HESA

Higher Education Strategy Associates

August 27

Bingo!

I love back-to-school time: the joy, the energy, the sense of limitless possibilities.  It’s almost enough to make you forget about the tsunami of dreadful journalism that accompanies it.

There are basically three reasons for bad back-to-school journalism.   First, higher education is complicated; it doesn’t lend itself to the simplistic narratives required for 800-word articles.  Second, there’s a serious lack of decent data about higher education in Canada, what with the Millennium Scholarship Foundation gone, HRSDC no longer funding any decent Statscan surveys, and provinces and universities holding on tightly to their own data on the grounds that someone might use it to compare them against other provinces/institutions (and that would never do!).  In this data vacuum, interested parties with their own agendas find it easy to peddle all sorts of demented, half-true factoids to journalists; hence, the frequent appearance of stories based on “data” which simply aren’t true.

The third problem is the lack of outcome measures.  Everyone wants “good” education, but no one knows what that is.  So journalists tend to fall back on input measures: small classes, students per professors, etc., which inevitably lead to a weird mythologizing of university life in the 1970s.  Nothing wrong with the 1970s of course, but it somehow never quite clicks with op-ed writers that a major reason life was so great for students back then was that access was restricted to a fairly small elite, and that the comparative “failures” of today’s universities are largely the result of expanded access.  This was a central failing of last year’s worst back-to-school-article, by Carol Goar.

In this year’s worst-back-to-school article derby, we already have an early contender from Vancouver Sun columnist, Douglas Todd – which the excellent Melonie Fullick has already skewered, here.  Todd’s piece gives a lot of column inches to the views of a single professor who doesn’t like foreign graduate students much, and claims that these foreign students cost tax payers more than they bring-in.  On closer inspection, one realizes that the “evidence” comes from a single, 11 year-old article about graduate enrolment in America.  Why either a tenured professor or a serious journalist would think that old data from one national policy context would tell you anything at all about the economics of education in another country and context is beyond me, but there you have it.

I’ll be announcing my worst-story winner on September 16th – if you have any suggestions, do let me know!  As a guide, I thought I’d provide you all with a “Bad Education Journalism” Bingo Card.  Each square represents a cliché, inaccurate piece of data, or trope borrowed from the US with no corresponding Canadian data.  Play with your friends!  See which articles cover the most squares!

Bad Back-to-School Journalism Bingo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 26

Fired Up. Ready to Go.

Welcome back to our daily edition of One Thought to Start Your Day.  I hope you all had a relaxing summer, because this year is shaping up to be one of the most interesting in the entire history of higher education.  It’s going to be exhausting.

As always, America – the home of mass higher education – will be setting the pace.  President Obama’s higher education reform proposals are so ambitious and touch so many hot-issues (metrics for institutional evaluation, how to beat the cost disease, the use of rankings, how to steer institutions using public funds) that the debate will echo around the world.  If you haven’t been paying attention to the Obama plan, start now.  With a 3-4 month lag, it’s pretty certain that this language will start popping up in Canada as well.

One key part of the Obama message is a focus on competency-based learning (CBL) as a way to cut time-to-degrees, especially for non-traditional students.  For this and other reasons, it’s going to be all CBL, all-the-time this year.  Expect to really sick of hearing about Western Governors University and South New Hampshire State (whose model I looked at while back, here).  This is a good thing, partly because it means we’ll have to hear less about MOOCs but also because CBL has the potential to generating genuinely useful conversations about what “outcomes” and “degrees” mean, and that’s long overdue.

In Canada, we have all the makings of a memorable year, financially.  Higher education institutions in Alberta have already been kicked hard; in Ontario and Quebec, all the signs are for zero growth in government income at best, and with institutions still locking in faculty salary increases of 4-5% per year once RTR is accounted for, it’s going to be Come to Jesus time at several institutions very soon.

(Yes, seriously, 4-5%.  Notice how neither University of Ottawa nor the faculty union is revealing details of the strike-averting settlement earlier this month?  They’re terrified of releasing it; pleading poverty to government while handing over 4-year 20% pay hikes to people making an average of $115K/year is really hard.)

Maybe that zero income wouldn’t look so bad if money was still coming in like gangbusters from students.  But it’s not.   This summer’s foreign service strike may result in major lost revenues in colleges and universities.  And even if it doesn’t, there’s trouble lurking in foreign recruitment waters due to a general slowdown in the BRIC economies and the tanking of the Indian rupee. 

A crisis is a terrible thing to waste.  It’s going to be rough – but there’s a chance we might start to see some interesting structural change, too. 

So…are you ready to go?

August 19

Cuts at the University of Alberta

If anybody wants to know what Ontario universities are going to look like over the next couple of years, they could do worse than check out what’s going on in Edmonton.

To recap: In its spring budget, the Government of Alberta cut 7% from university operating grants.  Since then, Alberta universities have been working out how to deal with this cut.  At Athabasca, it’s meant significant layoffs.  At Mount Royal it’s meant program closures.  At the University of Alberta, so far, there’s been more sound and noise about the size of the cutbacks ($60 million over two years) than details.  

The university initially tried to persuade the faculty union to give back some or all of the raises it won for 2013 and 2014 in the last round of collective bargaining.  Predictably, this went nowhere, although the faculty union’s rationale (“it doesn’t matter if we refuse because saying yes wouldn’t come close to delivering a comprehensive solution”) had the merit of being amusingly reminiscent of those used by the anti-Kyoto crowd (“it doesn’t matter if we don’t meet Kyoto commitments, because China”).  This seemed to take the administration by surprise and out came a buy-out plan which – it is feared – could see many productive mid-career faculty leave (though I’m skeptical – where would they go?  Not many universities with salaries comparable to Alberta’s are hiring these days)

Note, though, that the 7% cut in operating grants does NOT mean a 7% cut in the budget.  That’s because the University of Alberta only gets 65% of its money from government.  When you add in all the new money it is getting from students – mostly international ones – income for 2013-14 is likely going to be almost close to what it was in 2011-12 budget.  Yet this is enough to force the university into salary buy-outs, position terminations, the elimination of travel and hosting budgets, etc.  And if you think it’s bad being a prof, try being a grad student: in the Arts faculty, 20 percent of TA positions are being cut. 

How is it that all these positions and activities could be funded three years ago but can’t be in 2013-14 on exactly the same budget?  The answer, unfortunately, is simple: tenure, low productivity and the prioritization of research all cause serious cost inflation such that even the tiniest reduction in university budgets causes absolute chaos.

Here’s the thing: no sane President can go to the public and argue that their institutions are doomed without perpetual budget increases of 3-4%.  The ONLY alternative is to make university cost structures less rigid.  Any university not focusing on that problem is in deep trouble.

August 12

The Neo-Soviet View of Education and the Labour Market

Recently, I had a conversation with someone in the trucking industry who argued that the phenomenon of Arts grads working minimum wage jobs while trucking companies were having problems hiring people at $30/hour was prima facie evidence for a “skills mismatch” for which the education system was responsible.  Seriously.  Turns out that a lot of people – including a hell of a lot of people in government from all political stripes – seem to think that a “skills mismatch” is what happens any time some jobs in certain fields aren’t getting filled at current wages.  The idea that people might be making decisions based on personal preferences doesn’t seem to occur to them; and the concept that wages might need to rise in order to overcome these preferences (with all the time alone on the road, and hours not compensated due to loading delays, etc, $30/hr simply isn’t enough, but an extra $5/hour might do the trick) definitely doesn’t occur to them.  Rather, say these folks, it is the preferences themselves which must change – and government (and schools and universities) is responsible for changing them.

Take, for instance, this recent piece from BC tech entrepreneur Ryan Holmes.  It is legendarily incoherent, but I’m told it represents the views of much of the tech sector, so it’s worth a read.  We’re falling behind the US in tech, it says, because of a brain drain.  All our best are heading south (we’re not told why, but presumably pay is an issue, no?).  We could import people to staff our tech sector instead, but this, we are told, is just a temporary fix.  (Why this is so when Silicon Valley’s success is almost entirely down to immigration is not explained).  No, the real solution is to train more people for tech jobs, and the barrier to this is that we don’t spend enough time in high school explaining to them how great tech careers are, etc etc.

If tech careers are so great, why is it up to government to sell them to students?   (“selling” may be too polite a term – Holmes wants governments to “funnel” students into engineering programs, which suggests a more directive approach.)  Maybe the problem is that while tech is naturally attractive for some, for many others it seems brutal, unstable and intimidating.  That doesn’t mean they won’t consider it – but it does mean that at current compensation levels, fewer people than the tech industry considers optimal think it would be a good fit for them.

If this were a market economy, we’d just tell businesses to raise the damn wage levels and see what happens.  But this is Canada, and our business community apparently doesn’t believe in the price mechanism as far as labour is concerned.  Instead, we blame government and schools for not sufficiently manipulating the supply of labour to favour specific industries.

Oy.  Come back Gosplan, all is forgiven.

August 06

Correlation and Causation in Technical Education

Stop me if you’ve heard this one before:

“In many Northern and Central European countries, including Switzerland and Germany, there are robust apprenticeship programs. In both of those countries, youth unemployment is very low compared to Canada and the U.S.”

Or this:

“As the economy changes, however, it is increasingly clear that this is the polytechnic moment… in the recent recession, youth unemployment was lower in countries with strong vocational training programs.”

There are three propositions here.  One is that Canada’s apprenticeship/vocational training/polytechnics systems are weaker than those in what for the sake of brevity I will call Germanic Central Europe (GCE).  Another is that unemployment is lower in GCE than it is in Canada.  Finally, it is heavily implied that there is some sort of causal relationship at work here; that GCEs have lower unemployment rates because of their educational systems.

Let’s take those three in turn.    It is certainly true that GCE countries have more apprentices than we do. But the term “apprenticeship” means something different over there.  As I pointed out back here, the reason places like Germany have more apprentices is because their set of apprenticeable trades is much wider than ours.  If you limit the analysis to just skilled trades, Canada’s apprentice numbers actually look about the same as Germany’s (our completion rates are much lower – but that’s a less sexy story).

As for “vocational education” and “polytechnics” (terms that are not synonyms): Canada already has the largest non-university tertiary system on the planet.   True, we don’t have a lot of “polytechnics”, but the recent trend in GCE has been to turn these institutions into degree-granting “Universities of Applied Science” with professional rather than vocational orientations.  So yes, GCEs’ technical education systems are different from ours.  But their sources of strength aren’t necessarily in “vocational” training the way we define it.

With respect to unemployment rates, it’s quite true that unemployment among 15-24 year-olds in places like Germany (8.1%), Austria (8.7%) and Switzerland (2.8%) are lower than in Canada (13.6%).  But youth unemployment can’t be examined in isolation: it is a function of overall economic conditionsThe ratios of youth unemployment to overall unemployment tell a different story: Canada’s rate is 1.92, Austria’s 1.85, Germany’s 1.53 and Switzerland’s a freakish 1.04.  Austria’s purported advantage, at least, disappears completely on this more sensible comparison

Finally, the issue of causation.  Dial things back about twelve years; Germany had the same “dual” system of apprenticeships, but unemployment rates were twice what they are now.  If apprenticeships “cause” low unemployment now, did they also “cause” high unemployment twelve years ago?  Obviously not.  Claiming causation in one period but not another looks like cherry-picking.

In short, it’s good to invest in top-notch technical education, but be wary of over-ambitious claims made about its impacts.

July 29

Looking Forward to 2017-18

Last week we looked at likely paths for government funding in the big four provinces.  Today, I want to look at how that might translate into actual changes at institutions.

The outlook for government funding, if you’ll recall, looks like this:

Figure 1 – Nominal Non-Health Dollars Available by Province, indexed to 2013.

 

But governments only account for about 54% of total revenue.  Students make up 39% and “other” makes up about 8%, so to look forward, one needs to look at these other two sources as well.

It’s hard to discern a historical pattern for “other revenue” (mostly because endowment income rises and falls like a yo-yo), so let’s just assume for the sake of argument that it will grow at 4% for the next few years.  Tuition is more predictable:  Ontario has locked in 3% annual increases for the foreseeable future, while Quebec’s tuition will be linked to inflation (roughly 2%).  Western provinces are more volatile on policy, but a reasonable guess is that BC’s path will be similar to Quebec’s while Alberta, being more populist and with cash to spare, will average something just below inflation (say, 1% p.a).  Of course, aggregate tuition dollars have very little to do with average tuition limits, but for the moment let’s assume no increase in student numbers.

So, add all those dollars together and what do we get? 

Figure 2: Net Income Projections for Post-Secondary Education, by province, to 2017-2018

 

That’s a little better, no?  See what a little tuition can do?

Still, this is only income. We still need to look at expenses.  Here, let’s assume that universities are able to keep their operating budget increases to 3% per annum (tight but do-able).  In that case, assuming no enrolment growth, institutions in Alberta should have a very small surplus in 2017, while Ontario institutions will face a collective deficit equal to 11% of expenditures, or around $950 million.

Figure 3: Budget Gap Projections, to 2017-18

Now, clearly, that Ontario scenario can’t actually happen; long before institutions get to that point, they will cut spending and find more revenue.  What figure 3 really represents is the size of the fiscal gap institutions will need to close over the next few years.

There are many ways to fill such a gap, but the main ones are wage freezes, hiring freezes and increased international enrollments.    But $950 million is a big gap to fill.  By my back-of-the-envelope reckoning, it’s equivalent (roughly) to a combination of a 4-year pay freeze and a 50% increase in international students.  Do-able but painful.

There is of course a very simple way to make most of these problems go away: just give institutions a little more room on domestic tuition. Unfortunately, that’s probably too sensible a solution for our times.

July 23

Go West

The key to understanding what post-secondary education is going to look like a few years down the road – say, 2017 – is to look at what is likely to happen to government funding.   We can’t know exactly what governments will spend on PSE, but we can know  how much money they are going to have available to spend simply by working out how much money each will likely have once health expenditures (which make up just 40% of the budget in most provinces) are accounted for.  Today, I’ll be doing this for the country’s 4 largest provinces, which make up 88% of the country’s population

With the exception of Ontario, most provinces’ governments move more or less in step with GDP growth.  Quebec and British Columbia keep their expenditures steady at around 20% and 15 of the economy, respectively.  Alberta’s fluctuate somewhat, usually in line with changes in hydrocarbon prices.  Since the Liberals took office in 2003, Ontario has been increasing the size of its government quite steadily from 13 to 18% of GDP.

 Figure 1 – Provincial Budgets as a Percentage of GDP, 2000-2013

 

Given this, it seems unrealistic to expect any of these governments to increase overall expenditures much faster than GDP growth.  Alberta and BC could conceivably inch up a bit after 2014 since their spending is currently slightly below the long term average.  For simplicity’s sake, though, let’s assume that growth in those two provinces will be restricted to growth in nominal GDP, which in both provinces is expected to average 4.5-5% for the foreseeable future.

Quebec and Ontario, meanwhile, can’t grow expenditures anywhere near that much because of their abysmal finances.  Quebec’s budget currently projects spending growth to be around GDP growth minus 1% out to 2017; in Ontario, program spending is frozen in nominal dollars through to 2017.

Now, the amount of money available for PSE (and other types of government spending) is limited by what happens to the health budget.  With the overall size of government more or less steady as a percentage of the economy, every time the health budget increases more quickly than GDP, the pool of money available for every other piece of spending – including PSE – must decline. In Quebec and British Columbia, the health budget has been growing at 5-6% annually for the past decade.  In Ontario, the figure is 7% and in Alberta it is a (frankly) ludicrous 9%. 

So, let’s assume that everyone can keep health care increases to just fractionally above expected GDP growth levels (say, 5% per year). Here’s what will happen to the pool of non-health dollars available in each province: 

 Figure 2 – Nominal Non-Health Dollars Available by Province, indexed to 2013.

 

Your eyes do not deceive you: that is indeed a 41% funding gap opening up between Alberta and Ontario over the next four years.  Given the assumptions above, non-health spending in Alberta can grow by 20% by 2017 and BC looks set for an increase as well.  Quebec should hold just about steady; Ontario, thanks to its need to get rid of its deficit without raising revenues, is going to see a fall of a little over 15%.

To be clear: I am not saying that PSE budgets will increase or decrease by these amounts.  What I am saying is that this is a good approximation of how the amount of funds available to PSE will evolve in each province over the next four years and that if historical funding patterns hold up, these kinds of changes in nominal funding are about what we can expect.  But politics still matter, and universities and colleges could still see increases to their budgets relative to the amount of available funding if they are smart in their lobbying (or cuts if they are not).  

A couple of years ago I said that differential patterns of higher education investment meant that the country’s intellectual centre of gravity was moving west rather quickly.  Notwithstanding recent cuts in Alberta and British Columbia, it seems to me that this trend can only pick up steam in the next few years.  

July 15

More Money Than You Think

If there’s one thing everyone knows, it’s that Canadian universities have had a hard time of it during the recession during the last few years, yes?  Absolutely starved for income because of government cutbacks, etc etc.

Not so fast.  Check out this data on university operating budgets from the CAUBO/StatsCan financial survey:

Figure 1: Indexed growth in University Operating Budgets 2007-08 to 2011-12

That’s right – across the country, university budgets went up by 28% between 2007-08 and 2011-12.  That’s more than twice the rate of inflation.  (Note: if you’re wondering why Alberta skews high, its because MacEwan and MRU were re-classified as universities in 2009 – take them out and Alberta basically looks like BC).

How is this possible, you ask?  Haven’t governments been cutting back?  Well, the last two years haven’t been very good, but let’s not project that too far backwards.  In fact, during the heart of the recession years, the worst any major province fared (Ontario – big surprise) was to keep pace with inflation.  Across the four big provinces which make up 90% of our national system, spending was actually up nearly 20%.

Figure 2: Indexed Growth in Government Contributions to Operating Grants, 2007-08 to 2011-12

Those of you with heads for numbers may now be scratching your heads.  Government grants are a little over half of all institutional income.  So if overall income is up 28%, and this half of it is only up 20%, that means the other half – the student half  must be up by…

 Figure 3: Indexed Growth in Tuition Income, 2007-08 to 2011-12

Yeah, that’s right: tuition income is up 40%.  Four.  Zero.  How is this possible when Statscan says tuition fee increases are only about a third of that?  Because this is aggregate tuition and Statscan looks at average tuition.  One is larger than the other partly because of increases in domestic enrolments, but more importantly because of spectacularly increased international enrolments, which also carry much higher tuition fees.

Obviously, with extra students come extra costs, which is why it doesn’t necessarily feel like there’s 28% more money floating around these days.  Between enrolment increases and cost increases (mostly labour costs, including rise through the ranks (Link to: http://higheredstrategy.com/rise-through-the-ranks-rtr/)), Ontario is still slightly down on the deal in per-student terms, while other provinces are up, but only slightly. 

“Cutbacks” aside, governments are still spending far more than they were on PSE six years ago (even in Alberta) and institutions have been absolutely raking in cash from tuition.  We don’t have the 2012-13 numbers yet, but they’ll likely be in the 8-9% range everywhere except Quebec.  That means operating budgets overall likely expanded by about 3-4% last year, even as governments reduced funding.

Two final thoughts: One, if institutions still feel squeezed when income is rising twice as fast as inflation, it means there are some serious issues to work out on the cost side.  And two, God help us if those international students stop coming.

 

 

July 08

The Size and Purpose of Government

Ever wonder why it seems like higher education is always in a financial trouble?  One big reason can be found in Agatha Christie’s autobiography.  Reflecting on her station in life as a young woman early last century, she noted in her memoirs how she never thought she would ever be wealthy enough to own a car – nor ever so poor that she wouldn’t have servants. 

In today’s world, of course, this makes no sense at all, since almost everyone has a car and almost no one has servants.  But 100 years ago the relative price of labour was such that it made perfect sense.   The lesson here is that over time, labour tends to rise in price relative to machines. 

Continually improving production efficiency is absolutely fabulous when it comes to consumer durables.  It means that cars are  a fraction of their former cost, while being faster, safer, and more reliable.  It means that for a couple of hundred bucks, anyone in the world can have more computing power in their cellphone that existed in the entire world in 1970. 

But the effect in labour-intensive industries is just the opposite: relative to other sectors, prices rise continually.  If everything were purchased privately, this would be no big deal – people would just adjust their budgets to spend the savings they make in one area (durable, machine-produced goods) and spend it on the other (labour-intensive goods). 

But here’s the problem: a few decades ago, society decided that most of the important labour-intensive industries – mainly health and education – needed to be in the public sector.  This limits the ability of individuals to shift consumption from one sector to the other because we constrain the ability of individuals to spend on their own education and health-care.  So the only way large-scale shifting between labour-intensive and capital-intensive goods can happen is through taxation.  For obvious reasons this complicates things.

So here’s the deal. The cost of providing a given standard of health and education will go up and up and up, no matter what anyone does.   We can either pay for that by taxing a heck of a lot more to fund those services (and hey, why not?  With cheaper consumer durables we require fewer post-tax dollars to keep ourselves clothed, sheltered and fed), or we can ask/allow citizens to pay for a greater part of the services they receive, or some mix of the two.  Those are the only choices.  Despite this, what governments across Canada are doing right now is the exact opposite of this.  They are freezing taxes while preventing these services from raising money themselves through new fees.   

As a long-term strategy, this is leading nowhere but failure and mediocrity.  We need to stop pretending we can avoid hard decisions on this.

July 05

Today’s Statscan Youth Jobs Report

Hi there.  Just a slight deviation from the summer publication schedule to bring you some perspective on the youth employment numbers coming out of StatsCan today.

Unless something has gone seriously gaga in the youth labour market in the past few weeks, today’s Labour Force Survey release will say that slightly over 70% of students aged 20-24 are employed and that unemployment among these students is in the 7-9% range. That sounds pretty good; the problem is that StatsCan’s definition of unemployment doesn’t even vaguely correspond to how students see the issue.

The basic problem is that StatsCan defines someone as being “out of the labour force” if they are in full-time studies; as a result, students taking summer courses are excluded from the calculation.  But in fact, as our own 2012 survey of summer employment showed, over 70% of summer students are also either working or looking for a job; among this group, unemployment typically runs at between 20 and 30% (last year, the figure was 29%; this year, it is 23%).  Indeed, one reason many students take summer courses in the first place is precisely because their jobs search was unsuccessful!  

Although our full annual employment report won’t be out for a bit, I want to provide you with some statistics on one other labour issue currently generating a lot of attention: unpaid internships.  Our preliminary examination of the data suggests that 5.4% of students are in some kind of internship or practicum this summer.  Of these, roughly half are educationally-related (e.g. mandated practicums in teaching or social work), meaning that about 2.7% of all students (or about 27,000 across the country) are in unpaid internships this summer.  That’s a long way below the 100-300K estimates one sees in the press these days, but it’s not inconsistent with those numbers since a) those larger figures represent internship positions across an entire year rather than positions at any one time, and b) our survey looks only at current university students and does not include either college students or recent graduates. 

Lastly, a key point about these unpaid internships: they’re mostly part-time affairs.  The median unpaid internship is just a 14 hours per week commitment; as a result, fully half of the students with unpaid internships are able to gain an income by working either full- or part-time. 

Have a good weekend, and be wary of overly rosy LFS statistics.

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