HESA

Higher Education Strategy Associates

Category Archives: Canada

July 25

The low-wage graduate problem

The week before last, the Canadian Centre for the Study of Living Standards (CSLS) put out a report (available hereon trends on low-paid employment  in Canada from 1997 to 2014 (meaning full-time jobs occupied by 20-64 year olds where the hourly earnings are less than 66% of the national median).  It’s an interesting and not particularly sensationalist report based on Labour Force Survey public-use microdata; however one little factoid has sent many people into a tizzy.  Apparently, the percentage of people with Master’s or PhDs who are in low-wage jobs (where the hourly earnings are less than two-thirds of the national median) had jumped from 7.7% to 12.4%.  This has led to a lot of commentary about over-education, yadda yadda, from the Globe and Mail, the CBC, and so on.

This freak-out is a bit overdone. I won’t argue that the study is good news, but I think there are some things going on underneath the numbers which aren’t given enough of an airing in the media.

First of all, as CSLS explains in great detail, the two important findings are that the incidence of low-wage work in the economy has stayed more or less stable, and second, Canadians on the whole are a lot more educated than they used to be.  This leads to a compositional paradox: even though all seven levels of education saw increases in the incidence of low-wages (see Figure below), overall the fraction of Canadians with low wage jobs dropped ever-so-slightly from 27.9% in 1997 to 27.6% in 2014.

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Now you have to be careful about interpretation here, particularly with respect to charges of “over-education”.  Yes, the proportion of grads in low-wage jobs is going up.  But the average wage income of university graduates is actually increasing: between 1995 and 2010, it rose by 6% after inflation.  And that’s while the number of people in the labour force with a university degree increased by 94%, and the proportion of the labour force with a university degree jumped from 19.3% to 28.7% (I would break out data on Masters/PhD specifically if I could, but public Statscan data does not separate Bachelors from higher degrees). 

What that tells us is that the economy is creating a lot more high-paying jobs which are being filled by an ever-expanding number of graduates.  But at the same time, more graduates are in low-wage jobs, which suggests that while averages are increasing, so is variance around the mean.

Another factor at work here is immigration.  Since the mid-1990s, the number of immigrants over 25 with university degrees has increased from 815,000 (23.2% of all degree holders) to 1.87 million (33% of all degree holders).  It’s not clear how many of those have graduate degrees (thanks Statscan!) but I think it’s reasonable to assume, given the way our immigration points system works, that the proportion of immigrants with advanced degrees is even higher.

The problem is that immigrants with degrees – particularly more recent immigrants – have a really hard time in the Canadian labour market, particularly at the start (see a great Statscan paper on this here).  To some extent this is rational because the degrees and the skills they confer are genuinely not compatible (see my earlier post on this), and to some extent it reflects various forms of discrimination, but that’s not the point here.  There are over one million new immigrants with degrees over the past fifteen or so years, many of them from overseas institutions.  The CSLS-inspired freak-out is about the fact that over the past 17 years the number of degree-holders has increased by 450,000 (of which 130,000 are at the Master’s/PhD level).  Simple logic suggests that most of the problem people are seeing in the CSLS data is more about our inability to integrate educated immigrants than it is about declining returns to education among domestic students.  I know the data CSLS uses doesn’t allow them to look at the results by where a degree was earned, but I’d bet serious money this is the crux of the problem.

So, you know, chill everybody.  Canadian graduates still do OK in the end.  And remember that comparisons of educational outcomes over time that don’t control for immigration need to be taken with a grain of salt.

June 15

A Canadian Accomplishment

Often, I think, I am seen as a bit of a downer on Canada.  It goes with the territory: my role in Canadian higher education is i) “the guy who knows what’s going on in other countries and ii) “the guy who pokes the bear”.  So frequently I ending up writing blogs saying why isn’t Canada doing X or wouldn’t it be great if we were more like Y, and people get the impression I’m down on the North.

Not true.  I think we have a pretty good system, one most of the world would envy if we could ever stop admiring our minute inter-provincial differences and explain our system properly.  Among OECD countries, we’re always in the top third of pretty much any higher education metric you want to use.  Never at the very top, but reasonably close.  It’s just that it’s not cheap, is all.  We’re never going to win any prizes for efficiency; countries like Israel, the Netherlands and Australia perform far better on those metrics.

But there is one area in which Canada does a fantastic job and doesn’t even realise it.  And that is the extent to which it has a strong culture of work-oriented higher education which is matched by few other countries.

Let’s start with our colleges and polytechnics, which for the most part deliver labour market-oriented professional education at a level known by UNESCO and OECD as “Type 5B” (bachelor’s degree programs are called “Type A”).  Among OECD countries only Japan and Korea do a greater proportion of young people have this kind of education.

Figure 1: Level 5 (post-secondary education) Attainment Rates of 25-34 year olds, Select OECD Countries

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We sometimes hear complaints from colleges and polytechnics about not getting enough respect, but the fact is, Canada has arguably the best-funded and most successful non-university post-secondary education system in the world.  We should say it, and celebrate it.

What about the university system, you say?  Well, the University of Cincinnati may have invented co-op education, but I don’t think there’s much doubt that the University of Waterloo perfected it.  Last time I checked, they were arranging over 17,000 co-op experiences for students every year.  And institutions across the country have adopted the idea as well.  Personally, I think that’s a result of competition from our excellent college sector: it keeps universities on their toes.

 

And OK, it’s easy to scoff at university claims that 40% of students get some kind of work-integrated learning experience because so many of them are so short-term and of not-particularly high quality, and because at least a few universities seem to care more about classifying as things as possible as “experiential” than actually creating more such experiences: but so what?  The fact that we’re having the debate at all suggests we are on the right track.  And that’s a sight better than most other countries I could name.

Now, I know some of you are going to say “but Germany! Switzerland! Apprentices!”.  And there are some admirable things about those systems (though, as I have said before), Canadians deeply misunderstand what it is apprenticeships in Germany actually do).  Namely, they aren’t post-secondary in nature (note how low Germany’s Type B score is in the figure above); rather, they’re part of the secondary system and in many ways are designed to keep people out of the post-secondary system.  It’s hard to compare out system to theirs.

So, in sum: could we do more on experiential and work-integrated learning?  Of course we could (and should).  But stop and smell the roses: compared to most places, we do a pretty good job on this stuff.  And we should acknowledge that to ourselves even if, in true Canadian fashion, we’re a little reluctant to say so to anyone else.

June 14

Affordability of Higher Education in Canada and the United States

About a decade ago, my colleague Kim Steele and I did a comparison of the affordability of public higher education in all ten Canadian provinces and fifty US states. In general, Canadian provinces did not do well; yes, Canada has lower costs for students, but its student aid system is less generous and – this is worth remembering – Americans are wealthier than we are. And so, once you adjust costs and net costs for family purchasing power, it turned out there was a substantial affordability gap in Americans’ favour.However, things have changed a lot in the intervening decade. Tuition has increased at a faster pace in the US than in Canada, and while both countries have made improvements in student aid, the gap in median household incomes has narrowed substantially due to the severity of the recession in the US. And so my colleague Jacqueline Lambert and I thought it would be fun to re-run some of those comparisons. We’ll be publishing our full 60-jurisdiction report in the fall but it seemed like it would be fun to give you some top-level comparisons right now.

First, a brief methodological note on this comparison. We take six different measures of cost (see table below) and divide each of them by each nation’s median household income. We do this because affordability by definition is a function of a household’s ability to pay – simply comparing costs, which on their own are meaningless.

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Most of this data is easily available from various official sources (email me if you’re curious).  The exception is living costs because while Canada occasionally produces student income/expenditure surveys (we at HESA have done a few of these), Americans simply don’t.  Not on a national basis, anyways.  When you hear American student aid analysts talk about “cost of attendance”, what they’re referring to are institutional estimates of costs to live on- or off-campus which form the basis of student aid need assessment.  Sometimes these estimates make sense, sometimes they are batshit crazy (do read the New America Foundation’s recent series on this issue, available here. Regardless, they’re the only data we have.

In our 2006 paper, we used US figures for on-campus housing and in Canada we used results from an Ekos survey for living expenses.  Here’s how affordability stacked up then:

Figure 1: Canada vs. US Cost Comparisons, 2002-03 
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American tuition and living costs were both 15-20% higher than Canadian ones, but once adjusted for household income they were roughly the same – education costs in both countries came out to 11% of median household income and total costs were 23-24%. Where the Americans had a real advantage was in loans: the ubiquity of loans meant that Americans were much less credit-constrained than Canadians and had to dig into their pockets much less in the short term. Result: on the most inclusive measures of affordability, Americans looked better than we did in 2002-03.

Now on to a more recent comparison, after a recession and many policy changes on both sides of the border. We’ve refined the US living cost data by using a weighted average of on-campus and off-campus housing costs, and to make the Canadian data more comparable we’ve chosen to use CSLP living cost estimates for Canada rather than actual survey data (nationally, the two are within 5% of one another, so it’s not a big change in practice). Here’s how the data looks for 2013-14:

Figure 2: Canada vs. US Cost Comparisons, 2013-14

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What happened? How does Canada now look so much more affordable? Well, not much on the income side; in fact US median household income grew slightly faster on the American side. But tuition grew a lot faster in the US than it did in Canada. So, interestingly, did American students’ living costs; in 2003 they were 18% higher than in Canada; now they are 86% higher. To some extent, the increase in US living costs is due to our methodological change of including off-campus housing costs. That said, US cost of attendance is truly rising quickly for reasons which are not entirely clear.

Some policy measures have kicked in to offset these rises. Grant dollars per student in the US have risen by over 170% in the past decade, and loans per student have risen 64%. Both these figures far outstrip the equivalent figures in Canada. But it’s not enough to close the widening cost gap. On the most inclusive measure of affordability – out-of-pocket costs after tax expenditures – Canadian families must spend 11.9% of median household income (compared to 13.1% a decade ago) while Americans must spend 20.8%, up from just 9.7% a decade ago.

Plenty of food for thought – on both sides of the border.

June 13

A Marginally Less Mediocre Set of Provincial Budgets

So, it’s that time of year when I bring you the round-up of what’s happened in provincial budgets over the past few months. Usually, when I do this, I look both at student financial aid and transfers to institutions; this time, I’m going to skip the student financial aid stuff because there’s essentially no change (rock steady since 2013 at around $2.35 billion in constant dollar terms).

One thing that happens a lot when you look closely at budget estimates is that it’s surprising how often what’s actually in the budgets doesn’t actually match how they are described in news reports. For instance, this year it was widely reported that post-secondary institutions in Newfoundland got the chop – but according to budget papers their operating budgets are essentially unchanged from last year (though capital budgets have been cut by $5 million). On the other end, the Alberta NDP was widely applauded for major new investments in higher education but as near as I can tell, this year’s operating transfers are only 3% (in real dollars) ahead of where they were two years ago (though capital funding is way up). That doesn’t mean that the alternative narratives are wrong; I’m looking at big-picture all-inclusive province-wide transfer data; there are other ways of slicing the data which get you quite different results. But its’ worth keeping in mind that the pictures that governments and institutions see are not always the same.

Anyways, here are the year-on-year changes in provincial PSE budgets, in constant dollars:

Figure 1: Year-on-year change in inflation-adjusted transfers to post-secondary institutions, 2015-16 to 2016-17, by province

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Four provinces saw a decline in both real and nominal dollars: Newfoundland, PEI, New Brunswick and Saskatchewan. Of these, two (NL, SK) saw cuts land disproportionately on the capital side. In New Brunswick, a couple of weeks after the budget, the government announced a one-off increase in funding from some weird new innovation/growth slush-fund-y kind of thing which generally has me a bit perplexed; however, because these comparisons are for reasons of comparability budget-to-budget, I have not included this here (they will presumably show up in higher baselines in next year’s comparison. British Columbia and Nova Scotia both increased expenditures, but by slightly less than inflation.

Quebec’s budget increase was slightly (0.18%) larger than inflation. Ontario’s increase was 0.8% but this was entirely due to a bump in capital spending – if we focused on operating dollars alone Ontario would show a slight decline. Manitoba’s new Progressive Conservative government increased spending on higher education of 1.75%; that’s slightly less than what the departing New Democrats had promised but still second-best in the country (don’t get comfortable; the budget cuts are coming next year). Alberta saw a stonking increase of nearly 11% in real dollars but roughly two-thirds of the growth in spending there comes from higher capital expenditures; like the federal government, Alberta has gone big on campus construction as a recession-antidote. With respect to the rest of the increase, some of it actually seems to stem from measures adopted in the previous fiscal year but only actually spent in this fiscal (Alberta, recall, had a weird budget cycle last year which saw the budget only adopted in October).

So the good news is that there was an increase in government expenditures nationally, but how big an increase is a matter of interpretation. If you include capital spending (as I do here), then nationally we had an increase of $375 million, or a just under 1.6%. However, very little of that is going into capital expenditures; take out the changes as one can discern in capital funding (not all provinces break it out clearly in their estimates) then the increase falls to less than $100 million, or less than half of a percentage point.

Over the last five years, what we see is a 3.1% decline in total transfers to institutions, as shown below:

Figure 2: Total Provincial Transfers to Post-secondary Institutions, 2011-12 to 2016-17, in constant 2016$

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Now, it’s important to keep these numbers in perspective. There are a lot of countries where institutions have got hit a lot worse. And of course, our institutions are able to offset losses in public funding by raising tuition (a bit), adding students and taking in more full-fee paying international student – paths not always open to institutions elsewhere.

But on the other hand, bear in mind that system-wide our costs are rising by 3% a year after inflation. Something, eventually, is going to have to give.

June 10

A National Day of Action

Earlier this week  Canadian Federation of Students (CFS) decided to hold a “National Day of Action”, its first since 2012.  Many may find this a bit puzzling: after all, this is a year in which the federal government increased student grants and doubled the number of summer student jobs (also, increased granting council funding and put aside gazillions for infrastructure, though that may matter less to students than to other post-secondary stakeholders).  So what, exactly, is CFS thinking?

Well, I don’t have an inside line to CFS or anything, but what’s important to remember is that the organization really, really does not think of itself as an interest group, and that therefore one shouldn’t try to analyze its decisions using the standard framework that lobbyists use to evaluate decisions.  Interest groups like to have access to decision-makers (ministers, MPs/MLAs, senior public servants).  Indeed, they gauge their success in terms of their ability to get decision-makers to think of their specific issues in their terms – to “capture” the decision-makers, so to speak.  There are a lot of student organizations in the country that think this way: in Ottawa, you have the Canadian Alliance of Student Associations or CASA (disclosure: I was National Director of CASA 20 years ago), but there’s also the Ontario Undergraduate Student Alliance and College Student Alliance here in Toronto, Students Nova Scotia in Halifax, and the Council of Alberta University Students out in Edmonton.

But CFS does not think of itself this way.  Instead, it thinks of itself as a “movement”.  And movements behave very differently from interest groups. 

For interest groups, getting close to decision-makers is THE way to promote change.  For movements, getting close to decisions-makers is cause for suspicion (i.e. “Talking to The Man?  What if we get corrupted by the Man?”).  Movements care less for concrete results in terms of obtaining things for “members” (itself a term which is understood fundamentally differently by movements and interest groups); rather, what matters for movements is changing people’s “consciousness”. 

Pretty clearly, that’s what at work here with CFS.  A National Day of Action is certainly a good way of getting individual student unions to engage with their members about the real and imagined plights of students, and getting them out on the street.  And after the day of action, if you ask them “was this a success”, they will answer not in terms of policies changed but simply in terms of the number of students who out in the street because for a movement, that is an end in and of itself.

That there are opportunity costs in taking this approach is literally incomprehensible to CFS (which, judging by its policy manual, isn’t especially conversant with the subject in any other context, either).  The idea that raising consciousness with students might actively piss off a government which spent a fair bit of political capital in providing new money for students, and hence make further co-operation and progress less likely, simply doesn’t compute.  This is not surprising, since they spend a lot more time thinking about how to persuade their own members to engage than they do thinking about how to engage policymakers.

Historically, Canada’s students have probably been reasonably well served by having one national student organization work as an interest group and the other as a movement.  They have to some extent acted as a good cop/bad cop duo, even if they actively despise one another.  But even so, it’s incredibly hard to see what good can come of this Day of Action.  Politicians respond favourably to people who say thank you when they’ve gone to bat for you.  They respond less well when you put thousands of people on the street to yell about how much they suck. 

I hope CFS gets all the consciousness-raising it needs out of this.  It’d be a shame to sacrifice actual progress on issues if they didn’t.

June 08

Are NSERC decisions “skewed” to bigger institutions?

That’s the conclusion reached by a group of professors from – wait for it – smaller Canadian universities, as published recently in PLOS One. I urge you to read the article, if only to understand how technically rigorous research without an ounce of common sense can make it through the peer-review process.

Basically, what the paper does is rigorously prove that “both funding success and the amount awarded varied with the size of the applicant’s institution. Overall, funding success was 20% and 42% lower for established researchers from medium and small institutions, compared to their counterpart’s at large institutions.” 

They go on to hypothesize that:

“…applicants from medium and small institutions may receive lower scores simply because they have weaker research records, perhaps as a result of higher teaching or administrative commitments compared to individuals from larger schools. Indeed, establishment of successful research programs is closely linked to the availability of time to conduct research, which may be more limited at smaller institutions. Researchers at small schools may also have fewer local collaborators and research-related resources than their counterparts at larger schools. Given these disparities, observed funding skew may be a consequence of the context in which applicants find themselves rather than emerging from a systemic bias during grant proposal evaluation.”

Oh my God – they have lower success rates because they have weaker research records?  You mean the system is working exactly as intended?

Fundamentally, this allegedly scientific article is making a very weird political argument.  The reason profs at smaller universities don’t get grants, according to these folks, is because they got hired by worse universities –  which means they don’t get the teaching release time, the equipment and whatnot that would allow them to compete on an even footing with the girls and boys at bigger schools.  To put it another way, their argument is that all profs have inherently equal ability and are equally deserving of research grants, it’s just that some by sheer random chance got allocated to weaker universities, which have put a downer on their career, and if NSERC doesn’t actively ignore actual outputs and perform some sort of research grant affirmative action, then it is guilty of “skewing” funding.

Here’s another possible explanation: yes, faculty hired by bigger, richer, more research-intensive institutions (big and research-intensive are not necessarily synonymous, but they are in Canada) have all kinds of advantages over faculty hired by smaller, less research-intensive universities.  But maybe, just maybe, faculty research quality is not randomly distributed.  Maybe big rich universities use their resources mainly to attract faculty deemed to have greater research potential.  Maybe they don’t always guess quite right about who has that potential and who doesn’t but on the whole it seems likelier than not that the system works more or less as advertised.

And so, yes, there is a Matthew effect (“for unto every one that hath shall be given, and he shall have abundance”) at work in Science: the very top of the profession gets more money than the strata below them and that tends to increase the gap in outcomes (salary, prestige, etc).  But that’s the way the system was designed.  If you want to argue against that, go ahead. But at least do it honestly and forthrightly: don’t use questionable social science methods to allege NSERC of “bias” when it is simply doing what has always been asked to do.

June 02

Institutional Branding (Part 1)

Branding is one of those things that inspires strong views in higher education.  Some fret over the fact that university brands are too similar, others get indignant over the fact that branding is necessary at all, usually using some variation on the rhetorical argument “what are we, dishwashing soap?”

Part of the problem, I think, stems from misunderstandings about what brands are and how universities use them.  Every university has a “brand” whether it wants one or not.  A brand isn’t logos and taglines, it’s the collective perceptions of an organization’s identity, or “personality” if you want to get anthropomorphic about it.  Trent’s brand, whether it wants it or not, is “Tree-Hugger U”.  Western’s is “Party U”.  Those little rhyming couplets about Brock and York (“if you can walk and talk…”, “if you can use a fork…”)  or that joke about one of my alma maters? (“Carleton – where the K stands for Quality”) – this are some of the most effective, if unfortunate, pieces of branding around.  So the issue isn’t really whether universities should have brands, the issue is whether and how they are going to manage them. 

The first issue in branding is who is the audience.  A managed brand is supposed to help you with your key audiences, and not all universities have the same audiences.  When smaller universities with lower admissions standards manage their brands, they are primarily doing so with an eye on undergraduate students because they worry about enrollment and filling seats so that they can pay their staff.  When U of T or McGill brand themselves, they don’t care about that stuff because they have far more quality applicants than they can accommodate.  Instead, they manage their brands in such a way as to attract top international faculty or with what I call “transformational donors” (i.e. people who can give them big whacks of cash all at once which can extend the intellectual reach of the university – mostly philanthropists, but also senior government officials and Ministers).  This is why some universities have taglines like “Yale, Shmale and others have ones like “A Place of Mind.”

The fact that universities brands are shooting to different levels of audiences is one of the reasons I think the “everyone has the same brand” argument is a little overdone.  But so too is the fact that (in Canada, anyway) most higher education institutions are playing to a really segmented geographical audience.  This makes the parallels to branding in other industries (eg. Dishwasher soap) somewhat fraught.  Ivory is playing in a continental market; universities like Fraser Valley, Winnipeg, Lakehead, Trois-Riveres, etc. are for the most part playing in a market which does not extend beyond provincial borders (and in some cases, considerably less).

What this means is that it really doesn’t matter how many Canadian universities have a brand of “your- friendly-local-university-which-does-great-things-for-the-local-community-and-launches-students-out-into-the-world” because these universities aren’t in competition with one another.  The number of students or philanthropists who are genuinely undecided between, say, Cape Breton, Windsor and Vancouver Island is infinitesimal.  So go ahead, use the same tag lines, visuals, and memes.  It’s all good.  Maybe if many similar regional institutions go in together on this they can get a bulk rate.

There are really only two situations where universities really need to be especially worried about the uniqueness of its brand.  The first is if the institution is genuinely in competition for students (usually grad students) or transformational dollars.  In Canada, that’s basically the U-15, give or take an institution or two (e.g. Simon Fraser, Guelph).  Here there is at least some need to stand out, although as one climbs the prestige ladder in higher education, the narrower are the criteria for genuine excellence and hence genuinely fewer potential brand identities that signal something which is both unique and desirable (UBC’s “Place of Mind”, for instance is a not-so-subtle way of sneaking in its desirable geography on top of a message of research-intensity, but not everyone has that option).  Basically, the needs for a distinctive call to transformational donors is at odds with the academy’s isomorphic preferences in terms of how to define “quality”.

The other situation is when you need to attract international students – an imperative faced by more and more institutions these days.  More on that tomorrow.

May 27

Three Unconnected Thoughts on PSE and Aboriginal Peoples

1)      Changing Disciplines

In the last five years or so, I’ve seen a real change in the way Aboriginal students are moving through the country’s PSE system.  For a whole number of reasons, aboriginal students were traditionally concentrated either in humanities disciplines like history and sociology, or they were in disciplines which led to careers in social services or direct band employment (child care, police foundations, education, nursing).  STEM and Business fields simply weren’t in the picture.  That’s changed substantially over the past few years.  Aboriginally-focussed business programs are popping up all over the place.  Increasingly, we are seeing enrolments in STEM (though there is still a long way to go).  So what’s changed?

A couple of things, I think.  First, the demographics of First Nations students are changing.   Time was, a very high proportion of aboriginal students came in after quite a period out of school, typically in their mid-20s.  Nowadays, we are seeing a lot more students transition at an earlier age, direct from high school (and more often than not from urban, mainstream high schools).  On average, this background prepares them better for PSE than graduation from on-reserve schools. Hence, they tend to be applying for and getting access to more selective courses.

But this begs the question: what’s behind this shift at the secondary level?  A lot of it is demographics.  A greater proportion of First Nations youth are living in urban areas, and so on average they have better access to better schooling.  Drop-out rates are still high and there is much to be done to improve inner-city schools, but conditional on completing high school First Nations graduates seem about as prepared as mainstream students to deal with the rigors of PSE.

Another important factor here is the aging of the last generation to have experienced residential schools.  Parents pass on their views of education to their children; unsurprisingly, those who had been through residential schools weren’t always inclined to encourage their children to invest a lot of their identity in schooling. On top of poverty, racism, etc., this probably had a lot to do with low aboriginal participation rates until fairly recently.  But most residential schools closed in the 1970s; so most of the kids now coming through the system are the grandchildren of the last residential schools generation.  Soon it will be the great-grandchildren.  The bad memories of residential schools are by no means gone, but they are of less relevance in terms of pre-disposition to invest in schooling, and that matters.

Finally, there’s the money issue.  Institutions are finding it a whole lot easier now to raise funds for aboriginal scholarships or other focussed initiatives than they used to.  And that certainly improves the quality of the aboriginal student experience, which probably contributes to improved completion rates.

2)  Money

People are rightly getting peeved at the federal Government for having not come through on its promise to add $50 million in funding for First Nations education through the Post-Secondary Student Support Program (PSSSP).  I expect that’s a promise the Liberals will try to fulfill next year or the year after (there may be a delay as the Feds ponder the implications of the Daniels decision which puts Metis Canadians on the same legal footing as First Nations vis-à-vis the federal government.

But what people haven’t remarked on is the huge boost in funding that First Nations students could receive should they sign up for federal and provincial students aid.  In Ontario, virtually all on-reserve students will be eligible for $9,000 in grants through the new Ontario Student Grant: elsewhere, they will be eligible for at least $3,000 through the improved Canada Student Grant.  If First Nations make their students apply for this aid before applying to their bands for PSSSP, then all their students will have at least some base amount of funding.  That would mean bands wouldn’t need to give as much to each individual student, and could use freed-up funds to provide aid to more students, thus alleviating the well-known waiting list problem.  But that would take a bit of organization to make sure band educational counselors know how to help their students navigate the federal/provincial aid system.  Something our friends at Aboriginal Affairs might want to think about.

3) Truth & Reconciliation

Since the release of Justice (now Senator) Murray Sinclair’s report last year, some Canadian post-secondary institutions have made some extremely useful gestures towards reconciliation, like requiring all students to take  at least one class in aboriginal culture or history.  Which is great, except it’s not actually what Sinclair asked for.  Rather, he asked that students in specific professional programs (i.e. health and law) be required to take courses in Aboriginal health and law, respectively.  As I said at the time I thought this was a stretch and that prestigious law programs would resist this (quietly and passive aggressively, of course).

It’s been a year now – and to my knowledge (everybody please correct me if I am wrong) – no university law or medical school has adopted this proposal.  I wonder how long before this becomes an issue?

May 18

Canadian B-Schools and Economic Growth

If there is one thing university Presidents desire, it is to be useful to society – and preferably to the government of the day, too.  After all, post-Humboldt, universities exist to strengthen the state.  The better a university does that, the more it will be appreciated and, hopefully, the better funded it will be.  So it has always struck me as a bit odd how little universities (an business schools in particular) have really done in order to help work on the causes of Canada’s perennially sluggish economy.

Canada’s fundamental economic problem is that outside the resource sector, companies struggle to reach scale.  Outside the oligopolistic telecoms and banking sectors, we are a nation of small and medium businesses.  Judging by the party manifestos in last year’s elections, many people like things that way.  Small businesses are good and deserving of lower tax rates, big businesses are bad and deserve to be taxed more heavily. 

The problem with this little story is that it is simply wrong.  Big businesses are crucial to innovation and hence to economic growth.  Big businesses are the ones that have the money to invest in R & D.  They are the ones that can make long-terms commitments to training employees (if you don’t think firm size plays a role in Germany’s ability to sustain its apprenticeship system, you aren’t paying attention). People may be rightly cautious about the power of capital and its influence on the political process; but that doesn’t mean we shouldn’t encourage the formation of large companies in the first place.  Ask the Swedes: their social democracy would never have existed without very large companies like Volvo, Saab and Ikea.

And so the key question is: why don’t we have bigger domestic companies in Canada?  Oh sure, we have the occasional behemoth (i.e., Nortel, RIM) but we don’t seem to do it in a non-ephemeral way, or do it across the board.  And when our companies do start getting big, they often sell out to foreign companies.

We can point fingers in a whole bunch of directions – one favorite is a lack of appropriate venture capital.  But to a considerable degree, it’s a question of management.  Universities like to talk about how they are teaching entrepreneurship but getting people to start businesses and getting those businesses to grow are two very different propositions.  We seem not to have a lot of managers who can take companies from their first million in sales to their first ten million in sales, or to take our businesses out of the Canadian context and into a global one (if you haven’t yet read Andrea Mandel-Campbell’s Why Mexicans Don’t Drink Molson, on this subject, do – it’s revealing).   And for that matter, how is it that our venture capital industry still seems more comfortable with mining projects than life science or biotech?

Can it be – say it softly – a question of education?

We pretend that success in innovation is a function of prowess in tech.  But to a large degree, it’s a function of management prowess: how can staff be better motivated, how can processes be changed to add value, how well can business or investment opportunities be spotted.  Might it be that the education of our business elite doesn’t include the right training to do these things? 

To be clear here, I don’t really have any evidence about this one way or the other.  No one does.  But if I were a university president, or a business dean, it’s a question I’d be asking myself.  Because if there’s an economic conundrum that needs solving its this one, and if there’s any way in which universities can contribute, they should.

May 16

The New-Brunswick Step-Function

So there’s a kerfuffle going on in New Brunswick about the government’s new “tuition-free” policy for students from families with under $60K in income which I mentioned in passing a couple of weeks ago.  Basically, the problem is that the government drew up the program hurriedly, on the back of an envelope, and didn’t think through the consequences.

If you just listen to the launch announcements, the new New Brunswick program is similar to the new Ontario program (which you may recall I praised to the skies: Ontario promised “free tuition” (actually, grants equal to or greater than average tuition) for “low and middle income families” while New Brunswick promised grants equal to tuition for anyone with family incomes under $60,000.  Same, right?

Wrong.  The difference is that the Ontario program has a long phase-out.  That is, grants fall as income rises, but gradually.  In New Brunswick, they drop off a cliff at $60,000.  A student from a family with income of $59,999 will get (effectively) $7,000 or so in grants, but at $60,001, you’re only going to get about $1,200.  Figure 1 shows eligibility for federal grants (in blue, for 2015-16 and 2016-17), and the New Brunswick Tuition Access Bursary (TAB) and the Ontario Student Grant (OSG) – the OSG line is a bit messy, and I assume it will actually be a bit smoother than this, but this is a best-estimate based on the Ontario budget papers).

Figure 1 – Eligibility for Grants, Ontario Study Grant Vs. New-Brunswick Tuition Access Bursary

ottsyd 20160514 01

In the business, this is what’s known as a “step-function”, and is generally best avoided because it creates all sorts of weird incentives.  In this case, a New Brunswick family with two parents earning $30,000 each and a kid in university will be way better off rejecting a salary raise than they would be accepting it, as their kid would lose $5800 in grant funding every year. 

But the problem in New Brunswick goes deeper than that.  It’s not just that such parents will lose money in the future, it’s that they are going to be worse off than they are now.  New Brunswick is paying for this move by ditching the provincial tax credits for tuition and education, and this elimination is on top of the federal government ditching its education and textbook tax credits to pay for the upgrade in federal grants.  What this means is that everyone in New Brunswick will lose about $1600 worth of tax credits.  For those at the low-end of the income scale, that’s fine, because this will be offset by the higher grants.  But for a family earning $60,001, they will be losing that $1600, but only gaining $400, thanks to the increase in federal grant.  Something similar happens in Ontario as well, but only once you get past about $110,000 in family income.  In New Brunswick, we’re talking about taking away $1200 per year in aid from people earning $60,000.  That’s a big, nasty hit. 

You may well ask “why didn’t New Brunswick have a more phased-out reduction”?  Well, it’s hard to tell.  The minister, after claiming her program was identical to Ontario’s, later told CBC that she had no idea Ontario had a phase-out and New Brunswick didn’t.  Which is, you know, a bit worrying.  But the bigger reasons are that New Brunswick a) has never spent that much on student aid, and so didn’t have as big a base of money to redistribute as Ontario and b) appears to have only re-invested half the money it saved from axing various tax credits (that’s an estimate – it hasn’t been super-transparent with cost estimates of the program; one wonders if this isn’t the reasons the government didn’t announce this measure as part of the budget where the figures would have been more transparent).  Had it re-invested more fully, New Brunswick probably would have had enough money to do an Ontario-style phase out.

Now, in addition to having announced a flawed policy, the Government of New Brunswick has annoyed the crap out of me personally by claiming that I provided the inspiration for said policy. To that end, it appears to have been handing out partial copies of a paper produced for the previous government in 2011-12.  Since my client has been (selectively) leaking my work, I don’t particularly feel bound by any of the usual confidentiality provisions. So here’s what actually happened:

HESA did do some work for the New Brunswick government – specifically, the Ministry of Advanced Education and Labour – in the fall of 2011.  We were asked two questions.  One, were the back-end subsidies New Brunswick was then using (a timely-completion loan remission program, the usual tuition & education tax credits and a graduate tax benefit) effective?  Two, could we come up with some more interesting ways to use that money? 

To the first question, we answered no, for a variety of reasons which, if you’re a regular reader, you can probably guess.  To the second question we said the money should be used three ways.  One, a new grant program to deal with “unmet need” (that is, need in excess of current aid maximums), which primarily would have benefitted students with dependents.  Second, because student debt and repayment is a much more serious problem in the Maritimes than it is in the rest of the country (because of higher debt & lower graduate incomes), we suggested a hard debt-ceiling of $7,000 per year, with the remainder turned into grants.  Last, we suggested some investment in early-intervention programs.  We did NOT suggest anything like what the provincial government has done.  And frankly I’m more than a bit teed off the present government chose to publicly present our findings that way.

Bottom line: getting rid of tax credits is good.  Re-investing funds in a way that concentrates more spending on lower-income students is good.  Bravo to New Brunswick to getting those two things right.  But details matter.  This government got the details wrong by not fully re-investing and putting too high a burden on middle-income students.  It needs to fix this.

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