HESA

Higher Education Strategy Associates

Category Archives: Universities

January 31

Hiring Decisions

One of the more thoughtful replies I received to my piece on CAUT’s politicization of university accounting pointed out that one of the reasons people didn’t trust university accounting was because they made seemingly incomprehensible decisions with respect to hiring.  How was it, my reader asked, that there was plenty of money to hire sessionals but never money to hire full-time, permanent faculty?  Isn’t that money fungible?  Why spend on one and not the other?

I can see why this might be puzzling if you’re used to seeing budget decisions in annual terms, but it’s actually fairly simple.  Yes, on an annual basis, one new assistant professor might cost the same as eight sessionals (or whatever – pick a number), but on a longer-term accounting, it’s a completely different story.

At this point I should point you to a recent piece by Carleton University’s Nick Rowe, entitled “University Budget Surpluses: Irreversible Investment and Uncertain Demand” which lays out the basic challenge in accounting for academic staff on the university’s books.  (This, by the way, is not the only Nick Rowe piece on universities you should read – everybody should read, and I mean now, his “Confessions of a Central Planner” which is the best thing ever written on university finance ever, by anyone.  Seriously, it’s genius).    I am doing a bit of violence to Rowe’s argument (which is somewhat broader than the case I am making here), but the simple version is this:

University income are uncertain – and in fact getting more uncertain all the time as universities increasingly become more dependent on market operations (i.e. money from students, both domestic and international).  That’s not the fault of anyone in the institution: that’s simply the way public policy has been moving for the past few years.  Now, if you’re a provost or a VP Finance trying to plan for a future, what’s the absolute last thing you want to do?  Add permanent costs.

Well, as Rowe points out, hiring a full-time prof is about as permanent a cost as it gets.  In fact, given the way tenure works and how collective bargaining agreements are written and the fact that retirement is increasingly a thing of the past, a new hire is pretty much the same category of investment as a new building: it’s going to be there for 40 years, minimum.  A new assistant professor should not be viewed as an $85,000 annual cost ($100K with benefits); he or she should rather be viewed as something like an extremely illiquid $6 million asset.

The analogy here is one with personal finances: say you were being paid $100,000 per year and you’re debating whether to buy a house or keep renting.  Then someone came along and said: listen, we’re going to pay you $80,000 and pay you a bonus of between $10,000 and $25,000 per year.  In all likelihood, this means you’ll end up right about at $100,000, but there’s a non-trivial chance that your pay may fall below that level.  Quick: are you now more likely to take on the responsibility of a mortgage?  Or do you stick with renting?  Not everyone will have the same answer here, but certainly most would consider the latter to be the “safer” option.

In any case: institutional policy on temporary vs. permanent hires is probably not a gauge of miserliness or what have you.  A more accurate analysis would suggest that such policies are actually a function of institutional confidence in future revenues.  Where institutions feel good about the future, they will make full-time hires; where they are less confident temps will be hired more often.  That’s not something anyone ever says out loud, for obvious reasons, but it is nevertheless a perfectly sensible long-term planning perspective.  No conspiracy theories about university budgeting practices required.

January 27

A Slice of Canadian Higher Education History

There are a few gems scattered through Statistics Canada’s archives. Digging around their site the other day, I came across a fantastic trove of documents published by the Dominion Bureau of Statistics (as StatsCan used to be called) called Higher Education in Canada. The earliest number in this series dates from 1938, and is available here. I urge you to read the whole thing, because it’s a hoot. But let me just focus in on a couple of points in this document worth pondering.

The first point of interest is the enrolment statistics (see page 65 of the PDF, 63 of the document). It won’t of course surprise anyone to know that enrolment at universities was a lot smaller in 1937-38 than it is today (33,600 undergraduates then, 970,000 or so now), or that colleges were non-existent back then. What is a bit striking is the large number of students being taught in universities who were “pre-matriculation” (i.e. high school students). Nearly one-third of all students in universities in 1937-38 had this “pre-matric” status. Now, two-thirds of these were in Quebec, where the “colleges classiques” tended to blur the line between secondary and post-secondary (and, in their new guise as CEGEPs, still kind of do). But outside of British Columbia, all universities had at least some pre-matric, which would have made these institutions quite different from modern ones.

The second point of interest is the section on entrance requirements at various universities (page 12-13 of the PDF, p. 10-11 of the document). With the exception of UNB, every Canadian university east of the Ottawa River required Latin or Greek in order to enter university, as did Queens, Western and McMaster. Elsewhere, Latin was an alternative to Mathematics (U of T), or an alternative to a modern language (usually French or German). What’s interesting here is not so much the decline in salience of classical languages, but the decline in salience of any foreign language. In 1938, it was impossible to gain admission to a Canadian university without first matriculating in a second language, and at a majority of them a third language was required as well. I hear a lot of blah blah about internationalization on Canadian campuses, but 80 years on there are no Canadian universities which require graduates to learn a second language, let alone set this as a condition of entry. An area, clearly, where we have gone backwards.

The third and final bit to enjoy is the section on tuition fees (page 13), which I reproduce here:

ottsyd-20170126

*$1 in 1937-38 = $13.95 in 2016
**$1 in 1928-29 = $16.26 in 2016

Be a bit careful in comparing across years here: because of deflation, $100 in 1928 was worth $85 in 1937 and so institutions which kept prices stable in fact saw a rise in income in real terms. There are a bunch of interesting stories here, including the fact that institutions had very different pricing strategies in the depression. Some (e.g. McGill, Saskatchewan, Acadia) increased tuition while others (mostly Catholic institutions like the Quebec seminaries and St. Dunstan’s) either held the line or reduced costs. Also mildly amusing is the fact that McGill’s tuition for in-province students is almost unchanged since 1937-38 (one can imagine the slogan: “McGill – we’ve been this cheap since the Rape of Nanking!”).

The more interesting point here is that if you go back to the 1920s, not all Canadian universities were receiving stable and recurrent operating grants from provincial governments (of note: nowhere in this digest of university statistics is government funding even mentioned). Nationally, in 1935, all universities combined received $5.4 million from provincial governments – and U of T accounted for about a quarter of that. For every dollar in fees universities received from students, they received $1.22 from government. So when you see that universities were for the most part charging around $125 per students in 1937-38, what that means is that total operating funding per student was maybe $275, or a shade under $4500 per student in today’s dollars. That’s about one-fifth of today’s operating income per student.

While most of that extra per-student income has gone towards making institutions more capital-intensive (scientific facilities in general were pretty scarce in the 1930s), there’s no question that the financial position of academics had improved. If you take a quick gander at page 15, which shows the distribution of professorial salaries, you’ll see that average annual salaries for associate profs was just below $3500, while those for full professors was probably in the $4200 range. Even after for inflation, that means academic salaries were less than half what they are today. Indeed, one of the reasons tenure was so valued back then was that job security made up for the not-stellar pay. Times change.

In any case, explore this document on your own: many hours (well, minutes anyway) of fun to be had here.

January 24

Budget Fun at the University of Ottawa

Back in early December, the Ottawa Citizen reported on a controversy at the University of Ottawa.  Basically, the story was that the University is facing a $20 million budget shortfall, the administration is consulting re: how to cut its budget and some people are very upset with some of the proposed solutions.

Of course, cutbacks anywhere, anytime, are unacceptable to someone in the institution.  The library, for instance, is being asked to contemplate a cut of $2 million).  “A source” told the Citizen that such a cut would “decimate its holdings and – horror of horrors – “severely damage its reputation”.

(Regular readers of this column may recall some data on library statistics I published earlier this year.  A quick check here suggests that even with these cuts, library expenditures per student at Ottawa would still be ahead of the not-reputationally-challenged-last-I-heard Queen’s, and that University of Ottawa has over the past ten years increased its collections budget by 50%. Even with the proposed cuts, it would still have the largest net increase in funding of any research university library in the country since 2004.  It would be surprising, to say the least, if any real reputational damage ensued from this.

How did Ottawa get into this position in the first place?  Here’s what a university spox told the Citizen: “The University of Ottawa is one of many Ontario universities facing financial challenges.  This is due in part to a permanent reduction in revenues from the provincial government of two per cent (over 2012-2013 levels) in government grants per registered students, resulting in decreased funding … At the same time, the university’s expenditures, especially those related to salaries, benefits, and special payments for pension plans continue to grow.”

OK, so let’s parse this.  Government has actually increased funding since 2012-13, not decreased.  Not by much, admittedly, but it has increased.  And the funding formula hasn’t changed.  So if “dollars per student” are down, it’s because  a) the University is admitting more students outside the formula (i.e. international students), or b) it’s new enrolments are disproportionately enrolled in “cheap” subjects like Arts and business, rather than expensive ones like medicine –  and that’s bringing down the ratio of “basic income units” (Ontario government jargon for “weighted student units” in an enrolment-driven funding formula) to actual students. The third option is that c) other universities have chosen to grow faster than University of Ottawa, thus dropping its share of system-wide BIUs slightly.  I have no idea which of these is true – I’m fairly confident both “a” and “b” are true but am not sure about “c”, but in any case those are institutional policy decisions, not government ones.  Blaming the government for them isn’t really kosher.

The government could of course, be blamed for not putting more money in the system as a whole.  But look – this province had a $17 billion deficit no so long ago.  The 2010 provincial budget was crystal clear that between 2010 and 2016, total program funding was only going to increase by $5 billion (about 4.4%). In fact, universities as a whole did better than this: they got an increase of about 6% in nominal terms (yes, still a decrease in real terms but actually better than anticipated).  The University of Ottawa  got an increase of about 5% in that period.

Would life be easier if government wrote bigger checks? Sure.  But everyone has had plenty of warning that government assistance wasn’t going to be increasing very much.  The real question is: given that everyone knew this, why were university expenditures allowed to grow so much?

Well, let’s go back to the summer of 2013, when the university was negotiating a new contract with the Association of Professors of the University of Ottawa (APUO).  Remember, at this point, everyone had known for more than three years that government wasn’t coming through with new money anytime soon.  And yet the institution conceded this astonishing deal.  The APUO’s summary of the deal is here, but the two key bits were:

  • A guaranteed increase in academic/librarian staff complement of 4% (from 1250 to 1311).
  • An increase in pay of 11.5% on top of PTR  over four years (but really three since the deal was backdated to 2012).

The result: between 2010 and 2016, the period in which government said “sorry guys, no more money”, aggregate expenditures on academic staff salaries – the biggest single line-item in the institution’s budget – increased by 29.4%.

Did I mention that the Faculty Union responsible for this $50 million rise in costs has launched a grievance re: the cuts?  No?  Well, now you know.

Of course, that’s not the only reason the university is in trouble.  While U of O made valiant efforts to increase its revenues in other ways (revenue from investments increased, and revenue from fees rose almost 45%, thanks in part to higher fees but equally if not more to increased international student enrolment), it wasn’t exactly doing much to curb expenditures in non-salary items either.  Sure, academic staff wages were increasing at close to 5% per year throughout this period, but other operating costs were rising at a little over 4%.  Bluntly: strong cost controls are not in place.  There’s blame to go around here.

It may seem like I am picking on the University of Ottawa, but trust me: I could tell a story like this about virtually any university in the country.  Governments are not ponying up for higher education the way they used to.  Student fees – international student fees especially – have made up some but not all of the gap.  Faculty unions are demanding pay increases in excess of institutional income growth and by and large they are getting them.  And cost controls in other areas of spending are little more effective.

Something has to give.

January 23

A Puzzling Pattern in the Humanities

Big news in Alberta the other day: the University of Alberta has decided to cut fourteen (14!) programs, in the humanities. That’s on top of a programs cull just two years ago in which seventeen programs – mostly in Arts – were also axed! Oh my God! War on the humanities, etc, etc.

Or at least that’s the way it sounds, until you read the fine print around the announcement and realise that these fourteen programs, collectively, have 30 students enrolled in them. The puzzle here, it seems, is not so much “why are these programs being cancelled” as “why on earth were they ever approved in the first place”?

For the record, here are the programs being axed: Majors programs in Latin American studies, Scandinavian studies, honours programs in classical languages, creative writing, history/classics (combined) religious studies, women and gender studies, comparative literature, French, math (that is, a BA Hon in math – which is completely separate from the BSc in Math, which is going nowhere), and also Scandinavian studies (again). And technically, they are not being axed, but rather “suspending admissions”, which means that current students will be able to finish their degrees.

Two takeaways from this:

The first is that the term “programs” is a very odd and sometimes misunderstood one. Universities can get rid of programs without affecting a single job, without even reducing a single course offerings. In the smorgasboard world of North American universities, all programs are essentially virtual. The infrastructure of a university is essentially the panoply of courses offered by departments. Academic entrepreneurs can then choose to bundle certain configurations of courses into “programs” (with the approval of a lot of committees and Senate of course). Of course, programs need co-ordinators and a co-ordinators get stipends and more importantly a small bump in prestige. But overall, programs are very close to costless because departments are absorbing all the costs of delivering the actual courses. (The real costs are actually the ludicrous amount of programming time involved in getting registrarial software to recognize all these different degree pathway requirements).

It doesn’t actually have to be this way. Harvard’s Faculty of Arts and Science only has about fifty degree programs; pretty much every mid-size Canadian university has twice that. And there’s no obvious benefit to students in this degree of specialization. What’s the advantage of this? Why, apart from inertia and a desire not to rock the boat, do we put up with this?

A second point, though. Readers may well ask “why do these kinds of program cuts always affect the humanities more than any other faculty”. This is a good question. And the answer is: because no other faculty hacks itself into ever-tinier pieces the way humanities does. Seriously. This isn’t a question of specialization – every field has that – it’s a question of whether or not to create academic structures and bureaucracies to parallel every specialization.

Imagine, for instance, what biology would look like if it were run like humanities. You’d probably have separate degrees and program co-ordinators for epigenetics, ichnology, bioclimatology, cryobiology, limnology, morphology – the potential list goes on and on. But of course biology doesn’t do that, because biology is not ridiculous. Humanities, on the other hand…

There are lots of good histories of the humanities out there (I recommend Rens Bod’s A New History of the Humanities and James Turner’s Philology: the Origins of the Modern Humanities), but as far as I know no one has ever really looked in a historical way as to why humanities, alone among branches of the academy, chose to Balkanize itself administratively in such an odd way.  For a set of disciplines which constantly worries about being under attack, you’d think that grouping together in larger units would be an obvious defence posture.  Why not just have big programs in philosophy, languages and literature and philology/history and be done with it?

January 16

Ever-bleaker Graduate Employment Data?

So just before I quit blogging in December, the Council of Ontario Universities released its annual survey of graduate outcomes, this time of the class of 2013.  The release contained the usual platitudes: “future is bright”, “vast majority getting well-paying jobs”, etc etc.   And I suppose if one looks at a single year’s results in isolation, one can make that case.  But a look at longer-term trends suggests cause for concern.

These surveys began at the behest of the provincial government seventeen years ago.  Every graduating cohort is surveyed twice: once six months after graduation and once two years after graduation.  Students are asked questions about their employment status, their income and about the level of relationship between their job and their education.  COU publishes only high-level aggregate data, so we don’t know about things like response rates, but the ministry seems pleased enough by data quality, so I assume it’s within industry standards.

Figure 1 shows employment rates of graduates six months and two years out.  At the two-year check point, employment rates fell by four points in the immediate wake of the 2008-9 recession, (be careful in reading the chart: the x-axis is the graduating class, not the year of the survey, so the line turns down in 2006 because that’s the group that was surveyed in 2008).  Since then it has recovered by a little more than a point and a half, though further recovery seems stalled.  At the six-month point, things are much worse.  Though employment rates at this point are no longer falling, they remain stubbornly seven percentage points below where they were pre-recession.

Figure 1: Employment Rates, Ontario University Graduates, 6 Months and 2 Years Out, by Graduating Class, 1996-2013

OTTSYD 20170115-1

If you want to paint a good story here, it’s that employment rates at 2 years out are still within three percentage-points of their all-time peak, which isn’t terrible.  But there doesn’t seem much doubt that students are on average taking a bit longer to “launch” than they used to; employment rates six months out seem to have hit a new, and permanently lower floor.

Now, take a look at what’s happening to starting salaries.  As with the previous graph, I show results for at both the six-month and the two-year mark.

 

 Figure 2: Average salaries, Ontario University Graduates, 6 Months and 2 Years Out, by Graduating Class, 1996-2013, in $2016

OTTSYD 20170115-2

What we see in Figure 2 is the following:  holding inflation constant, during the late 1990s, recent graduates saw their incomes grow at a reasonably rapid clip.  For most of the 2000s, income was pretty steady for graduates two years out (less so six months out).  But since the 2008 recession, incomes have been falling steadily for several years; unlike the situation with employment rates, we have yet to see a floor, let alone a bounceback.  Real average incomes of the class of 2013 six months after graduation were 11% lower than those of the class of 2005 (the last fully pre-recession graduating class); at 2 years out the gap was 13%.  Somehow these points did not make it into the COU release.

That, frankly, is not good.  But it seems to me that we need to hold on a little bit before hitting panic buttons about universities being a bad deal, not being relevant to shifting labour market, etc, etc.  Sure, the drop-off in both employment rates and incomes started around the time of the recession and so it’s easy to create a narrative around changed economy/new normal, etc etc.  But there’s something else that probably playing a role, and that’s an increase in the supply of graduates.

 

Figure 3: Number of Undergraduate Degrees Awarded, Ontario, 1999-2013

OTTSYD 20170115-3

The other big event we need to control for here is the massive expansion of access to higher education.  In 2003, the “double-cohort” arrived on campus and that forced government to expand institutional capacity, which did not subsequently shrink.  Compared to the year 2000, the number of graduates has increased by over 50%; Such an expansion of supply must have had some effect on average outcomes. It’s not simply that there are more students competing for jobs – something one would naturally assume would place downward pressure on wages – but also, the average quality of graduates has probably dropped somewhat.  Where once graduates represented the top 20% of a cohort in terms of academic ability, now they probably represent the top 30% or so.  Assuming one’s marginal product in the labour market is at least loosely tied to academic ability, that would also predict a drop in average post-graduation incomes.  To really get a sense of what if anything has changed in terms of how higher education affects individuals’ fortunes in the labour market, you’d want to measure not average income vs. average income, but 66th percentile of income now vs. 50th percentile of income fifteen years ago.  Over to you, COU, since you could make the microdata public if you wanted to.

In short, don’t let institutions off the hook on this, but recognize that some of this was bound to happen anyway because of access trends.

More graduate income data fun tomorrow.

January 10

The Politicization of University Accounting

Back in the fall, the Canadian Alliance of University Teachers (CAUT) published an interesting little guidebook called CAUT’s Guide to Analyzing University & College Financial Statements, written by Cameron and Janet Morrill, two profs at the University of Manitoba’s Asper School of Business.  Stripped to its essentials, it purports to be a DIY guide for faculty to help hold their institutions to account over finances.

Nothing wrong with that.  Learning how to read financial statements is a good thing.  The issue is the subtext (“THEY’RE LYING TO YOU!”) and the curious way in which they treat the matter of internally restricted funds.

In practice, universities have three types of funds.  There are unrestricted funds: money which they can do whatever heck they like with.  For the most part this is equivalent to the annual operating budget.  There are externally restricted funds – money which can only be used in manners specified by outsiders who have provided them money.  These include most research budgets and infrastructure money (you can’t take CFI money and blow it on beer and popcorn) as well as – of course – money destined for the school’s endowment.

But then there’s a third and slightly more curious type of money called “internally restricted funds”.  These are funds which institutions have set aside themselves for various purposes, usually related to the long-term health of the institution.  They don’t show up as a separate category on balance sheets, though a quick read of notes accompanying the financial statements is usually sufficient to work out their size (admittedly not the most exciting pastime).

The CAUT document is implicitly a guide for how to hunt for evidence that administrators are lying about the institution’s health.  The document starts off in fact by the authors telling the tale of how gradually they came to understand that their own university’s financial position was not fragile but loaded, thanks to their sophisticated understanding of “interfund transfers” (i.e. the process of putting money into internally restricted funds).  Left unsaid: hey, these internally restricted funds could be going to increase professor’s salaries!

Occasionally the document seems to accept the existence of and rationale for internally restricted funds, but the kicker is in the appendices, where they produce a step-by-step guide to working out how much unrestricted cash an institution really has on hand, and use the financial statements of the University of New Brunswick and the University of Ottawa as their case studies.  The formula they use is a little complex but basically it comes down to 1) find out how much money they have in “investments” 2) subtract the endowment and externally restricted funds 3) the residual is “unrestricted cash and investments”.  Which of course can only be true if you completely ignored internally restricted funds.

According to the Morrills, UNB has about $130 million in “unrestricted cash and investments” – you know, just loose money hanging around – while Ottawa has $331 million.  This is preposterous, as even a cursory look at each institution’s financial statements.  At Ottawa, for instance, note 19 of the financial statements clearly notes that the university has $297 million in internally restricted funds (ie., almost exactly what the Morrills claim to be “unrestricted cash and investments”) and note 12 of the financial statements lists a number of the uses of these funds, including: a $57 million for capital expenditures (e.g to match an external grant), $30 million to support faculty research activities, $31 million in a sinking fund to retire long-term debt, etc.

At both UNB and Ottawa – and I think it’s safe to assume it’s true at other institutions as well – internally restricted funds also cover money set aside to cover the unfunded costs of benefits programs, and funds for strategic priorities.  They also cover (and this is one of Canadian higher education’s dirty little secrets) many millions of dollars which are under the control of individual faculties and departments with respect to which the central administration has barely any understanding let alone control.  How did they get these?  Simple: many universities allow faculties/departments to roll over any unspent non-salary-related money in their budgets from year-to-year.  Over time, these can become formidable war chests.  I know of one medium-sized university in western Canada where such funds add up to around $60 million.  But is this really “unrestricted cash/investments”?   I can’t imagine any university administrator trying to take such funds away from lower units.  The words “from my cold dead hands” leap to mind.

So what we have here is a document from CAUT which is encouraging its member locals to label “internally restricted funds” as “unrestricted cash and investments” and hence, presumably, available for distribution to faculty members during collective bargaining talks.  And there is a sense in which this is correct: the designation of certain funds and certain priorities are political designations within the university itself.  It was a decision by the Board of Governors which restricted these funds and the Board could just as easily have not restricted these funds, or restricted them to some other purpose.

It might be a good idea to have an honest discussion about the size and use of these funds, and the trade-offs they entail.  Should professors get more pay at the expense of paying off the institutional debt or covering the unfunded costs of future benefits?  Should the institution have a lower tuition increase this year paid for by raiding faculty funds built up over the years for internal priorities?  I think those kinds of discussions would be helpful and clarifying.

But that’s not what the Morrills and CAUT are trying to do here.  Quite clearly, by claiming that internally restricted funds are in fact “unrestricted cash & investments” what they are trying to do is get more of their members to believe that universities have plenty of money lying around to spend and hence that any holding out at the bargaining table is chicanery rather than prudence.

Let’s not beat around the bush.  This is a lie, one designed specifically to increase labour strife by increasing distrust in university financial statements.  I wonder what CAUT has to gain by publishing it?

December 12

How International Tuition Fees Keep Canadian Universities Afloat

Everyone knows that international student numbers have been going up over the past decade or so. What you might not know is what kind of effect that’s having on university budgets. So, today, a few brief tables and charts.

First, tuition fees for international undergraduate students. Nationally, these have been growing at a rate of inflation +4% over the past decade, which is substantially faster than the rise in domestic tuition (roughly, inflation +1.5%). Nationally, the average international tuition is $23,589, but both this figure and the recent run-up in tuition is due almost entirely to what is going on in Ontario. Ten years ago, international student tuition in Ontario was barely different from the national average; now, after a decade of annual increases of inflation +6%, it lies a full $6,000 above it.

Figure 1: International Undergraduate Student Tuition, Canada and Selected Provinces, 2006-07 to 2016-17, in constant $2016

unnamed

Now of course, if you have increasing numbers of international students paying increased fees, it stands to reason that their financial contribution is also increasing. Now, no institution actually publishes data on the amount of money they receive from international students, so no one has ever looked at the extent to which Canadian universities are dependent on that type of revenue with any degree of specificity. But if one simply multiplies out student numbers (using data from Statscan’s Post-secondary Student Information System) by average fees (from Statscan’s Tuition and Living Accommodation Costs Survey), one can get a rough sense of the magnitude of their contribution (some quirks in the way Statscan deals with business students means we can’t quite capture data on MBA students accurately, so we are probably undercounting a bit). What we find when we do this (see Figure 2) is that nationally, roughly 23% of all fees paid come from international students.

Figure 2: International Students’ Fees Paid as a Percentage of all Fees Paid, Canada and Selected Provinces, 2008-09 to 2013-14

unnamed-1

Now a careful examination of Figure 2 reveals some interesting facts. The proportion of fees coming from international students is highest in Quebec (44%) not just because fees are high, but because tuition for domestic students is so low. Conversely, the proportion in Ontario is relatively low even though international tuition is high because domestic fees are also high.

We can move on from this to show what percentage of all operating revenues are accounted for from international fees, which I show below in figure 3.

Figure 3: International Tuition Fees as a Percentage of Operating Income, Canada and Selected Provinces, 2008-09 to 2013-14

unnamed-2

Nationally, income from international students at Canadian universities was equal to a little over 7% of operating income in 2013-14 (also true in Ontario, which you probably can’t see on the chart because the lines are almost entirely parallel); however, the averages by province vary enormously, from 12% in British Columbia to 4% in Alberta to even lower in Prince Edward Island and Saskatchewan.

(In the preceding graphs I stuck to only showing the largest four provinces, because including all ten makes for a gory visual mess; but for all the other provinces, information for 2013-14 is shown below in table 1. And for those who might be kvetching because I am not presenting college data – we asked colleges for data to do precisely this kind of analysis, and by and large they refused.)

Table 1: Data on International Fees, Canada and Provinces, 2013-14

unnamed-3

A final point here: at most Canadian universities, total operating income plus capital expenditure per student is in the range of $25,000 a head. What that suggests is that in most provinces, international students, despite paying what is allegedly “market” tuition, are in fact still not paying the full cost of their education and are in fact being subsidized. Only in Ontario is this clearly not the case; elsewhere, it would appear that foreign students – far from being “cash cows” – are in fact being subsidized by Canadian taxpayers.

More thoughts on this tomorrow.

November 29

Faculty Salary Data

We haven’t looked at Faculty salary data in awhile.  Time for a gander.

Let’s compare data from the years 2009-2010 and 2014-15: a nice round five years.  The data for 2009-2010 is from the old Statistics Canada UCASS survey, discontinued but recently revived; the 2014-14 data is from the National Faculty Data Pool, an organization set up by Canadian Universities to keep the UCASS going after it was defunded.  I have restricted the sample to the 38 institutions which appear in both datasets.  A few institutions chose not to participate in the NFDP exercise, most significantly Montreal, Laval, Sherbrooke, UNBC, Winnipeg, Brandon, St. FX, Cape Breton and Mount Saint Vincent; Victoria is excluded because its data is not available from 2009-10.  On the whole, these missing institutions tend to have lower salaries than other universities in Canada, and as a result, the national averages that arise from this exercise are going to be somewhat higher than a true national average.   So, focus on the change over time (which is very accurate, for institutions accounting for over 80% of professors across the country) and not the averages.

Got that?  OK, good.  On to figure 1, which shows average change in professorial salaries by rank.  For purposes of comparability, the 2009-10 data is shown in 2014-equivalent dollars.

Figure 1: Average Canadian Professorial Salaries by Rank, 2009-10 and 2014-15, in constant 2014 dollars

ottsyd-20161129-1

So, what we see here is that across all ranks, faculty salaries for tenured and tenure-track professors have increased faster than inflation since 2009-10.  The increase was largest for both full and associate profs at just over 5%, while for assistant professors the figure is just 1.1%.  However, the average rise in real salaries across all ranks is a whopping 12.4% over five years – or roughly 2.3% per year on top of inflation (for comparison: economy wide, average wage rates over the same four years rose by just 1.5% or 0.3% per year).  How is this possible?  Simple: the professoriate is aging, and a greater fraction of professors are now in the upper (and better-paid) ranks than was the case five years ago.  Progression Through the Ranks makes a huge difference.

Now, let’s compare Canadian salaries to American ones, using the annual American Association of University Professors’ Annual Report on the Economic Status of the Profession for 2014-15.  This is tricky for three reasons.  The first is the problem of differing exchange rates; I deal with this by using 2014 Purchasing Power Parity value ($1C = $0.85 US).  The second is that the US has a much wider variety of institutions which get included in their national statistics: at the top end there are a lot of very rich private universities and at the bottom there are a lot of institutions which are what we would call community colleges, neither of which are included in the Canadian data.  To deal with this I chose to compare professors at public doctoral institution in the US only with professors at 13 research-intensive universities in Canada for which the National Faculty Data Pool has data (i.e. U-15 minus Montreal and Laval).

The third and trickiest issue is how to account for the fact that American salaries cover 9 months of work while Canadian ones are for 12, with Americans free to top up their salary by up to 2 months’ worth of their regular salary (2/9 = 22%) with money from research grants (these are sometime called “summer salary”.  To show a range of possible comparators, I show 9-month US base salaries, 12-month salaries for those with summer salary, and a weighted average of the two, based on data from the National Research Council’s Assessment from Research-Doctorate Programs in the United States suggesting that 69% of academic staff at research institutions hold research grants.  Note that no data exists as to how often grant money gets used from summer salary; for lack of data I assume here that everyone who receives a grant takes the maximum two months, which almost certainly results in an overestimate for US salaries, so caveat emptor, etc.

With that in mind, Figure 2 provides the comparison of salaries across professors at public research universities in Canada and the US.

Figure 2: Canadian vs. US Professorial Salaries at Public Doctoral/Research Universities by Rank, 2014-15, in Canadian $ at PPP.

ottsyd-20161129-2

The quick conclusion from figure 2 is that base salaries in Canada are higher than those in the US, but that much of this goes away once research dollars are included, especially for full professors.  However, across all ranks, Canadian professors at research universities not only have higher average salaries ($144,153) than American ones ($127,298), and that this result remains true even if we look only at American professors with research grants ($134,879).

Now on to figure 3 where we look at changes in salaries over the past five years.  I’ve again restricted the comparison to research/doctoral universities, but for fun I’ve included US privates.

Figure 3: Real Change in Salaries, in Canadian at Public Doctoral/Research Universities by Rank, 2009-10 to 2014-15, Canada vs. US

ottsyd-20161129-3

Across all ranks at doctoral/research universities, Canadian research university professors’ salaries rose 13.3% after inflation.  For US privates, the equivalent was 2.9% and at US publics it was negative 0.8%.  At each individual rank, the differences are smaller (and in fact at the assistant professor level, rises in Canadian salaries are smaller than in the US).  Why the difference?  Well, mainly, it’s that in the two countries we are seeing two completely different demographic shifts.  In the US, a decreasing percentage of professors are of “full” status, whereas in Canada it is increasing.  Their lower ranks are growing, ours are shrinking.

I would just remind everyone that these stonking increases in compensation are occurring at a period which the Canadian Association of University Teachers (CAUT) continues to refer to as one of “austerity”.  I therefore propose that CAUT get on the phone to their counterparts in Greece and explain this fascinating model of austerity in which the average professor is receiving annual raises equal to 1.5 to 2.5% above inflation, year after year.  I bet they’d really get a kick out of it.

November 28

Canadian Enrollment Data, 2014-15

Statistics Canada published the 2014-15 enrollment data last week and I thought I would give you a bit of an overview.  The data is based on snapshots of enrollment taken in the fall, so we’re talking a 24-month lag here (most other OECD countries can do this in 12-18 months), but this is Statscan so just be glad you’re getting any data at all.

The headline news is that enrollment in 2014-15 was up – barely – from 2.048 million to 2.055 million students (i.e. by 7,000 students), which puts enrollment at an all-time high. As a percentage of the Canadian population, students are thus now 5.8% of the Canadian population.  Just to put that into perspective: that’s roughly the population of Saskatchewan and Nova Scotia combined.  if students were a province, they would be the country’s fifth-largest.  Students make up roughly the same proportion of the population that works in education, law, social services and government services occupations combined, or roughly 5.5 times the number of individuals employed in natural resource occupations.

Figure 1: Enrollment by Level and Intensity, 1994-95 and 2004-05

ottsyd-20161128-1

But while enrollment increased at both universities and colleges, there are some interesting dynamics if you poke around a bit under the hood.  The main one is that part-time enrollment fell substantially for the second year in a row at universities and third at colleges.  Full-time and part-time enrollments are going in completely different directions at the moment.

Figure 2: Changes in Full- and Part-time student enrollments, 2010-11 to 2014-15 (2010-11 = 100)

ottsyd-20161128-2

The other really interesting trend in enrollments has to do with international students.  Over the past five years, total full-time enrollment at colleges and universities has increased by 126,000.  48% of that increase is accounted for by international enrollments.  Or, to put that another way: domestic student enrollment has increased by about 5%, but international student enrollment has increased by 56%.  These figures are shown below in figure 3.  Apologies for lines not being distinct, but that’s a factor of the trends being almost identical in both the college and university sectors.

Figure 3: Changes in Domestic and International Full- time enrollments, 2010-11 to 2014-15 (2010-11 = 100)

ottsyd-20161128-3

That last graph is especially important when you think about institutional finances.  Assuming (at a high level of generality) that tuition income from international students is about three times what it is for domestic students, that implies that over 75% of the increase in tuition revenue over the period 2010-11 to 2014-15 comes from international students.   I’ll try to get into more detail on this at some point before Christmas, but by my back-of-the-envelope reckoning that makes international student fees responsible for almost exactly 50% of total increase in operating funds over those five years.

Let that sink in for a bit.  Fifty percent.

There are a lot of implications to that number.

November 24

Who’s More International?

We sometimes think about international higher education as being “a market”. This is not quite true: it’s actually several markets.

Back in the day, international education was mostly about graduate students; specifically, at the doctoral level. Students did their “basic” education at home and then went abroad to get research experience or simply emigrate and become part of the host country’s scientific structure. Nobody sought these students for their money; to the contrary these students were usually getting paid in some way by their host institution. They were not cash cows they did (and still do) contribute significantly to their institutions in other ways, primarily as laboratory workhorses.

In this market, the United States was long the champion since its institutions were the world’s best and could attract top students from all over the world. In absolute terms, it is still the largest importer of doctoral students. But in percentage terms, many other countries have surpassed it. Most of them, like Switzerland, are pretty small and small absolute numbers of international students nevertheless make up a huge proportion of the student body (in this case, 55%). The UK and France, however, are both relatively large markets, and despite their size they now lead the US in terms of percentage of doctoral students who are international (42 and 40% vs 35%). Canada, at 27%, is at right about the OECD average.

Figure 1: International Students at Doctoral Level as Percentage of Total
ottsyd-20161123-1

Let’s turn now to Master’s students, who most definitely *are* cash-cows. Master’s programs are short degrees, mainly acquired for professional purposes and thus people are prepared to pay a premium for good ones. The biggest market here are for fields like business, engineering and some social sciences. Education could be a very big market for international Master’s but tends not to be  because few countries (or institutions, for that matter) seem to have worked out the secret for international programs in what is, after all a highly regulated profession. In any case, this market segment is where Australia and the UK absolutely dominate, with 40 and 37% of their students being international. Again, Canada is a little bit better than the OECD average (14% vs. 12%).

Figure 2: International Students at Master’s Level as Percentage of Total
ottsyd-20161123-2

Figure 3 turns to the market which is largest in absolute terms: undergraduate students. Percentages here tend to be smaller because domestic undergraduate numbers are so large, but we’re still talking about international student numbers in the millions here. The leader here is – no, that’s not a misprint – Austria at 19% (roughly half of them come from Germany – for a brief explainer see here). Other countries at the top will look familiar (Great Britain, New Zealand, Australia) and Canada doesn’t look to bad, at 8% (which strikes me as a little low) compared to an OECD average of 5%. What’s most interesting to me is the US number: just 3%. That’s a country which – in better days anyway – has an enormous amount of room to grow its international enrollment and if it hadn’t just committed an act of immense self-harm would have be a formidable competitor for Canada for years to come.

Figure 3: International Students at Bachelor’s Level as Percentage of Total

ottsyd-20161123-3

Finally, let’s look at sub-baccalaureate credentials, or as OECD calls them, “short-cycle” programs. These are always a little bit complicated to compare because countries’ non-university higher education institutions and credentials are so different. Many countries (e.g. Germany) do not even have short-cycle higher education (they have non-university institutions, but they still give out Bachelor’s degrees). In Canada, obviously, the term refers to diplomas and certificates given out by community colleges. And Canada does reasonably well here: 9% of students are international, compared to 5% across OECD as a whole. But look at New Zealand: 24% of their college-equivalent enrollments are made up of international. Some of those will be going to their Institutes of Technology (which in general are really quite excellent), but some of this will also be students from various Polynesian nations coming to attend one of the Maori Wānanga.
Figure 4: International Students in Short-Cycle Programs as Percentage of Total

ottsyd-20161123-4

Now if you look across all these categories, two countries stand out as doing really well without being either of the “usual suspects” like Australia or the UK. One is Switzerland, which is quite understandable. It’s a small nation with a few really highly-ranked universities (especially ETH Zurich), is bordered by three of the biggest countries in the EU (Germany, France, Italy), and it provides higher education in each of their national languages. The more surprising one is New Zealand, which is small, has good higher education but no world-leading institutions, and is located in the middle of nowhere (or, at least, 5000 miles from the nearest country which is a net exporter of students). Yet they seem to be able to attract very significant (for them, anyway) numbers of international students in all the main higher education niches. That’s impressive. Canadians have traditionally focused on what countries like Australia and the UK are doing in international higher education because of their past track record. But on present evidence, it’s the Kiwis we should all be watching, and in particular their very savvy export promotion agency Education New Zealand.

Wellington, anyone?

Page 3 of 2912345...1020...Last »