HESA

Higher Education Strategy Associates

Category Archives: incentives

November 07

Spousal Income

Over the past decade, successive Canadian governments have tried to give bigger and bigger breaks to parents through the student aid system. Loan eligibility has steadily been widened to richer and richer families by making expected parental contributions less onerous. But for some reason, no recent government has seen fit to change spousal contribution rates. Since the mid-1990s, this rate has been set at 80% of the spouse’s combined net income over a threshold which varies a bit by province but which in practice is about $13,000 per year.

Implicitly, the policy assumes both partners are students (in which case why not just treat their two applications as individual independent students?). But if the couple has one student and one non-student, the implications are mind-bogglingly punitive. Essentially, as soon as the non-student earns anything over about $35,000 per year, the expected contribution jumps so high that it is impossible for his/her spouse to get a loan. At any given level of family income a spouse is expected to contribute $15,000 more to a student’s education than a parent would.

Thanks to this policy, families with one spouse in school and one spouse working face an effective tax rate (that is, taxes paid plus reductions in benefits) of…drum roll, please…over 90%. And that’s only if the working spouse is debt-free. If they are repaying their student loan as well, the income phase-out on Repayment Assistance means that the effective tax rate on spousal incomes rises to well over 100%. You’d be hard-pressed to find a more text-book example of a welfare wall – the disincentives to work are just phenomenal.

I could go on, but I’ll spare you the gory details (though for more deets, you can check out I Love You Brad, But You Reduce My Student Loan Eligibility which is a few years old but still basically correct). It’s just a clumsy set of rules written twenty years ago when pinching pennies regularly trumped good policy-making. But bureaucratic inertia has left this clunker on the books for too long. It’s terrible policy, which no one in government can defend with a straight face. It’s not just inequitable; it creates a serious barrier to mature students (many of whom are married) returning to school.

Married students don’t have their own organized interest group and for some reason, this isn’t a cause student unions have seen fit to take up on their behalf. But if, like me, you think this needs changing, just forward this email to diane.finley at parl.gc.ca and let her know this mistake needs fixing.

Let’s see what happens.

September 28

Differentiating University Missions (Part Three)

Here’s an important question. Why don’t Canadian governments act as if outputs matter when it comes to funding universities and colleges?

There’s nowhere in Canada where the overwhelming majority of operating funding isn’t essentially determined by enrolments (OK, you get goofy exceptions like Nova Scotia where the funding formula is based on what enrolment was in 2003, but apart from that…). But this creates no incentives other than to try increase market share, which essentially is a zero-sum game. It’s also really dull.

If we want to shake things up and get institutions to pursue differentiation, we need to go in a radically different direction. And in this respect, I’m a big proponent of the methods of the X Prize Foundation. Put a carrot out there big enough for institutions to pursue and institutions will change their behavior.

Interested in emphasizing good teaching? Why not offer $50 million annually to the institution that comes top on teaching quality in the next Globe and Mail satisfaction exercise? I guarantee that dozens of institutions will snap to it in terms of emphasizing teaching.

(Yes, yes, I know it’s an imperfect measure of teaching. But do it once and it’s an absolutely certainty that institutions will come up with a better measurement method the next year, so why not, you know?)

One could do the same kind of thing in terms of all sorts of outputs. The institution with the greatest impact on local economies? $40 million every five years. The institution that does the most to improve graduate employability? $80 million every five years. The amounts don’t actually matter that much, as long as they are big enough to drive institutional behaviour.

Where quantitative data can’t quite provide a definitive answer, adjudication can be done entirely by academics themselves (though preferably ones from out-of-province or from other countries) – by all means, let’s keep the principle of peer review. If nothing else, it will make institutions pay attention to their own outputs a lot more assiduously, which would be a good in and of itself.

As we saw yesterday, academia left to itself won’t provide diversity. You can try to tie institutions down to particular missions, but that’s likely to meet with resistance. So why not put down the stick and try some carrots instead? Considering how badly we’ve done at incentivizing diversity to date, the downside seems pretty minimal.

September 27

Differentiating University Missions (Part Two)

One of the things that distinguishes Canadian universities from those virtually anywhere else is the unparalleled freedom they have to determine their own mission. In most countries – including our neighbours to the south, I should underline – the final say over public institutions belongs with government. As one of our American-born staffers once explained to a compatriot “the difference is that up here, public universities get funding from the government, and then they tell government to kiss off.” Our institutions have freedoms that are largely reserved for private institutions in most countries.

At one level, of course, this is all to the good. It’s generally accepted that decentralization of authority in education leads to more innovation and responsiveness. What’s intriguing, though, is that despite all this freedom, there’s a remarkable unanimity among institutions about which direction they’d like to be heading: more graduate students, more research intensity and a more globalized posture.

Obviously, this can’t be explained by free institutions looking for market opportunities. It would be ludicrous to suggest that there aren’t communities looking for universities that specialize in undergraduate teaching and that have strong regional development mandates.

What it does suggest, though, is two things: a) there are other, deeper tendencies in academia which are pushing in the opposite direction and b) governments don’t make other missions sufficiently attractive financially.

The deeper tendency is fairly obvious; the professoriate – which owns our universities in all but name – spends the better part of a decade in training being trained to do research and would, given the choice, prefer their professional lives to revolve more around research than teaching. Professionally, great researchers are valued over great teachers. Left to their own devices, this is what they’d prefer to be doing. Hence the trend towards institutional isomorphism.

So the role of government – assuming it doesn’t want all universities to look the same – is to create a system that encourages institutions to act in diverse ways. Assuming tuition is capped and institutions can’t make money out of good teaching by charging for it, government only has two choices. One is that it can use regulatory power to set out different missions for institutions (which is essentially what happens in the U.S., and is also more or less what was advocated by HEQCO’s Harvey Weingarten and Fiona Deller in their paper The Benefits of Greater Differentiation of Ontario’s University Sector).

The other is that government can use a variety of financial carrots to incentivize different types of behavior. More on that tomorrow.

September 26

Differentiating University Missions (Part One)

This week, HESA is hosting a conference in Toronto on the subject of Differentiation of University Missions. We’re focusing on this because we think there are a host of factors both inside and outside academia that are pushing institutions towards isomorphism. In a word, there’s a danger that institutions are becoming clones of one another, robotically following the same script – rather like the placid ladies of Stepford.

There are obviously a lot of facets to this issue, but broadly, I think we can point to three factors which (in no particular order) dovetail with one another to put pressure on institutions to homogenize themselves:

1) Government Incentives.  In most countries, governments don’t really incentivize institutions to behave differently from one another.  In Canada, we present almost no incentives for institutions to do anything other than publish more and accept more students. Given the current array of subsidies, where is the incentive for institutions to pursue excellence in teaching, or to do a superb job in regional development?

2) The Preferences of the Professoriate.  Let’s not kid ourselves; nobody is happier about the increasing research-intensitiveness of Canadian universities than academics themselves. When middling universities tell their staff they have to teach less in order to keep up with the big boys and girls of Canadian academia, who complains, exactly?

3) The Prestige Race. I’m not entirely convinced this third reason is actually conceptually separate from the second; however, some very smart people who I respect a great deal (like conference guest Ellen Hazelkorn) do, so it seems apposite to include it. Basically this argument is that the pull of major rankings systems – especially the big international ones like the Shanghai Jiao Tong rankings – have queered the definition of excellence to the point where institutions have no choice but to privilege their research missions of over all other.

What can we do about this? What other models are there out there to encourage diversity? Who gets to decide what missions institutions can or can’t have? These are the questions we’ll be dealing with this week, both at out conference and in this blog. Feel free to join in the discussion.