Higher Education Strategy Associates

April 08

ATMs and the Future of Education

I recently came across a fascinating counterintuitive piece of trivia in Timothy Taylor’s Conversable Economist blog.  At the time ATMs were introduced in 1980, there were half a million bank tellers in America.  How many were there 30 years later, in 2010?  Answer: roughly 600,000.  Don’t believe me?  See the data here.

Most people to whom I’ve told this story tend to get confused by this.  ATMs are one of the classic examples about how technology destroys “good middle class jobs”.  And so the first instinct many people have when confronted with this information is to try and defend the standard narrative – usually with something like “ah, but population growth, so they still took away jobs that could have existed”.  This is wrong, though.  When we look at manufacturing, we see absolute declines in jobs due to (among other things) automation.  With ATMs, however, all we see is a change in the rate of growth.

The key thing to grasp here is that the machines did not put the tellers out of business; rather, they modified the nature of bank telling.  To quote Taylor, “tellers evolved from being people who put checks in one drawer and handed out cash from another drawer to people who solved a variety of financial problems for customers”.

There’s an important truth here about the way skill-use evolves in the economy.  When most people think about technological change and its impacts on skills, they initially tend to presume “more machines → high tech → more tech skills needed → more STEM”.  But actually this is, at best, half the story.  Yes, new job categories are springing up in technical areas that require new forms of training.  But the more important news is that older job categories evolve into new ones with different kinds of requirements, and requiring a different skill set.  And in most cases, those new skills are – as in our bank teller example – about problem-solving.

Now, as a society, every time we see job requirements changing, our instinct is to keep kids in school longer.  But: a) pretty soon cost constraints put a ceiling on that strategy; and, b) this approach is of limited usefulness if all you’re doing is teaching the same old things for longer.

At a generic level, it’s not hard to teach in such a way that you’re giving students necessary skills to thrive in the future labour market.  Most programs, at some level, teach problem-solving (identifying a problem, synthesizing data about it, coming up with possible solutions, evaluating them, and coming up with a solution), although not all of them test for them explicitly, or explain to students how these skills are likely to be applied later on.  More could be done with respect to encouraging teamwork and interpersonal skills, but these aren’t difficult to add (although having the will to add them is something different).

The more difficult problem has to do with understanding where technology is likely to replace jobs and where it is likely to modify them.  What do driverless cars mean for the delivery business?  At a guess, it means an expanded market for the delivery of personalized services during commuting time.  Improved automatic diagnostic technology or robot pharmacists?  More demand for health professionals to dispense lifestyle and general health counselling.  Increased automation in legal affairs?  Less time on research means more time for, and emphasis on, negotiation.

I could go on, but I won’t.  The point, as Tyler Cowen makes in Average is Over (a book whose implications for higher education have been criminally under-examined) is that the future in many fields belongs to people who can best blend human creativity with the power of computers.  And so the relevant question for universities is: to what extent are you monitoring technology trends and thinking about how they will change what you teach, how you teach it, and how you evaluate it?  Or, put differently: to what extent are your curricula “future-ready”?

In too many cases, the answers to these questions land somewhere between “not very much” and “not at all”.  As a sector, there is some homework to be done here.

April 07

Not Mutually Exclusive

One often hears university administrators say things like: “if we don’t reduce growth in salary mass, we’re all in trouble”.  Sometimes, the word “academic” gets thrown in front of salaries, for good measure.  In response, one often hears faculty unions say: “but academic salaries are down as a proportion of operating spending since 1992”, or “salaries as a proportion of the budget have remained constant in recent years”, and conclude from this that salaries can’t possibly be the problem.

How should we evaluate these claims?  Well, first off, we should acknowledge that these are all true statements.  Let’s start with the question of academic salaries as a proportion of operating budgets.  Between 1990 and 2002, these did fall substantially, from about 39% of total operating expenditure to about 30%.  But it has remained more or less constant thereafter.  There were multiple reasons for this fall, the main one being that academic staff numbers actually fell during the mid-90s under the effects of that decade’s austerity, which meant that absolute dollars spent on staff were frozen from about 1992 to 1999.

Figure 1: Academic Salaries as a Percentage of Total Operating Expenditures, 1991-2012














Of course, one countervailing factor here is that a greater proportion of compensation is now going out in the form of benefits (mainly pensions) rather than salaries.  So sometimes, instead of looking just at academic salaries, we want to look at total compensation – and not just for academics, but for all employees.  Figure 2 shows all compensation as a percentage of operating budgets.  This, too fell in the 90s, but is just now starting to edge up a bit again, to around 75% of total spending.

Figure 2: Total Spending on Compensation as a Percentage of Operating Budgets, 1991-2012














Now, looking at these graphs, you could very well ask: “so what’s the problem?”  As indeed many faculty unions do.  Well, the answer is that these graphs represent fractions: expenditures as a percentage of total expenditures.  But it’s worth looking at both the numerator and the denominator here.  Figure 3 shows what has been happening to total operating expenditures in Canada.  Between 1998 and 2012, expenditures increased by 67% after inflation, or an average of 4.7% per annum in real dollars.

Figure 3: Total Operating Expenditures and Expenditures on Compensation, in $2012, 1991-2012














So it’s quite possible to look at Figure 2 and say, “up to 2012, staff compensation was in no way a cause of financial hardship to universities”.  However, to go from here, to saying: “therefore we don’t need to worry about compensation, and things can continue on as before”, requires one to believe that university revenues will continue growing at 4.7% per year, in real dollars.  And flat out, that hasn’t been happening, and isn’t going to happen anytime soon.

Take a look at the last couple rounds of provincial budgets.  On average, the 2013-14 budgets saw funding go down by 0.7%.  The 2014-15 round saw them increase by about $7 million nationally (or 0.066%).  And that’s in nominal terms – in real terms, that’s a decrease of about 4%.  Now, tuition increases of 6.6% over two years makes up for that a bit, but at best – even including the effects of rising international student numbers – we’re probably looking at increases in operating budgets of about 1.5% in the last two years, and in all likelihood for the foreseeable future ( and this year will almost certainly be less than that).

So, assuming 4% increases in compensation costs, and 1.5% increases in income, what does Figure 2 look like, extended out a couple of years?  Figure 4 tells the tale.

Figure 4: Total Spending on Compensation as a Percentage of Operating Budgets, 1991-2017 (Projected)














The result, simply, is that at present rates of expenditure and income growth, compensation will rise from 75% of the budget in 2012, to 85% of the budget in 2017.  Or, put another way, to make room for compensation growth, universities will have to cut their non-salary budget items by nearly a third over the next few years.

And that’s why, despite faculty unions being correct about the salary growth having been affordable up to now, the evidence still points to present salary mass growth as being unsustainable going forward.  The two stores are not mutually exclusive.

April 06

College Tuition 2014-15

Statistics Canada, for reasons best known to itself, only tracks tuition for university programs.  For college programs, we’re basically in the dark.  We’ve got nothing, nada, zip.

In theory, it’s not all that difficult to work out.  All you need to know is price and enrolment for each program offered: sum the prices, divide by enrolment, and voila!  Average tuition.  And yet nobody does it (my guess for why Statscan doesn’t do it?  Something less than full confidence in the enrolment data that comes in from colleges).

(Actually, Canada’s not alone in this.  In truth, there are very few countries with accurate tuition indexes.  Most countries either have zero tuition, or a set tuition fee, or fees [under Australia’s HECS system, students pay one of three prices depending on what fields of study they are in, with no variation by institutions], or they have a huge multiplicity of prices, often due to having many private institutions.  Almost no one keeps track of what goes on in private sectors, which is why you will search in vain for decent statistics on tuition in places like Brazil, Mexico, Russia, or even China for that matter.  The miracle has more to do with the fact that we have a decent set of tuition statistics for universities – albeit ones with some pretty loopy characteristics, as I noted back here – rather than the fact we don’t have one for colleges.  But I digress.)

The more faithful among you may remember that we here at HESA Towers tried to come up with a college tuition figure a few years ago.  In retrospect, our numbers were probably a little high in at least one province (Saskatchewan).  So this time, we think we’ve fixed the problems, and are giving it another shot.

Here’s how we came up with our numbers.  We looked at posted prices on institutional websites, and then – where tuition varies across programs – came up with an enrolment-weighted average fee for diploma-level programs (both shorter and longer programs are excluded from these calculations). In Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, and Saskatchewan there is only one institution, so the calculation is relatively straightforward. In Alberta, an estimated enrolment-weighted tuition figure for diploma-level programs was provided to us by the provincial government. In these six provinces, we are pretty confident about our numbers.

In the other four provinces (Ontario, Manitoba, British Columbia, and Quebec), we did not do a census of institutions; instead, we obtained fee and enrolment data from a representative sample of college institutions, enrolment-weighted the fee data, and assigned it to the entire province.  I know what you’re thinking: Quebec CEGEPs do not charge tuition.  However, they do charge a variety of fees for things like athletics, student services, etc., and we counted those. In these four provinces, there is a bit more of a margin of error in that we are not fully certain how representative our sample is.

Caveats aside, here’s what we found.

Figure 1: Average Tuition in College Diploma Programs














Saskatchewan and Prince Edward Island have the highest average fees, at just under $4,700.  This does not of course mean that all students are paying this amount; in fact, most are paying less, but both schools have enough high-tuition programs to pull up the average.  In most provinces, the average is somewhere between $3,100 and $4,100, though Quebec and Newfoundland are substantially below that.  The national average is $2,396.

That’s the picture for 2014-15 anyway.  We’ll try to keep this index up-to-date each year – look for an update on this in September.

April 02

More Inter-Provincial Finance Comparisons

Yesterday we compared provinces on PSE spending as a percentage of GDP – that is, as a percentage of their ability to pay.  More or less, what we found was that most provinces were pretty similar, at 2.5% of GDP, with Saskatchewan a bit lower, Alberta a lot lower, and Nova Scotia and PEI much higher.  But provinces have different economic capabilities and different student participation rates.  So how do all these different expenditure patterns play out where it counts, in dollars per student?

Before I get into the actual numbers, some quick explanatory notes: all income and enrolment figures are for 2011-12, and expressed in 2012 dollars.  The income figures represent all income, not operating, meaning that any big capital projects in that year will skew things a bit.  The “government” figures include both federal and provincial spending.  To keep things relatively consistent, I express student numbers in Statscan FTEs (3.5 PT = 1FT), rather than headcounts; BC and Alberta, who have way more part-time students than anyone else, would look a bit worse if we did this using headcounts only.  Finally, although I am expressing everything in terms of institutional income, since income and expenditure are pretty much identical, you can assume that everything I say here for per-student income is basically true for per-student expenditure, as well.

Got that?  OK, off we go.

Figure 1 shows what income per head looks like in the college sector.  Nationally, colleges receive $16,585 per FTE student per year, just under two-thirds of which come from government.  Most provinces have averages above this, but Ontario and Quebec (which between them have almost 75% of the country’s college students) spends less.  The surprise here is Alberta: despite receiving slightly less than the national average as a percentage of GDP, on a per-student basis its colleges and institutions receive a fairly outlandish $32,000 per FTE, of which about $19,000 comes from government.

Figure 1: College Income per FTE Student by Source and Province, 2011-12














Now, let’s turn to universities.  On average, Canadian universities have income of $31,000 per FTE, which is ahead of pretty much any university system in the world, with the exception of US privates.  Most provinces are pretty close to that level: only Manitoba is substantially below $30,000 per student, and only Saskatchewan, and Newfoundland are substantially above it.  In most provinces, universities get about 60% of their total income from government; the exceptions are Ontario and Nova Scotia (where it is about 45%), Newfoundland (73%), and Quebec (66%).

Figure 2: University Income per FTE Student by Source and Province, 2011-12














If this doesn’t look like what you’re used to seeing (e.g. Quebec universities don’t seem underfunded compared to Ontario universities), it’s partly because we’re not strictly looking at operating funding here: research funding from the federal government is also included, and that can change the lens a little bit.

Another truth here: the highest levels of funding are in Newfoundland and Saskatchewan.  While Memorial, Saskatchewan and Regina are all decent universities, none of them tend to make anyone’s top ten list of Canadian institutions.  Reasonable people might therefore question the strength of the link between per-student funding and quality.

Combine figures 1 and 2 and you get Figure 3, which shows average income across all post-secondary institutions per FTE.

Figure 3: Institutional Income per FTE Student by Source and Province, Colleges, 2011-12














Now, Quebec goes to the bottom of the pile, but that’s mostly because of weak funding in the college sector (which is fair enough, because much of it is effectively the final year of high school).  The biggest winners are – surprise, surprise – the three oil provinces of Newfoundland, Saskatchewan, and Alberta, all of whom are see institutional income of $35,000 per FTE student or thereabouts, which is roughly 35% higher than the national average of $25,800 per student.

It’s a very different picture than the one we saw yesterday when looking at expenditures as a percentage of GDP.  Essentially, rich provinces don’t need to spend as much of their income on higher education to have good post-secondary education.  As noted yesterday, Nova Scotia universities receive 2.5 times as much, in % of GDP terms, as do Alberta universities; yet, due to differences in provincial GDP and enrolments, Alberta institutions actually receive more dollars per FTE.

So which is the better measure, dollars per student or % of GDP?  It kind of depends on one’s perspective.  Institutions, naturally, care about the dollars: if someone else has more, they want parity so they can compete.  But governments and citizens probably care more about % of GDP, which is a measure of society’s ability to pay for things.  Every percentage of GDP used by PSE is a percentage that can’t be used to pay for something else, be it roads, hospitals, or personal consumption.

In other words, you can make a decent case for pretty much any province to be among the country’s best or worst, depending on whether you use a GDP framework or a per-FTE framework.  This is intensely annoying to people who crave certainty and exactitude, but that’s the way it is.

April 01

Some Inter-Provincial Finance Comparisons

Last week, I blogged about how OECD figures showed Canada had the highest level of PSE spending in the world, at 2.8% of GDP.  Many of you wrote to me asking: i) if the picture was the same when we looked at other measures, like per-capita spending or spending per-student; and, ii) could I break things down by province, instead of nationally.  I am ever your servant, so I tried working on this.

I quickly came up against a problem, which was simply that I could in no way replicate the OECD numbers.  Using numbers from FIUC (for universities) and FINCOL (for colleges), the biggest expenditure number I could come up with for the 2011-12 year was $41.75 billion in institutional income.  Dividing this by the 2011 GDP figure of $1.72 billion used in Education at a Glance (itself inexplicably about 3% smaller than the $1.77 billion figure Statscan reports for 2011) gives me 2.43%, rather than the 2.8% Statscan reported to OECD.  There is presumably an explanation for this (my best guess is that it has something to with student assistance), and I have emailed some folks over there to see what’s going on.  But in the meantime, we can still have some fun with inter-provincial comparisons.

Let’s start with what provinces spend on universities:

Figure 1: University Income by Province and Source as a Percentage of GDP














In most provinces, total university expenditure is right around two percent of GDP.  Only in two provinces (Saskatchewan, Alberta) is it significantly below this, and only in two (Nova Scotia, Prince Edwards Island) is it significantly above.  In terms of public expenditure, the average across the country is about one percent of GDP.  Nova Scotia, at 3.2%, is likely by some distance the highest-spending jurisdiction in the entire world.

Now, some of you are no doubt wondering: how the heck can Nova Scotia universities spend two and a half times what Alberta universities spend (in GDP terms) when the latter are so bright and shiny and the former are increasingly looking a little battered?  Well, I’ll get more into this tomorrow, but the quick answer is: Alberta’s GDP is eight times higher than Nova Scotia’s, but it only has about three times as many students.

Of course, universities aren’t the whole story.  Let’s look at colleges:

Figure 2: College Income by Province and Source as a Percentage of GDP














This is a wee bit more interesting.  Most provinces are bunched closely around the 0.5% of GDP mark, except for Quebec and Prince Edward Island.  If we were using international standards here, where college is usually interpreted as being ISCED level 5 (or level 5B before the 2011 revision), Quebec’s figures would be much lower because CEGEP programs leading to university are considered level 4 (that is, post-secondary, but not actually tertiary), and hence would be excluded.

But PEI is the real stunner here: apparently Holland College accounts for nearly 1.2% of GDP.  This sounds ludicrous to me and I have no explanation for it, but having looked up Holland College’s financials it seems to check out.

Here’s the combined picture:

Figure 3: Total PSE Income by Province and Source as a Percentage of GDP














So, what we see here is that most provinces again cluster around spending 2.5% of GDP, which would put their spending roughly on par with the world’s second-biggest spender, Korea (but slightly behind the United States).  Saskatchewan, at 2% of GDP, would still be ranked very highly, while Alberta, at 1.73% would be only a bit above the OECD average.

The crazy stuff is at the other end: PEI and Nova Scotia, where higher education spending exceeds 3.75% of GDP.  And yeah, their GDP is lower than most of the rest of the country (GDP/capita in those two provinces, at $39,800 and $41,500, respectively, is less than half what it is in Alberta), but there are lots of OECD countries with GDPs of roughly that level of income (e.g. Spain) who spend about a third as much on education.

Tomorrow, we’ll look a bit more at per-student spending.

March 31

Quebec’s Student Strikes: Does History Repeat?

So, many of Quebec’s student unions are on strike again (if you’re interested in a running total, check out this site).  Only this time it’s not about tuition or even (mostly) about university funding – it’s about “austerity”.  If I were the government, I would welcome this, because it’s likely to end in defeat for the radicals.

Let’s dial the clock back to 1986. Back then, there were two big pan-Quebec student organizations: the Rassemblement des associations étudiants Universitares (RAEU), roughly the equivalent of the present-day Féderation étudiante universitaire du Quebec (FEUQ), and the Association nationale des étudiants et étudiantes du Quebec (ANEEQ), which roughly represents the same unions as does the present-day Association pour une solidarité syndicale étudiante (ASSÉ), and sometimes goes by CLASSE (the CL standing for “coalition large”).  The Liberals had replaced the PQ late the previous year, and there were rumours that their first budget would remove the freeze on tuition fees that had been in place since the late 1980s.  It’s unclear that the Liberals did in fact intend to do this (in their first budget at least), but ANEEQ led an impressive student mobilization that definitively took this option off the table.  RAEU, which had been more luke-warm about mobilization, lost members and folded soon thereafter.

Flushed with a sense of power, ANEQ called another strike in the fall of 1988 over what were a pretty minor set of revisions to the student loan act.  The strike didn’t go very well: students could see the point in fighting a tuition fee freeze, less so with something that didn’t seem as negative.  The next December, sensing weakness, the Liberals finally broke the tuition freeze and increased fees from about $550/year to $1,300/year (still well below the Canadian average, even then).  RAEU re-invented itself as FEUQ, a more “presentable” option than the communist/syndicalist ANEEQ, but was still unable to stop the tuition hike.

(You think I’m exaggerating about communists?  I vividly remember being at a student “summit” in February 1990 in Quebec City, at which the leaders of ANEEQ kept running to the back of the room every few minutes to get instructions from this dude no one had ever seen before.  He was dressed in fatigues, combat boots, a red beret, and a Che Guevara beard.  Totally surreal.  And this was three months *after* the Berlin wall fell.)

Anyways, you can see where I’m going here in terms of the parallels.  The 2012 student mobilization was superb, the best ever seen in Canada.  But the conditions this spring just aren’t there for a repeat.  The leadership is not as inspired (FEUQ is falling apart, ASSÉ’s Camille Godbout is no Gabriel Nadeau-Dubois), the issue at stake is much vaguer and much less likely to resonate among students, and most importantly the Couillard government has a public legitimacy that the late-stage Charest government, worn out by scandal, fatally lacked.  It’s 1988 again, and the student movement is fighting the wrong fight.

In short, this strike is pure hubris on the part of the syndicalists.  It will likely end in failure, and weaken the student movement.  The door will then be open for the Liberals to finally raise tuition fees.

March 30

Investing in Students

One thing I’ve seen a lot of recently, particularly from the left, are exhortations to “invest in education”, “invest in people”, and “invest in students”.   However, as economist Stephen Gordon noted on twitter this weekend, the actual meaning of the verb “to invest” is “to acquire a productive asset”.  So, in a literal sense, it would appear that a lot of people on the left are interested in a government-led return to slavery.

Of course, this isn’t what the left means when it says “invest”.  In fact, calls for “investment” are a kind of rhetorical sleight of hand, combining one perfectly sensible idea with a much more dubious one.  The sensible bit is that “public spending on higher education has significant positive returns”; the less sensible bit is “if we spent more, we will continue to get similar high returns”.

The problem here – one which the investment crowd isn’t always keen to acknowledge – is that when real investors make investments, they actually measure returns.  And when they do, they measure returns relative to the original amount invested.  If returns do not increase in-line with investments, then this is what we call a bad investment.

To understand what I mean, let’s think about the Klein cuts in Alberta in the early 90s, or the Harris cuts in Ontario in the mid-90s, or the Bouchard cuts in Quebec in the mid-90s.  In all three cases, universities saw double-digit percentage decreases in operating grants.  Did student intake or graduation rates fall?  Was the quality of these graduates materially worse than those of any other era?  No?  Then what we have here is a case of a rise in returns to investment; governments spent less and got the same return.

The argument that a rise in spending will return a better investment is actually a tough one to make.  Will we get more graduates?  Will we get more thoughtful or productive graduates?  Will we get more research?  These are all things you have to measure.  By and large in Canada, our investments of the 2000s bought us more graduates and more research.  On other aspects – who knows?

(At this point in any of my talks, someone always asks something to the effect of: “but what about the other aspects of higher education, like citizenship, or critical thought?”  To which my answer is: if that’s what you think we’re buying with public expenditure: fine.  The issue is: on what basis do you think graduates will have more of those qualities if spending goes up 5%, or 10%, or whatever?)

I suspect some of the “investment” crowd wouldn’t mind actually measuring its investments; but, I also suspect there’s a larger portion of this group that could not care less about return on investments.  For these people, the word “invest” is simply a crude disguise for the word “spend”, and by “spend” they mostly mean transferring spending from the private sector to the public sector, hence raising private returns and lowering public ones (and this is from the left, for God’s sake).

None of this is to argue against public spending on education, of course.  And none of it is to say there aren’t reasons why higher education spending shouldn’t be increased.  But be careful of the language of investment: it doesn’t always lead where you think it will.

March 27

Better Know a Higher Ed System: South Africa

So, I was in South Africa last week talking to people from various ends of the higher education system.  It’s a fascinating place, which is attempting the almost-unimaginably difficult task of creating a single, functional system of education from the wreckage of apartheid.

One key aspect of contemporary South Africa is that genuine political competition is still some ways off.  Opposition parties exist, and the ruling alliance is experiencing some strain due to the increasing unhappiness of the main trade union, COSATU, but the fact of the matter is it’s still almost inconceivable the ANC could lose power before 2024 at the earliest.  Absent competition, quality of service delivery tends to suffer because government simply doesn’t have its feet to the fire very often.  And education is most certainly suffering. In fact, K-12 education is widely pointed to as the file where the ANC has performed the most poorly.  Obviously, the legacy of the apartheid-era Bantu education policies place a terrible burden on the system, but nevertheless when surveying the education system as a whole, words like “abysmal” and “train wreck” do spring to mind.

Only about half of all students finish twelve years of high school (most drop out between year 10 and year 12).  Of those, only about three-quarters pass the matriculation exams.  Of those, only thirty percent achieve a sufficiently good matric that they qualify (on paper at least) to attend university.  The result is that only about one-in-eight youth is actually eligible to attend university.  And of course within that one-eighth, whites and Indians are significantly over-represented.  Participation rates for whites are up around 50%; for Africans, they languish at around 10%.

Dropout rates within university are also a problem.  At best, only about half of students complete their three-year course of studies within six years, meaning that at the end of this very leaky pipeline, one finds an attainment rate of around 6%; nowhere near what is needed to run an advanced economy.  As a result, South Africa’s economy is not advanced in any sort of comprehensive way – what it has is a thin sliver of a developed economy, laid on top of a much larger economy indistinguishable from what you’d see in the rest of Africa.  If you can imagine dropping New Zealand into the middle of Kenya, you’ve more or less got the picture.

New Zealand dropped onto Kenya is a reasonably accurate description of the university system, too.  There are a handful of formerly-white institutions (Witswatersrand University, Stellenbosch University, University of Cape Town, etc.), which are basically research universities (only really badly funded).  However, a majority of institutions are either historically black or recently-merged (more about mergers next week), which often seek to emulate research institutions, but haven’t even vaguely got the human or financial resources to act that way.  Shouldn’t they differentiate, you say?  In theory, perhaps, but here you again run into the apartheid legacy: how can anyone argue with a straight face for a system where the only “top” universities (i.e. research intensive ones) are the ones that are historically white?

The money problems are real, too.  South Africa’s GDP per capita is about the same as China’s ($6,500 US).  But China can support lots of world-class research on that budget because most of its profs don’t speak English that well, and hence have limited mobility.  It can pay them well below world rates, and so there is lots left over for lovely new infrastructure, labs, etc.  South Africa can’t get away with that.  A significant fraction of its academics are quite mobile and liable to leave for Australia, the US, or wherever, at the drop of a hat.  Their pay rates therefore have to be at least marginally competitive with those of much, much richer countries, which leaves very little left over for all the other stuff universities need to be excellent.

No simple answers here, but lots of challenges – and increasingly lots of interesting solutions, too.  I’ll have more on this next week.

The first area has to do with how institutions raise income.  Sub-Saharan African countries tend to fall into two groups: those that are over-reliant on government funding (most of Francophone and Lusophone Africa), and those that are reliant on private fees paid mainly to private institutions or through dual-track tuition systems at public universities (most of Anglophone Africa, especially East Africa).  What you don’t tend to see in Africa are universities relying on self-generated non-fee income to fund themselves.  Here’s where South African universities’ money comes from:

Figure 1: South African Universities’ Income by Source (Source: Vital Stats, Public Higher Education 2012, Council on Higher Education, South Africa)


One could quibble around the edges with this: if you count all the money government spends on student aid, the state stream is considerably bigger (and the tuition stream smaller), but the really amazing thing is the third-stream income, which comes neither from government or students. At 31%, it’s pretty much the highest percentage of anywhere in the world.

Figure 2: Third-Stream Income as a Percentage of Total University Income, South Africa and Selected OECD Countries (Source: Vital Stats, OECD Education at a Glance 2104, Table B3.1)


Interestingly, South African institutions are achieving this without a significant tradition of charitable giving.  This isn’t a US private college situation where the money is all coming from endowments; according to a 2009 survey, endowments account for only about 11% of the money.  About a third of it comes from contracts, and over 55% of it comes from things like sales of service.

Sure, the big old (sotto voce: “white”) institutions like Wits and UCT do better on this measure than others (48% and 40%, respectively), but even the poorest institutions (the universities of technology) make 15% of their income this way – same as Japan and Australia.  That’s evidence of a very high degree of entrepreneurialism.  Admirable.

The other interesting thing about South African institutions at the moment is the attention being paid to curriculum.  As I noted previously, South Africa is plagued by drop-outs; only about 50% of starters complete their studies.  The culprit, by general agreement, is under-preparedness of students; there is an articulation gap between secondary and post-secondary (which makes initial transitions difficult) and curricula in many subjects contain transition points that takes for granted certain knowledge and abilities that all students may not have.

(Interestingly, while there are wide gaps in primary and secondary schooling available to Africans and whites, the dropout problem is only partly related to this.  Though there are differences in completion rates by “population group” [the preferred way to say “race” in South Africa] they actually aren’t that wide: 6-year graduation rates for Africans are 47%, compared to 59% for whites.  Compare that to the US, where the rates are 40% for Blacks and 62% for whites.)

So, your country’s system has an articulation problem, a transition problem and – to top it off – worries about how well current education is preparing students for the future labour market.  What do you do?  Well, the current preferred solution to this problem (outlined in this document) is to lengthen periods of study:  that is, to move from a system of mostly three-year degrees to a system of mostly four-year degrees.  And this isn’t simply a matter of adding a base foundation year – what’s being contemplated is a wholesale re-writing of curricula from the ground-up.  In some ways, it’s a more daunting task than the Bologna curriculum re-write, which often involved little more than slicing five-year degrees into a three-year Bachelor’s degree, and a two-year Master’s.

It’s not entirely clear whether this will happen – cost implications are significant, and there isn’t a lot of money in the kitty in Pretoria.  But having gone through our own debate about degree-lengths a few years ago, it’s refreshing to see a discussion driven by desired learning outcomes and curriculum analysis rather than vigorous hand-waving from politicians.

South African universities have taken extraordinary measures to close the funding gap;  if they were able to take similarly bold measures to tackle the attainment gap, the payoff would be profound.

March 26

Three Stories to Watch in Europe

Europe’s been reasonably quiet for the last few months as far as higher education is concerned, but there are now a number of interesting stories to watch.

Here’s the lowdown on three of them:

In Hungary, the ruling right wing Fidesz party has announced a wholesale change to the way it would fund higher education.  It’s looking to abolish (within the state system at least) a number of courses deemed to be “non-productive” (e.g. communications), and requiring others to become fully tuition-fee funded.  Tuition fees have a complicated history in Hungary.  Hungary adopted tuition fees in 1996, and applied them in a dual-track fashion (kids with good secondary marks could go for free, others could attend the same courses if they paid a fee).  In 2008, a voter-initiated referendum was held on the abolition of tuition fees, which passed by a 4-to-1 margin.  But this was never implemented: the party that promoted the referendum – Fidesz – promptly attained power and reneged on the deal (much to the relief of the universities who relied on the fees).

It’s fair to say that since attaining power, Fidesz’s policies towards higher education have been pretty nightmarish.  The number of funded places has declined by more than half; an attempt in 2013 to make free places contingent on students signing an agreement to work in Hungary for twice the length of their university course was foiled only by the European Commission (which took a dim view of the attempt to restrict mobility rights).  The attempted 2013 reforms drew sustained opposition from students and faculty – a rare event in a country where the governing party has a massive majority.  We’ll see how this new policy plays out.

In the Netherlands, there is a simply fascinating student uprising going on against “managerialist” universities.  It started when the University of Amsterdam announced that a number of different courses in the humanities would merge into a single liberal arts program.  This led to a two-week student sit-in at the Bungehuis (home of the humanities faculty) that ended in a police action, but students resumed the sit-in at a nearby building shortly thereafter.

The students’ critique is not, interestingly enough, about underfunding (the humanities faculty has done rather well in terms of funding recently, despite a small drop in enrolments), but rather about the secretive and “anti-democratic” nature of the modern university and – echoes for Canada here – universities losing money on property deals.  It’s struck enough of a chord that the university has put forward a ten-point plan to meet the students’ demands.   On the face of it, there are some big steps forward here, though likely not enough to satisfy protesters, who may feel they’re on a roll: copycat protests broke-out last week at the London School of Economics.  My guess is that this peters out in a week or two, but it may be the beginning of some valuable discussions about how universities are managed in Europe.

Finally, one consequence of the economic crisis in Russia is that students are not receiving their government bursaries.  Basically, what appears to have happened is that cash-strapped universities have raided funds received from government to pay for short-term costs (such as making payroll).  This probably isn’t more than a one-week story – eventually bursaries will be sorted out.  But it’s indicative of the kinds of problems Russian higher education – indeed, all Russian institutions – are currently experiencing.

March 25

Budget Denialism

You’ve heard of climate change denialism?  The use of spurious, crap data to try to undermine public acceptance of the well-established phenomenon of climate change?  Well, there’s something sweeping Canadian campuses that’s very similar.  I call it budget denialism.  Let me show you some examples from two universities in particular: Dalhousie and Wilfrid Laurier.

The Dal budget is here.  The focus of complaints at Dalhousie has been the $5.6 million cut to “faculties”.  Now, when you hear the word “faculties”, you think teaching (or instruction and instructional support, more broadly) – so when you hear about a cut to the faculties’ budget, while overall budgets are rising, you’re meant to think: “mean, empire-building administration, taking money away from teaching and giving it to themselves/building new buildings”.  That’s certainly the tenor of this article.

Except for one thing: the faculties budget doesn’t include salaries.  Salaries are up $9.9 million, 86% of which goes to faculties.  So actual spending on instruction and support within faculties is rising this year by roughly 2.1%.  Indeed, if you read the budget with any kind of care, it’s pretty clear that the main reason faculties are taking a $5.6 million hit to non-salary areas is precisely because this $9.9 million increase in salary needs to be accommodated.  Budget denialists of course see no connection here.

Most inane is the comment from the Dal Faculty Association that there shouldn’t be any cuts because Dal is in perfect financial health.  Her evidence?  That Dal has over a $1.6 billion dollars in assets.  Seriously, that’s what she said.  Like she’s never heard of the difference between an income statement and a balance sheet.  Like assets can magically be turned into income.  I look forward to seeing the DFA elaborating on this point by explaining its approach to liquidating endowments, and how to choose what buildings Dal should sell so as to never ever have to make a tough budget decision ever again.

Wilfrid Laurier University is an even better example of budget denialism in action.  The Laurier budget isn’t even a particularly tough one.  Though it’s predicting a $25 million gap between income and expenditures in three years, it doesn’t do much to close that gap.  In fact, it’s allowing for a 5% increase in the overall salary/compensation budget this year, while revenue will only increase 3%.  The math only works because Laurier is: a) choosing to run a $2 million deficit; and, b) laying off 22 staff.

The response from the academic community?  Well, there’s this guy who basically says budgets are political instruments, and you should only look at financial statements.  And since no previous financial statements show deficits, any talk of deficits in future must be a lie.  And this guy apparently has a Ph.D.  I presume he also thinks this can’t be the year 2015, because no previous year has ever been 2015.

And then there are the folks who just simply can’t understand how increasing salaries by 5% while increasing revenues by only 3% means something has to give.  Running a deficit is part of it; so too are layoffs to reduce salary mass, which Laurier did to 22 people the week before last.  Cue sniffy complaints of Laurier having lost its soul, ruined by management, and – worst of all – being run like a business.

(Running things like a business is, of course, the ultimate sanctimonious academic insult, spat out in disgust by people who by-and-large have never actually balanced an organizational budget.  I’ve always wanted to ask people who say this whether they believe non-profits never fire people, and if their budgets magically balance themselves, regardless of salary commitments.)

There’s room, obviously, for debate about university budgets and what gets prioritized.  But pretending there is no price to pay for hefty (5%!  Who gets 5% these days?) annual compensation increases, which everyone in universities seems to have got used to, simply isn’t on.  As with climate denialists, we should assume that budget denialists have some fairly self-interested reasons for taking the stance they do, and evaluate their evidence accordingly.

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