national quality assurance agency; why that matters, I can’t say.  In connectivity, Canada ranks 16th, but much further off the pace in an absolute sense. We do OK on research collaboration, but are miles behind countries like Switzerland on international students, and the United States on webometrics.  On outputs, we do well in most areas, but several categories are (bizarrely) not normed for size, so the US creams everyone.

As you can tell, I have a few reservations about the indicators used in this ranking (and even more about the fact they don’t publish the actual indicator data), but I think there is a basic truth contained here.  Canada isn’t the best at anything, but we’re still in the top third in the OECD on most of the indicators that matter.  There are precious few countries – the US, perhaps, the Nordic countries, and the Netherlands – who can say the same.

It’s not because we’re doing anything special – it’s about what you’d expect from the second best-funded system in the world.  But if we’re going to take that next step up – or at least keep our position during a period of cutbacks – what we really need to do is learn from countries like Switzerland and the Netherlands, and discover how they can match us for achievement with substantially less funds at their disposal.

May 10

Feed the Students, Starve the Schools?

Yesterday, I outlined the 2013-14 budget picture for university and college operating transfer funds.  Today, I’m doing something similar for student assistance. It’s a very different picture.

In addition to the caveats I mentioned yesterday regarding the challenges of budget-to-budget comparisons, student aid analysis poses its own unique set of challenges.  The main one is that provinces have trouble accurately predicting demand; so if in one year demand soars (or falls), the next year tends to bring a big budget increase (or decrease) to bring numbers into line with reality. Also, at least theoretically, student aid is counter-cyclical.  As student incomes rise, need goes down, and so too do aid expenditures.  So a declining budget doesn’t necessarily mean a government is cutting – it may also mean that students are better off (or that a government budgeted high the previous year, and is bringing estimates down to match reality).  In short, some care is required in interpretation.

That said, here’s what we see when we look at student aid budgets across Canada from 2012 to 2013.

Change in Student Aid Expenditure Estimates, 2012-13 to 2013-14, by Province

 

 

 

 

 

 

 

 

 

 

 

 

According to provincial estimates, BC and Newfoundland both appear to have cut student aid, but I have my doubts about whether this happened in practice.  In BC, the reduction may be a recategorization of certain expenses; in Newfoundland, the budget speech actually indicated an enrichment of the program this year, so my guess is that they wrongly budgeted high in the previous year, and are bringing estimates down accordingly.  But here’s the key point: nationally, aid is up by $135 million (or about 6.4%), to $2.3 Billion.

This is not a one-year fluke, either. If we extend the baseline back to 2011-12 (which allows us to see the full effect of Ontario’s unnecessary tuition rebate scheme), we see the following:

Change in Student Aid Expenditure Estimates, 2011-12 to 2013-14, by Province

 

 

 

 

 

 

 

 

 

 

 

 

Your eyes do not deceive you; that’s a 25.4% increase nationally, over two years. Institutions, in comparison, received a 0.9% increase.  To put this another way: student aid is up $465 million; institutional funding is up $156 million.  For every new dollar going into higher education, just 25 cents are going to institutions.

Distribution of New Provincial Appropriations for Post-Secondary Education, 2011-12, 2013-14

 

 

 

 

 

 

 

 

 

 

 

 

This 75-25 split might make sense if provinces were allowing institutions to make up cuts through tuition, as they did in the 1990s.  But this isn’t the case.  This year, tuition increased nationally by a little over 2.5%; next year, it will almost certainly be less than 2%.  The 75-25 ratio might also make sense if student aid money were going to poorer students; but of course that’s not true either; the Ontario 30% grant by design primarily ended up mostly in middle-class hands.

This vote-chasing foolishness is tolerable for a year or two.  But if provincial governments don’t change tack, we’re soon going to have a real institutional capacity problem on our hands.  Mark my words.

May 09

2013-14 Provincial Budget Analysis

The last of the provincial budgets was delivered last week, so it’s time for a quick analysis of spending on operating funding for universities and colleges.

Some important caveats on this data: Budgets often have only a vague relationship with what actually gets spent.  Last year in Quebec, for instance, what eventually got allocated to institutions was a good $120 million less than what was budgeted.  So numbers for 2013-14 need to be viewed as provisional.  And to be consistent, if you’re going to analyse a set of budget figures, you need to compare them to the previous year’s budget, which can be equally unreliable.  On top of all this, governments change their reporting systems periodically, which means you have to do a lot of irritating hunting around to try to get something comparable.

For instance, if you look at the material distributed by the Government of Ontario in last week’s budget lock-up, they claim a $22 million increase in transfers to institutions; if you compare it to what they said they would spend in their last budget, they’re down by $68 million.  In Quebec, operating grants are reportedly set to increase by about 1%, despite last year’s mid-year cut.  $30 million of that make-up can be explained by the government’s sticking to its investment plans; as for the other $150 million, I can’t explain it at all, and nor can anyone I’ve spoken to in Quebec.  Mysteries abound.

Lastly, it’s worth remembering that “total operating grants” (I’ve excluded capital funding here) is a different figure from “formula funding” – governments seem increasingly keen to give money for specific purposes outside the formula (in Ontario, for example, 25% of the announced “increase” was for a special fund for student mental health).  There is little predictability for institutions around these funds.

Enough banter.  Here’s the chart:

Change in Provincial Operating Transfers to Institutions, Budget 2012-13 to Budget 2013-14

 

 

 

 

 

 

 

 

 

 

 

 

Six of ten provinces had cuts, albeit mostly relatively small ones; Saskatchewan is the real outlier here, where the good times, seemingly, continue unabated.  Nationally, we appear to have had an absolute net decline in provincial operating funding of about $120 million, on a total expenditure of $16 billion.  That’s a fall of 0.7%, or 1.7% in real (after-inflation) dollars – more if you don’t believe the Quebec figure.  That’s the third year in a row we’ve had a fall in real expenditures (-1.6% in 2011-12, -0.27% in 2012-13), but I believe this is the first time since the late 1990s that we’ve had a national fall in nominal dollars.

What’s in the future?  Well, we might not see another nominal decrease next year, but if you look at the underlying budget fundamentals in the provinces, I can’t see institutions getting increases over inflation until 2016-17 at the earliest.  Better hope those international students keep coming.

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