HESA

Higher Education Strategy Associates

September 03

What The Heck Did You THINK Was Going to Happen?

I’m a bit bewildered by some of the recent commentary about declining returns to education, most notably last week’s paper from CIBC on the subject.  While the actual report was not nearly as stupid as the ream of press coverage that followed it, it still had a few howlers, and definitely lacked critical thinking.

First, the howlers.  1) The returns to Bachelor’s degrees are not declining; they are, in fact, growing at a slightly slower rate than at other levels of education, which isn’t the same thing.  2) The gap between college and university graduates is closing, but it’s because college grads are doing better, not because university grads are doing worse.  3) Yes, the difference in unemployment rates between university and high school graduates is, as the report says, only about 1.5 percentage points (which is down considerably over the last decade or so).  But why emphasize that fact when the gap in employment rates – which are presumably much more important, and yet were unmentioned by the report – remains over 12 percentage points?  There’s too much cherry-picking of data here for my taste.

But look, here’s the bigger picture: it really shouldn’t be a surprise if graduate wages are stagnating, and there’s one very simple reason for this: there are way more graduates than there used to be.  Between the late ‘90s and the late ‘00s, the country went from having 600,000 undergraduates to having 900,000 undergraduates.  That’s an extra 75,000-90,000 graduates hitting the labour market every year.  That’s a heck of a supply shock.

The surprise, frankly, isn’t that university graduates’ wages aren’t climbing as quickly as those of college and high school graduates.  The surprise is that they’re rising at all.  This suggests that there is, in fact, enormous labour market demand for the skills provided by university students; if there weren’t wages would have decreased.

I pointed this out on Twitter the day the CIBC paper came out only to learn that for many people – including people who would describe themselves as fiercely progressive – even the hint that relative rates of return might be falling turned them into foaming conservatives with respect to university admissions.  Too many students!  We need a labour market policy!  Etc., etc.

I mean, what exactly did everyone think was going to happen when we allowed enrolment to rise by 50%?  That there would be no change in returns?  And even if there was a slight fall in returns – who cares?  In a democracy, isn’t it better to have 150 people earning good returns than 100 people earning brilliant ones?

Yeesh.

August 30

So, This Obama Plan, Then (Part 2)

To recap yesterday’s blog: President Obama has a plan to make colleges reduce their costs, and deliver better value for money.  It involves having the government rate institutions on Accessibility, Affordability, and Outcomes; those which rate poorly risk losing eligibility for various forms of federal student aid (which, in total, is up around $150 billion/year these days).

While there’s no question that college costs do need to be reined in, this particular solution strikes me as odd.  Here’s what you have to believe in order to think that the President’s plan will work:

1)      That there exists a set of metrics, applicable to all institutions, which can measure Accessibility, Affordability, and Outcomes.  Forget data availability, institutions juking the stats, and whether one should judge institutions based on graduate salaries – can this stuff actually be measured in an equitable manner?  Will universities be judged on affordability without reference to the amount of state aid they receive?  Will those in rich states be penalized for the number of Pell-eligible students they enrol because there are fewer of them around than in, say, Alabama?  For employment rates or salaries, do tribal colleges or HCBUs get measured on the same scale as Princeton?  And if you’re looking at university-wide comparisons, rather than program-level ones, won’t mid-tier liberal arts colleges get completely blown out of the water?  There are probably work-arounds on most of these, but they aren’t simple.  Which leads to the next issue:

2)      Assuming the answer to 1) is yes, that the government is actually capable of finding and choosing the right measures.  I’m skeptical, let’s put it that way.

3)      That the Government, at the end of the day, is prepared to take students hostage to make this work.  Does anyone really believe that the government is going to reach the point where it says to a group of students: “we’re with you, your school isn’t delivering good value.  To show you our support, we’re going to cut off your student aid”?  The words “communications nightmare” don’t even begin to cover it.

This last one really speaks to a large problem with the Obama program.  The US federal government actually doesn’t have the tools to affect affordability because it doesn’t control the appropriations process.  At the end of the day, it’s a state issue, as it would be here in Canada.

So is this just an elaborate set-up to allow Obama to use the bully pulpit to jawbone institutions into line?  Or does the White House (and it is the White House – DOE appears to have had little to do with this) actually believe that there is a workable technocratic solution here? I’d like to think the former; I’m afraid it’s the latter.

August 29

So, This Obama Plan, Then (Part 1)

Canadians have few – if any – original ideas when it comes to education.  Generally speaking, we tend to reuse American ideas a few years after the’ve gone viral down south.  But what with all these interwebs and the Twitter these days, the lag time on this is getting shorter and shorter.  That’s why it’s definitely worth paying close attention to the recent Obama initiative on college costs: there are a lot of themes in that plan which have resonance here, and it’s likely that we’ll be hearing about them from both sides of the border soon enough.

Basically, Obama wants to keep the price of higher education down.  For years, Washington has tried to do this by increasing student aid, or providing tax credits, or what have you.  And they’ve actually been largely successful in doing so, at least for lower-income students, as the data from Matt Bruenig shows, here.  But this strategy is costing the US Government loadsadough, and it has started to dawn on them that Reagan-era Education Secretary, William Bennett, might have been right when he said that student aid just ends up raising tuition (as a side note, one of the most fascinating things in the US scene over the last two years has been the conversion of all the lefty education types into believers of the Bennett hypothesis).  So they’ve moved on to bigger fry.  They don’t just want to get prices down.  They want to get costs down.

This, as Joe Biden once almost said, is a big freaking deal.  No higher education system in the western world has ever succeeded in getting its costs down.  What with the cost disease and all, the only way costs go is up.  Unless of course you start reducing the price of labour.

So, how does he plan on getting costs down?  Well, he wants more experimentation with delivery methods.  MOOCs and Competency-based learning (CBL) are clearly big parts of that.  And he’s prepared to spend a quarter of a billion to fund this kind of experimentation in order to find out what works and what doesn’t (some governments still do believe in evidence-based policy, apparently).

That’s the easy bit.  The trickier stuff involves penalizing institutions that do not provide “value-for-money”.  The US Government plans to come up with a rating system for institutions, based on: Accessibility (the percentage of its students receiving Pell Grants), Affordability (some combination of tuition, scholarships, and financial aid), and Outcomes (graduation rates, advanced degrees, and the salaries earned by graduates).  Institutions that don’t score well on this rating will see federal funding reduced via a decrease in their students’ eligibility for student aid.

Sound crazy?  It kind of is.  More on this tomorrow.

August 28

The Opposite of Strategy

The London Free Press recently published a summary of Western’s new draft strategic plan (there’s a longer version on Western’s website, but it’s password protected).  I urge you to read it.  It’s not uniquely bad by any means – there are lots of other institutions who have published similar sorts of documents – but it nevertheless represents a kind of quintessence of what’s wrong with university strategic plans.  It is a Stepford Wife of a strategy.  Nothing about it says, “Western”.  You could slap pretty much any mid-sized university’s name on it and no one would be any wiser.

Apparently, Western is going to become “world-class” by “hiring the best people”, and will invest in research by creating 50 new research chairs.   They’re also going to be, “educating students to succeed” (better than the alternative, I suppose) by expanding graduate programs (increased research-intensity, under another name), and establishing new professional graduates programs (a new synonym for “cash cow”).  They’re also going improve relations with alumni and London-area stakeholders (neither of which has any intrinsic relationship to world-classness); and finally – this one’s my favourite – they will “find new funding sources”.

(There are a couple of bones in here to undergraduates, but the old mission of offering “the best undergraduate experience at a research-intensive university” is nowhere in evidence).

I hope for Western’s sake that the actual draft document is more nuanced than the Free Press’ summary.  If strategy is about finding your unique strengths, and building on them, then this little list is the exact opposite of strategy.  There are no ideas here which haven’t already been used by several hundred other universities around the world.  There’s no unique value proposition, nothing that would allow Western to say “we’re different, and here’s why”.  Just rote genuflection at the altar of more research, and more grad students.

(Again, let me be clear – Western is hardly the country’s only offender on this score.  There are many other institutions out there with equally Stepford-Wife-like strategies.  They know who they are).

World-class research-intensiveness is not achieved by much other than sheer financial firepower (Korea’s Seoul National University and KAIST come to mind).  Bluntly, there is no chance that Western’s resources over the next decade are sufficiently large to succeed in that league. Mid-sized, public universities who mindlessly go down the “more research, more grad students” road are entering a fight for prestige they can’t possibly win.

Trying to excel by being like everyone else is a weak strategy.  Standing out and gaining prestige in a crowded field relies in part on being prepared to take audacious risks that challenge orthodoxy.  Before this plan moves from “Draft” to “Final”, let’s hope Western figures out which risks it should take.

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.

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