Higher Education Strategy Associates

March 26

The Curious Case of Disappearing Student Debt

If you’re one of those people who obsessively follows stories about student debt, it’s possible you’ve heard some rumblings about the latest Canadian University Survey Consortium (CUSC) survey, which seems to show a drop in student debt over the last three years.

CUSC is an important source of information about student debt in Canada.  Every three years, this consortium surveys a few tens of thousands of graduating students, and asks them (among other things) about their outstanding student debt.   We need this source of data because the National Graduate Survey only comes out every five years (too infrequent for most policy purposes), and the feds and provinces have yet to come up with a way to jointly report debt statistics (joint reporting being necessary, given that students receive loans both from federal and provincial governments).

Anyways, here’s what the CUSC data shows in terms of borrowing incidence:

Incidence of Borrowing, by Source, 2003-2012













The small uptick in borrowing incidence is about what you’d expect.  But where this data gets weird is when you look at the amount of total borrowing:

Mean Amounts of Borrowing (Among Those Borrowing), by Source, 2003-2012, in Real 2012 Dollars













Contrary to all expectations, overall debt fell by 14% in real dollars between 2009 and 2012.  So, what’s going on here?

One possible answer concerns participation in CUSC, which changes slightly from year-to-year.  Of the institutions who took part in the 2009 survey, twenty-six participated again in 2012; eight institutions left (notably Alberta, Calgary, UBC, and UVic), and ten came in (including York, Waterloo, Sherbrooke, and UQTR).  Clearly, the addition of a couple of low-debt Quebec schools, and the absence of high-ish debt schools from British Columbia, is an obvious possible explanation for this mystery.

Except: in 2012, for the first time, CUSC weighted its response data by the size of each institution’s graduating class.  Given the makeup of participating schools, this shift means that, in fact, 67% of weighted 2012 responses comes from high-debt jurisdictions (Saskatchewan, Ontario, New Brunswick, and Nova Scotia), compared to just 62% in 2009.  Given what we know about regional differences in debt, from previous National Graduate Surveys, the new sample should, ceteris paribus, have actually delivered a slightly higher debt number.  So the change in sample doesn’t seem to be the answer.

Other explanations?  Well, total grants issues in Canada did increase, slightly, after the replacement of the Foundation with Canada Study Grants, and the class of 2012 would have benefitted from a few extra years of Canada Education Savings Grants, but neither seems likely to have changed borrowing patterns this much.   It may also simply be greater prudence – students spending less in hard times.

Makes you wish we had better statistics, doesn’t it?

March 25

Lines in a Budget

We hope you liked our review of the 2013 Federal Budget.  Just to round off last week’s commetary on the all things budgetary, I thought I’d offer a few thoughts on the dangers of coming to snap conclusions about government policy from a budget document.

Obviously, there’s the problem of time.  It’s tough to try to get everything together, in a nice tight package, in the space of three or four hours; unlike the dudes who do news coverage for the networks and dailies, we haven’t spent all day in lock-up with the document.  That doesn’t just lead to the odd spelling error (oops), it means we sometimes miss things entirely.

The big(ish) one we missed this time was a little line on page 194, which says:

In the coming year, the Government will examine the Indirect Costs Program in consultation with the post-secondary sector, including the Association of Universities and Colleges of Canada, to ensure that the program is meeting its objective of reinforcing excellence in post-secondary research.

Now, this could mean a lot of things.  It could just be an indication that the government is planning to do some sort of due-diligence program review.  Worst case scenario (though I doubt this is the case), it means a penny-pinching government might be out to slash the program.

Or – and this is what they don’t tell you in civics class – it might amount to nothing at all.  Sometimes the Government of Canada puts stuff in budgets, and then never follows-up.  In 2011, the Government pledged to reallocate $60 million of HRSDC money, over three years, in order to “promote enrolment in key disciplines related to the digital economy such as science, technology, economics, and mathematics”.  Well, we’re heading into year three, and, as far as I know, this still hasn’t happened, which kind of makes you wonder how last week’s pledge of spending  millions promoting “in-demand” subjects is going to play-out.

Or how about this, from 2010:

The Government will engage in a new approach to providing  support to First Nations and Inuit post-secondary students to ensure that students receive the support they need to attend post-secondary education. The new approach will be effective and accountable, and will be coordinated  with other federal student support programs.

This also never happened.  And while the PSSSP is ripe for an overhaul, given this government’s not-altogether-happy track record with First Nations, it’s probably just as well that it didn’t.

A line in a budget is only a statement of intent.  It takes a lot of work to get it from there, to being the law of the land.  And you just can’t tell on budget night what’s what.

March 21

HESA’s 2013 Federal Budget Commentary

On Thursday afternoon, Finance Minister, Jim Flaherty, stood on the floor of the House of Commons, and delivered the Government’s eighth Federal Budget.  In lieu of an OTTSD for Friday, we at HESA have examined the document, and produced a commentary on its implications for higher education in Canada.

You can read our 2013 Federal Budget Commentary, here.

Thanks for reading.  And as always, let us know what you think.


March 21

A Dream Budget

Today is budget day in Ottawa.  Tonight, you’ll get our full budget coverage (replacing tomorrow’s morning blog), and if you’re of the twitter persuasion, you can follow my analysis from 4PM, on, at @AlexUsherHESA.  But for now, let’s think about what a good Canadian federal budget would look like for higher education.

In keeping with the times, this will be a completely cost-neutral budget.  We’ll start with some obvious places to cut: the elimination of the education amount and textbook tax credits (pure middle-class giveaways), and of in-school interest subsidies on Canada Student Loans Program (CSLP).  Together, those two should give us about $900 million/year to play with.

Now, where to spend it?

Let’s start with CSLP.  Using the money we’ve just taken-out of the program, let’s give it back to students in the form of a concessionary loan rate after graduation.  Instead of paying kids to borrow while they’re in school, and then hitting them with rates 400 basis points above the price at which government borrows, we could give them one even rate across their entire loan.  Winners: students who take a long-time to repay; Losers: those whose parents currently pay off their loans.  Cost: $300 million (or so).

Let’s take another $300 million and give it to Aboriginal Affairs, to double the size of the Post-Secondary Student Support Program (PSSSP).  If you want to expand access to PSE in Canada, there’s no better way to spend marginal dollars.  At the same time, rules should be amended so as to take program administration out of bands’ hands, and transfer it to aboriginal organizations, which have more administrative capacity (see: my 2009 paper on this, here).

Next, let’s go with $100 million, more or less unfettered, to the granting councils in the usual 40/40/20 configuration.  Then maybe $50 million to do something snazzy on university-research interaction.  As I noted a few weeks ago, traditional tech transfer just ain’t working in most places, and it’s time to come up with a new model.  I have no idea what that is, exactly, but I know I’d probably ask the guys at the UBC Industry Liaison Office to design it.

Then, another $125 million to some kind of new fund that would modernize and improve teaching at universities and colleges in Canada.  Let’s get scientific about improving pedagogy, and let’s get serious about helping institutions open themselves up to experiential learning, and get students involved in applied research.   Done well, this could be a huge branding opportunity for Canadian education as a whole.

Last, take $25 million and send it to Statscan so we can get a decent educational statistical system in this country.  Finally.

Chances of this being implemented: zero.  But I guarantee it’s a better and cheaper package than anything Flaherty announces this afternoon.

March 20

Skills Shortages (Part 2)

As I noted yesterday, much of the talk about skills shortages in Canada is data-free, and factually-challenged.  What, for instance, are we to make of claims that we have a huge shortage of people in the construction trades, when even a simple look at Labour Force Survey data tells a very different story?

Unemployment by Industry, 2007-2012













Yeah, that’s right: workers in the social sciences, education, and government fields (mostly university graduates) have unemployment rates of about 3%, compared to 9% for workers in the construction trades.

But what about those huge pay increases we’ve been hearing about for skilled trades?  Well, they do exist – if you happen to be part of the 1.5% of the total workforce involved in resource extraction.  Otherwise, wage increases in trades pretty much mirror wage increases in the wider economy.

Wage Growth by Industry (selected industries) 2003-2012














Now, none of this is to deny that in some parts of the economy (skilled trades and health care, in particular), in some provinces (mainly Alberta and Saskatchewan), skills shortages do exist, and the inability to fill these positions creates a bottleneck to growth in some booming industries.  But, then, what’s the right policy response?  I haven’t got the answers, but I do have some thoughts:

1)      Be skeptical about “better labour market information” schemes.  Do we really think the unemployed don’t know that things are booming out west?  The problem is that retraining for in-demand jobs takes 3-4 years, by which time they may no longer be in-demand

2)      Be very skeptical about financial incentive schemes.  In February’s Policy OptionsKen Coates and Rick Miner proposed giving scholarships to students who go into particular, “in-demand” trades.  This, frankly, is bizarre: if jobs are going begging, shouldn’t wages rise to attract demand?  What business is it of government’s to subsidize particular occupations?

3)      Focus on Completion Rates.  There’s much talk about needing to “make trades more attractive”.  But new entrants to trades are close to all-time highs – more than double the rates of the late 90s.  As a recent CGA report cogently noted, the problem is that new apprentices aren’t finishing their programs.  Solve that, and the larger shortage problem is solved, too.

But my final thought is this: why can’t Alberta and Saskatchewan deal with this on their own?  Why is this a federal issue?  Cynics on the left may push the idea that it’s because Harper hates educated humanists, etc, etc., but I think it’s simply that this government listens to western business.  If they have a problem, this government will bend national policy to suit, just as previous ones bent national EI policy to suit Quebec and the Atlantic.

That’s Canadian federalism for you.

March 19

Skills Shortages (Part 1)

OK, apparently this week I’m going to have to talk about skills shortages, because it seems that people in Ottawa have LOST THEIR EVER-LOVING MINDS on the subject.

The basics of the policy discussion are as follows: Canada currently has an unemployment rate of about 7.5%, which is deemed too high.  Despite there being roughly 6 unemployed people for every job vacancy, there are some jobs which are going unfilled because of skills shortages.  This, everyone can probably agree, is a Bad Thing.

Conventional wisdom would suggest that the problem is a lack of aggregate demand – that is, a lack of jobs.  But there is an increasing drumbeat saying that the problem is one of aggregate skills – or, a “skills mismatch”.

So, which is it?  A jobs challenge, or a skills challenge?  And if it’s the latter, what kinds of skills are missing?

One way to look at the tightness of labour markets is to look at the ratio of unemployed-to-job openings.  Statistics Canada has been measuring this over the last couple of years, and here’s what they’ve found:

Ratio of Unemployed-to-Job Openings, by Province













The major determinant of unemployment is, as it always has been, regional economic disparity.  Everywhere outside the Prairies, the ratio of unemployed-to-job openings is over 6-to-1; the idea that skills mismatches are in any way driving unemployment in these areas stretches credulity.

That doesn’t rule out the skills mismatch hypothesis in other parts of the country, though.  But what kind of skills mismatch is it?  Is it true that, as one Conservative source allegedly said, “we have too many BAs and not enough welders”?  That’s a common meme, stemming in no small part from the constant rhetorical confusion between “needing more skilled workers”, and “needing more workers in the skilled trades”, which is not the same thing at all.

This can be easily verified.  Recently, CIBC put together a nice little report, which listed the 25 occupations showing signs of a skills shortage over the next few years.  Here they are, in the table below, listed in no particular order:

25 Occupations Showing Signs of a Skills Shortage (Source: CIBC)















Maybe five of those require apprenticeships; most of the rest require university degrees.  True, only one relates to BAs, but that suggests a need to put more money into expensive STEM problems, not shift students out of universities altogether.

But this isn’t the line we’re hearing right now from elected representatives.  Why, exactly, is that?  More on this tomorrow.

March 18

Comparing Outcomes Across Credentials

I was doing some random websurfing the other day and I came across the BC Student Outcomes Page, which makes freely available an absolute cornucopia of data on its graduates.  BC has a seriously decent survey set-up, in that they do surveys of each graduating class, every year – universities, colleges, apprenticeships, you name it.  Actually, it’s probably overkill, but for data nerds like me it’s absolute heaven.

Anyways, BC surveys all its graduates between 9 and 20 months after graduation (not ideal, I know, because a lot can happen in that period), and asks them about their satisfaction with their program, how they rate the usefulness of the skills they gained, and their employment status.  Given all the talk going on about shifting labour markets, and the need for greater emphasis on skills training, yadda yadda, I thought I would line up the combined results for the 2009, 2010, and 2011 surveys – that is, the years that cover the recent period of elevated unemployment – to see how people with each of the three credentials rated their education.  (DataBC released the pre-compiled results, here.)

First, satisfaction: how happy are Bachelor’s graduates, Diploma/Associate Degree/Certificate graduates (which, for the sake of convenience, I’ll call “Sub-Bachelor’s” graduates), and apprenticeship graduates, with the education they received?  Well, the answer to that question is so dull I’m not even going to post a graph (lest I be accused of doing this).  Across the board, 94% said they were satisfied or very satisfied.  The only sub-group that stood out were Bachelors-level students in Education, where the percentage was 89%.

The percentage of students saying they gained useful skills and knowledge is a bit more interesting.

BC Graduates Rating Knowledge/Skills Received in Their Program as “Useful” or “Very Useful”, By Level of Credential, 2009-2011













That apprentices are most likely to rate the knowledge/skills obtained in their programs as being useful is unsurprising, but the other two sets of numbers are more interesting.  In Bachelor’s programs, all programs except Arts/Science (78%) and Visual/Performing Arts (81%) are in the high-80s or low-90s.  In sub-bachelor’s program it’s a similar story, with General Arts and Science (53%) and Visual/Performing Arts (63%) pulling down other averages, which are in the high-70s to low-90s. Takeaway: provision of useful skills in BC colleges is pretty uneven.

Now, here’s the killer stat: unemployment rates.

Unemployment Rates of Recent Graduates, By Level of Credential, 2009-2011













Yes, really.  Break it down even further and you get even more interesting numbers: Visual/Performing Arts BAs – 8%; Arts and Science BAs/BScs – 9%; Construction trades apprentices – 11%.

Now, it’s great – obviously – that people are taking apprenticeships and skilled trades more seriously these days.  But this meme about how undergraduate degrees are inferior to other forms of education in terms of skills and job outcomes?  It’s factually incorrect.  It’s got to stop.

March 15

The US Debt Freak-Out

If you read the US papers at all, you’ll have noticed a recent ratcheting-up of panic about student debt.  Take Charles Blow’s recent New York Times column, which describes US debt levels  as “staggering”, and having “long-term implications for our society and our economy, as that debt begins to affect when and if young people start families or enter the housing market.”

Some facts are in order.

It is certainly true that, in the United States, it’s possible to accumulate some absolutely staggering amounts of student loan debt, to no good purpose.  Law grads, in particular, routinely rack up six-figure debts, only to end up in positions with mid-five-figure salaries (do read Paul Campos’ Don’t Go to Law School (Unless) – it’s an eye-opener on this topic).  But those numbers are severe outliers.  In fact, among the 60% of American students who borrow, the average debt is about $27,000 – with median debt being somewhat lower.

Sound familiar?  It should.  Those numbers are almost exactly the numbers we’ve had in Canada since the turn of the century.  And though life isn’t as easy for young people with loan debt today as it was thirty years ago, it’s not as though the last decade’s worth of graduates are some kind of immiserated proletariat.  Against expectations, the rise in debt in the 90s didn’t reduce access (quite the opposite, actually), and it didn’t lead to a generation of debt peonage.  In fact, grads in their late 20s and 30s live pretty much the way they always have.  True, home ownership rates have fallen among the under-40s, but that has at least as much to do with a historic rise in house prices as it is does student debt.  In short, current levels of debt don’t have major behavioural or life-course consequences.

So, are Americans freaking out to no good purpose?  Only partly.  There are two good reasons why a similar level of debt in the US might be more consequential than it is here.  The first is that, with weaker safety nets, the consequences of falling into poverty are much, much worse.  The second reason is that the US student loan policy choices have been sub-optimal.

In Canada, thanks to Interest Relief (and later, the Repayment Assistance Program), students with incomes into the mid-$20,000s are exempt from making payments on their loans.  In the US, the threshold for loan deferment is, in practice, about half that, meaning that, unlike in Canada, some very poor borrowers can be required to make large loan payments.  America could have copied us in ensuring a good safety net for the poorest; instead, they chose to subsidize student loan interest rates across the board, regardless of need.

High levels of student debt are manageable.  It just takes good policy choices.

March 14

The New Normal: Students First, Institutions Last

There’s a new dynamic at work in Canadian higher education.  And it should scare the bejesus out of everyone who cares about the sector.

Consider the following:

In Alberta, where the Conservative Government last week cut operating budgets by nearly 7%, and institutions have been told to forget about offsetting through tuition fees, the student aid budget rose by almost a quarter.

In Ontario, the Liberal Government won re-election last year on a platform of no more money to institutions over four years (a pledge matched by all other parties), combined with a 30% discount in tuition for full-time undergraduates.  The Ontario Tories do seem to want institutions to be able to raise a bit more money via tuition fees in carefully selected programs.

In Nova Scotia, the provincial government commissioned Tim O’Neill to tell them how to save the higher education system, then ignored his report, then cut higher education budgets by a little more than 10% over the last three years (with more cuts to come).  Student aid, increased in the early years of the government, was spared those cuts.

At the federal level, it’s not much better.  The left-ish Canadian Centre for Policy Alternatives (CCPA)’s annual Alternative Federal Budget fell into the same pattern: Add $1.7 billion to provincial transfers for PSE, but attach strings so it had to be used to reduce tuition.  Despite committing almost $4 billion in spending to the sector (some of it repurposed from tax credits), the only new money that might flow to higher education from the AFB proposals would be through expanded PSSSP funding to First Nations students.  The rest?  It goes to students, in one form or another.

The pattern is clear.  From east to west, from left to right, the pattern is the same: protect students (and their families), cut the institutions.

Some increases in student aid are justifiable, of course.  And Canadian PSE institutions are generously funded by international standards, and so should find a way to adjust to these cuts, at least in the short-term.  But there’s a deeper problem here.  If we’ve reached the point where the question of how to least inconvenience students and parents trumps the provision of quality education, the sector has a serious long-term problem on its hands.

At root, it’s a collective failure to convince the public that they’re getting value-for-money in PSE.   Until people are convinced otherwise, the demand for cheaper education is going to trump the demand for better education.  Priority one for everyone in the sector is to reverse that dynamic.

March 13

Apprenticeships: Time for Quality over Quantity

We have a problem with skilled trades and apprenticeships in Canada.  At the root of it are three things: short-term thinking, bad forecasting, and a training schedule driven by money over pedagogy.

Short-termism is embedded in Canadian apprenticeships.  When the economy is booming, we take on more apprentices; when it’s in the tank, we cut back.  This is because “enrolment” is based entirely on decentralized private sector demand for young, cheap labour.   Given that finishing an apprenticeship takes four or five years (roughly the length of an economic cycle), this more or less guarantees that the supply of apprentices is always going to be out of whack; not enough when the economy is at full tilt, and too many when the economy is slowing down.  Yet, for some reason, this simple fact is never acknowledged in policy circles, let alone the subject of any serious reform measures.

Aggravating this situation is the fact that industry is pounding on government’s doors, asking for financial help to expand apprenticeships (read: supply of inexpensive labour).  Usually, these are couched in terms about looming “shortages” of people in the skilled trades, but some of these predictions depend on overly optimistic views about future demand.  As a recent – and quite brilliant – paper from the Certified General Accountants of Canada noted, we really only have a skills shortage if you assume future demand will increase at the pace it did between 2003 and 2007.  If you assume a more moderate pace – say, the 2001-2011 average – the only shortages one sees are in carpentry, which has plenty of new apprentices, but the highest discontinuation rate of any trade in the country.  Heal thyself, guys.

And then, of course, there’s the problem that Canada’s apprenticeship system is among the world’s least coherent, pedagogically speaking.   Other countries send apprentices on day release for in-class training instruction, because theory and practice are best integrated that way.  On the other hand, we use the pedagogically dubious block-release system for in-class training – which is basically a ruse to suck money out of the EI system (apprentices are technically unemployed while studying, and hence are EI-eligibile).  Might that be one reason our apprentices take longer than any in the world to reach journeyman status?  Maybe.  I don’t see anyone rushing to find out, though.

Sadly our federal and provincial governments these days seem to reach instinctively towards skilled trades and apprenticeships as the answer to most issues of youth employment and human resource development.  What we actually need is a better and more efficient apprenticeship system, one that smooths out the swings in supply and demand.  But all the clamour right now is in favour of more of the same.  Expect our skilled trades problem to fester.

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