HESA

Higher Education Strategy Associates

Category Archives: salaries

April 07

Not Mutually Exclusive

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

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

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

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

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

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

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

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

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

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

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

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

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

January 22

Classroom Economics (Part 4)

Yesterday we looked at ways to get the teaching budget down.  Today, we’re going to look at the other half of the cost equation: all that overhead.  And we’re going to look at it by asking the question: how big a cut in overhead would it take to equal the effect of replacing 20% of your credit hours with sessionals (which, as we saw yesterday, reduces overall teaching loads by 17%)?

Recall the equation: X = aϒ/(b+c), where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning one student sitting in one course for one term), “ϒ” is average compensation per professor, “a” is the overhead required to support each professor, “b” is the government grant per student credit hour, and “c” is the tuition revenue per credit hour.  Given that equation, the answer to our question is simple: you need to drop overhead by 17%.  But how might one go about achieving a cut that size?

On average across Canada, universities spend about $16,300 per FTE student on things other than academic staff compensation (yes, really).  Over half of that – 54% or so – goes to non-academic staff compensation: the professional staff, the cleaners, the lab techs, the janitors, etc.  They’re all in there.  No other single item comes close.  The table below shows the full breakdown.  Most of those categories are pretty self-explanatory, except perhaps for “other” operational expenditures (which is mostly long-term space rental and property taxes, with a few miscellanies thrown in for good measure).

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Now imagine you want to achieve your 17% reduction without firing anyone, or trying to get them to give back salary – what are your options?  Well, to start with, it’s important to acknowledge there’s a bunch of things in here that are difficult to touch.  Scholarships, for instance.  And not paying interest isn’t too smart.

So that leaves only 35.8% of the whole non-academic budget.  Squeezing 17% out of that would be pretty horrific; it would require cuts of as close to 50% as makes no odds.  What do you think our universities would look like with half the library acquisition budget gone?  Half the travel and communications budget gone?  Half the budget for light and heat gone?  It’s simply not an option.

All of this, of course, means that balancing budgets this way leaves you with very few options other than reducing labour costs.  Say you had a way to reduce your non-academic staff costs by 10% – either by wage rollbacks or layoffs, or some combination of the two: you’d still have to find a way to squeeze 20% out of the rest of the non-academic budget to make the math work.  And that would be tough.

Bottom line: there is no easy salvation here.  Any serious reduction in costs on this side will require some bloodletting in terms of staff.  That’s never easy to stomach.

My wrap-up on all this tomorrow.

January 21

Classroom Economics (Part 3)

(If you’re just tuning in today, you may want to catch up on Part 1 and Part 2)

Back to our equation: X = aϒ/(b+c), where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning one student sitting in one course for one term), “ϒ” is average compensation per professor, “a” is the overhead required to support each professor, “b” is the government grant per student credit hour, and “c” is the tuition revenue per credit hour.

I noted in Part 1 of this series that most profs don’t actually teach the 235 credit hours our formula implied. Partly that’s because teaching loads aren’t distributed equally.  Imagine a department of ten people, which would need to teach 2350 credit hours in order to cover its costs.  If just two people teach the big intro courses and take on 500 credit hours apiece, the other 8 will be teaching a much more manageable 169 credit hours (5 classes of under 35 students for those teaching 3/2).

Now, while I’m talking about class size, you’ll notice that this concept isn’t actually a factor in our equation – only the total number of credit hours required to be taught.  You can divide ‘em up how you want.  Want to teach 5 courses a year?  Great.  Average class size will be 47.  Want to teach four courses?  No sweat, just take 59 students per class instead.  It’s up to you.

When you hear professors complain about increased class sizes, this is partly what’s going on.  As universities have reduced professors’ teaching loads (to support research, natch) without reducing the number of students, the average number of students per class has risen.  That has nothing to do with underfunding or perfidious administrators; it’s just straight arithmetic.

But there is a way to get around this.  Let’s say a university lowers its normal teaching load from 3/2 to 2/2, as many Canadian institutions have done in the last two decades.  As I note above, there is no necessary financial cost to this: just offer fewer, larger courses.  Problem is, no university that has gone down this path has actually reduced its course offerings by the necessary 20% to make this work.  Somehow, they’re still offering those courses.

That “somehow” is sessional lecturers, or adjuncts if you prefer.  They’ll teach a course for roughly a third of what a full-time prof will.  So their net effect on our equation is to lower the average price of academic labour.  Watch what happens when we reduce teaching loads from 3/2 to 2/2, and give that increment of classes over to adjuncts.

(.8*150,000) + (.2*50,000) = $130,000

X= 2.27($150,000)/($600+$850) = 235

X= 2.27(130,000)/($600+$850) = 195

The alert among you will probably note that the fixed cost nature of “a” means that it would likely rise somewhat as ϒ falls, so this is probably overstating the fall in teaching loads a bit.  But still, this result is pretty awesome.  If you reduce your faculty teaching load, and hand over the difference to lower-paid sessionals, not only do you get more research, but the average teaching load also falls significantly.  Everyone wins!  Well, maybe not the sessionals, but you get what I mean.

This underlines something pretty serious: the financial problems we have lay much more on the left side of the equation than on the right side.  However much you think professors deserve to be paid, there’s an iron triangle of institutional income, salaries, and credit hours that cannot be escaped.  If you can’t increase tuition, and more government money isn’t forthcoming, then you either have to accept higher teaching loads or lower average salaries.  And if wage rollbacks among full-time staff isn’t in the cards, then average costs are going to be reduced through increased casualization.  Period.

Or almost, anyway. To date we’ve focused just on ϒ – but what about “a”?  Can’t we make that coefficient smaller somehow?

Good question.  More tomorrow.

November 25

Graduate Income Data Miracle on the Rideau

My friend and colleague Ross Finnie has just published a remarkable series of papers on long-term outcomes from higher education, which everyone needs to go read, stat.

What he’s done is taken 13 years of student data from the University of Ottawa and linked it to income tax data held by Statistics Canada.  That means he can track income patterns by field of study, not over the puny 6-24 month period commonly used by provincial surveys, or the new 36-month standard the National Graduate Survey now uses, but for up to 13 years out.  And guess what?  Those results are pretty good.  After only five years out, all fields of study are averaging at least $60K per year in annual income.  Income does flatten out pretty quickly after that, but by then, of course, people are earning a pretty solid middle-class existence – even the much-maligned Arts grads.

Figure 1: Average Post-Graduation Income of Class of 1998 University of Ottawa Graduates, by Field of Study and Number of Years After Graduation, in Thousands of 2011 Constant Dollars

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One of the brilliant things about this data set is that you can not only compare across fields of study in a single cohort, but also you can compare across years for a single field of study.  Finnie’s data shows that in Math/Science, Humanities, Social Science, and Health, income pathways did not vary much between one cohort and another: a 2008 History grad had basically the same early income pathway as one from 1998.  In two other fields, though, it was a different story.  The first is Business, where the 1998 cohort clearly had it a lot better than its later counterparts; after two years out, that cohort was making $10K per year more than later ones, a lead that was then maintained for the rest of their career.  In ICT, the fate of various cohorts was even more diverse.

Figure 2: Average Post-Graduation Income, Selected Cohorts of University of Ottawa Engineering/Computer Science Graduates, by Number of Years After Graduation, in Thousands of 2011 Constant Dollars

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This is pretty stunning stuff: thanks to the dot-com bust, the first-year incomes of engineering and computer science graduates in 2004 was exactly half what it was in 2000 ($40,000 vs. $80,000).  If anyone wants to know why kids don’t flock to ICT as a career, consider uncertain returns as a fairly major reason.

Also examined is the question of income by gender:

Figure 3: Average Post-Graduation Income of Class of 1998 University of Ottawa Graduates, by Gender and Number of Years After Graduation, in Thousands of 2011 Constant Dollars

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Two interesting things are at work with respect to gender.  The initial income gap of $10,000 in the first year after graduation gap is almost entirely a field-of-study effect: take out Engineering/Computer Science, and earnings are almost the same.  But after that, the gap widens at a pretty continuous pace for all fields of study.  It’s most pronounced in Business, where top-quartile male incomes really blow the averages out, but the pattern is the same everywhere.  Because of the way the data is collected, it’s impossible to say how much of this reflects differences in labour-market participation and hours worked, and how much of this is differences in hourly pay, but the final result – a gender gap of $20,000 to $25,000 in average earnings, regardless of field of study – is pretty striking.

Are there caveats to this data?  Sure.  It’s just one university, located in a town heavy on government and ICT work.  My guess is that elsewhere, things might not look so good in Humanities and Social Science, and ICT outcomes may be less boom-and-bust-y.  But fortunately, Ross is on this one: he is currently building a consortium of institutions across the country to replicate this process, and build a more comprehensive national picture.

Let me press this point a bit on Ross’ behalf: there is no good reason why every institution in the country should not be part of this consortium.  If your institution is not part of it, ask yourself why.  This is the most important new source of data on education Canada has had in over a decade.  Everyone should contribute to it.

 

 

Nb. One tiny quibble about the papers is that they present everything in monochrome graphic form – no tabular data.  To make the above figures, I’ve had to eyeball the data and re-enter it myself.  Apologies for any deviations from the original.

October 27

The Way Forward on Collective Bargaining

So, last week (here, here, and here) I noted that in most parts of the country, total compensation levels have been running more or less in line with changes to total operating grants.  But this is not a reason to become complacent about university finances and future collective bargaining agreements, for two reasons.

First, what I’ve been showing is that salary mass has been increasing in line with operating income.  But salary mass and salaries are two different things.  If I give very high salary increases, I can keep salary mass down by reducing total staff complement.  That is very clearly starting to happen at some universities, and it’s not necessarily positive.  So there’s that.

Second, all the projections I’ve made have assumed that growth in tuition revenue is going to continue at present rates.  But there are some good reasons to suspect that this won’t be the case.  On one hand, domestic student numbers are already falling in Ontario and the Maritimes, due to demographics.  But more importantly, there’s simply no guarantee we’ll continue to increase tuition revenues from international students the way we have for the last seven or eight years.  And yet, every time another campus signs a big-money salary deal with staff, this is implicitly what the system is banking on.

What most people on Canadian campuses haven’t yet realized is the extent to which the 4.5% annual real increases in total operating budgets have been funded by international students (actually, a lot people don’t even believe that operating budgets have been increasing, but that’s another story).  And to keep those increases going into the future requires that institutions not only to keep the students they have, but also that they maintain a constant rate of growth.

So here’s the deal.  With institutional income increasingly coming from volatile market-based sources, sensitive to changes in demand, and quite possibly headed in the wrong direction, we are ill-served by a collective bargaining culture based on keeping-up with what profs at (insert comparator institution here) got 12 months ago.  That way lies an inflationary spiral.  What really matters is how total operating income is going to grow, and how to ensure salary mass increases don’t crowd out other important educational expenditures.

There is a simple way to do this, and, as I suggested back here, it involves linking pay to institutional income.  Institutions need to start saying publicly, at the outset of negotiations, what their likely income increases are going to be over the next 3-4 years, and make it clear that no settlement will be signed in which salary mass increases are more than this.  If an institution’s total net income is expected to increase by 10%, make it clear that 10% is the most that can be offered to staff.  Within that 10%, many things can be negotiated, of course.  But the bottom line has to link pay to income.

What if income increases more than 10%?  Staff should get their share of any incremental increase, of course.  That way, everyone has an incentive to see total revenues increase – which currently means giving everyone an incentive to be more foreign-student-minded.

Unions might not like this.  And that’s their right.  But then it would also be their responsibility to explain what universities should be cutting if growing paycheques can’t keep up with faltering revenue – publicly, and before the start of any contract negotiations.

September 24

The Math at Windsor

Not only is there strike talk at Laurentian, but there is also a strike in the air at Windsor (a one-day strike was held last week, but a full strike is promised for October 1st if no deal is reached).  Bargaining there began earlier this year, but for whatever reason, no progress was made in negotiations over the spring.  After a conciliator was unable to nudge the two sides closer together, the university was in the legal position to impose its offer on the faculty, which it did in early July. This was a canny piece of timing: by doing this in the summer, the university deprived the union of an immediate strike threat (because who cares if profs go on strike in summer?).

This was a rare case of a university playing hardball on timing; and though this may have wrong-footed the union, they’ve responded by making great rhetorical hay out of having a contract imposed on them.  Now, the strike is no longer about petty monetary demands, it’s about the right to collective bargaining.  Yay, righteousness!  And that’s a big bonus for the union, because if the strike was just about financial proposals, their position would be almost indefensible.

The union position is that the university’s offer – 0%, 0%, and 3% over three years – is inadequate because staff can’t be expected to accept wage increases below inflation.  While that’s one way of framing the institution’s offer, it glosses over the stonking amount of money the university is offering faculty through its Progression Through the Ranks (PTR) system (for a refresher course on PTR, see here).  Under the university’s offer, every single professor (other than those with over 30 years experience) gets an annual pay rise of $2,550.  This isn’t based on merit or anything, the way it is at Alberta or UBC or Waterloo, it’s just for sticking around another year.  On top of that, they get 0%, 0%, 3%.

Now that doesn’t translate easily into a percentage figure because $2,550 represents a different percentage for each professor, depending on their current pay. But let’s take a stab at it based on known average pay by rank.  Current pay figures are unavailable (thanks for cutting the UCASS faculty salary survey, StatsCan!), but I do have them from 4 years ago – they’ve probably gone up slightly since then, but for giggles let’s use them to take a look at what the university offer means if the PTR is included.

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On top of that, there’s something called the “Windsor Salary Scale” – a Windsor-only deal, in place for decades, which means that the Windsor salary scale always rises at the Ontario median.  Based on the past few years’ deals, this would mean average pay rises of another 4% or so (15.4% now for assistant profs, if you’re counting) – though it’s hard to predict exactly, since we don’t know what future salary settlements across Ontario will look like.  On the other hand, professors will also be asked to pay more into their pensions, what with returns being so meagre in our low-interest rate environment.  So let’s call these two a wash and stick with the figures in the table above.

To summarize, this deal – which, recall, had to be imposed – will see nearly all faculty salaries rise by rates well above inflation (in the case of assistant professors, by a factor of two).  The only ones who will not see a rise equal to inflation are that tiny minority (the 30+ years crew) already at the top of the pay grid, and who in most circumstances will be earning over $150,000.

Remember, this is at a university in a region where first-year enrolment fell by 10% this year, and where the regional youth cohort (Windsor-Essex-Chatham-Kent) is set to shrink by 15% or so over the next six years – meaning the institution will receive even fewer tuition dollars, and will receive a declining share of total government grants budget, which, if we’re lucky, will decline by only 3% in real terms over the next three years.

And still the union said no.

September 23

Another Reason to Get Serious About Measuring Workloads

So I see the Laurentian faculty union is threatening to strike.  The main issues are “workload” (they’d like to have lower undergraduate teaching loads to deal with an influx of graduate students) and pay (they’d like to “close the gap” with the rest of Ontario).

This is where the entire system would be well served by having some understanding of what, exactly, everybody is getting paid for.  Obviously, if you’re doing the same amount and type of work as someone else, you’ve got a pretty good claim to parity.  The problem is that what professors do – that is, their expected workload and outputs – can vary significantly from one place to another.

Lets’s take the issue of graduate supervision.  Laurentian profs are doing more of it than they used to – overall, 6% of full-time enrolments at Laurentian were at the graduate level in 2012, up from 4% five years earlier.  But if we’re going to use “the Ontario average” as a goal, it’s worth noting that across the province, 12% of full-time students are graduate students.  So on average, Laurentian professors do only about half as much graduate supervision as other professors across the province – and probably less if we were to weight doctoral supervision more highly.

Well, what about undergraduate teaching – maybe they do more of it that others?  On paper, they teach 3/2 (except in Science and Engineering, where its 2/2).  That’s the same as at most smaller Ontario institutions, and somewhat more than you’d see at larger institutions where 2/2 or even 2/1 is the norm.  But that’s not the whole story: class sizes are smaller at Laurentian.  Sixty-seven per cent of all undergraduate classes at Laurentian are under 30 students, compared to just 51% at York (though, surprisingly, the figure at Queen’s is almost the same as Laurentian – 65%).  But ask yourself: which takes more work, a 2/1 with average class sizes of 60, or a 3/2 with an average class size of 30?  Hard to tell.  But how can you make arguments about “equal pay for equal work” unless you know?

Then there’s research output.  If you use tri-council funding as a metric, and normalize for field of study, Laurentian profs in Science and Engineering are winning about 55% of the national average – higher than Ryerson, but less than half of what Carleton gets.  That’s not too bad.  In humanities and social sciences, however, Laurentian wins only 21% of the national average – about a fifth of what they get at Ottawa, and a third of what they get at Laurier (all data from our Measuring Academic Research in Canada paper, available here.  I could go on with data about publications and citations, but you get the idea: Laurentian professors’ research output isn’t all that close to the provincial average.

To recap: Laurentian is a school where (on average) professors have lower graduate teaching responsibilities and research output than the Ontario average, and an undergraduate teaching load that is higher than average in terms of number of classes, but is arguably lower in terms of total students taught.  So where should their pay be, relative to the provincial average?  Probably somewhere below the average, which indeed is where it is.

But the question for this dispute is: how far below?  Better comparative data, combined with some agreement about the relative weight of different parts of the professorial job, would take a lot of heat out of this debate.

September 12

Hosanna! *More* Graduate Income Data!

Okay, so I goofed on Tuesday.  Contrary to what I said, Colleges Ontario actually does publish sector-wide data on graduate incomes six months out – they just don’t publish it with the rest of the KPI data.  Instead, it’s at the back of the graduate outcomes section of their excellent annual Environment Scan (thanks to Glenn for the heads up).  So let’s take a look at what they say.

On Tuesday we noted that graduate employment outcomes for college graduates six-months out seemed to have taken a bigger knock in the recession than university graduates.  To wit:

Figure 1: Percent of Ontario Graduates Employed Six-Months Out, by Graduating Class

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That said, although employment results have fallen significantly, the picture is somewhat better when you look at the changes in graduate incomes.  Now, looking at “college” outputs is always a bit tricky because colleges offer so many different kinds of credentials.  In Figure 2, we look at change-over-time in incomes for holders of each credential, and also the weighted average for all credentials.

Figure 2: Income of Ontario College Graduates Six-Months After Graduation, by Credential Level, by Graduating Class, in $2011

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In one respect, Figure 2 is about what you’d expect: the longer a college program lasts, the more a college graduate makes (graduate certificates are a partial exception in that they are usually one-year, but they are meant to be delivered after four years of university, so the basic rule still holds).  But it also shows that in real terms, the diplomas, advanced diplomas, and graduate certificates have held their value reasonably well, while certificates have lost 4% (degrees have lost more – 5% – but the numbers there are tiny and therefore subject to a bit more volatility).

Now let’s see how that compares to the six-month numbers at universities, which are below in Figure 3:

Figure 3: Income of Ontario University Graduates Six-Months After Graduation, by Field of Study, by Graduating Class, in $2011

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Figure 3 show a slightly different picture than what we saw with the 2-year out data back on Monday.  Humanities and physical sciences still saw the largest fall, but at six months the 2011 computer science grads were 7% up on the class of 2007 (as opposed to 3% down at the 2-year mark), and overall the decline was 6% (as opposed to 13%).  This implies that the job market for recent graduates actually got significantly worse between 2011 and 2013.

Finally, let’s compare college and university averages.

Figure 4: Income of Ontario College University Graduates Six Months After Graduation, in $2011

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Figure 4 shows – unsurprisingly – that university graduates make more than college graduates six-months out.  But it also shows that college credentials seem to be holding their value better than undergraduate degrees – down just 2%, rather than 6% for universities, over the period 2007-2011.

This is one of those rare cases where employment averages and income averages are moving in different directions.  In one sense, everyone wins: in the near future, expect Ontario universities to promote themselves as a way to a safe job, and Ontario colleges to talk about how their credentials hold their value in bad times.  And they’ll both be correct.

September 08

Some Scary Graduate Income Numbers

Last week, the Council of Ontario Universities put out a media release with the headline “Ontario University Graduates are Getting Jobs”, and trumpeted the results of the annual provincial graduates survey, which showed that 93% of undergraduates had jobs two years after graduation, and their income was $49,398.  Hooray!

But the problem – apart from the fact that it’s not actually 93% of all graduates with jobs, but rather 93% of all graduates who are in the labour market (i.e. excluding those still in school) – is that the COU release neither talks about what’s going on at the field of study level, nor places the data in any kind of historical context.  Being a nerd, I collect these things when they come out each year and put the results in a little excel sheet.  Let’s just say that when you do compare these results to earlier years, things look considerably less rosy.

Let’s start with the employment numbers, which look like this:

Figure 1: Employment Rate of Ontario Graduates 2 Years Out, Classes of 1999 to 2011

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Keep your eye on the class of 2005 – this was the last group to be measured 2 years out before the recession began (i.e. in 2007).  They had overall employment rates of about 97%, meaning that today’s numbers actually represent a 4-point drop from there.  If you really wanted to be mean about it, you could equally say that graduate unemployment in 2013 has doubled since 2007.  But look also at what’s happened to the Arts disciplines: in the first four years of the slowdown, their employment rates fell about two percentage points more than the average (though, since the class of ’09, their employment levels-out).

Still, one might think: employment rates in the 90s – not so bad, given the scale of the recession.  And maybe that’s true.  But take a look at the numbers on income:

Figure 2: Average Income (in $2013) 2 Years After Graduation, Ontario Graduating Classes from 2003-2011, Selected Disciplines

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Figure 2 is unequivocally bad news.  The average in every single discipline is below where it was for the class of 2005.  Across all disciplines, the average is down 13%.  Engineering and Computer Science are down the least, and have made some modest real gains in the last couple of years; for everyone else, the decline is in double-digits.  Business: down 11%.  Humanities: down 20%.  Physical Sciences: down 22% (more evidence that generalizations about STEM disciplines are nonsense).

Now, at this point some of you may be saying: “hey, wait a minute – didn’t you say last year that incomes 2 years out were looking about the same as they did for the class of 2005?”  Well, yes – but you may also recall that a couple of days later I called it back because Statscan did a whoopsie and said: “you know that data we said was two years after graduation?  Actually it’s three years out”.

Basically, the Ontario data is telling us that 2 years out ain’t what it used to be, and the Statscan data is telling us is that three years out is the new two; simply, it now takes 36 months for graduates to reach the point they used to reach in 24.  That’s not a disaster by any means, but it does show that – in Ontario at least – recent graduates are having a tougher time in the recession.

Tomorrow: more lessons in graduate employment data interpretation.

July 28

Coming Soon to Ontario: a British Columbia Solution

Unless you’ve been out of the country, or under a rock, for the last couple of years, you’ll be at least vaguely familiar with the concept that the province of Ontario is broke.  So broke, in fact, that it has departed radically from previous practice and, back in 2012, effectively froze physicians’ pay for two years.  Not individual physicians, of course – but on aggregate.  A zero overall increase.  And the government is now working to try to extend this freeze for another couple of years.

That makes good sense.  Health care costs have historically risen at several percentage points above inflation, and have squeezed other parts of the provincial budget (education has held out OK, all things considered, but other budget lines have been less well-protected), and physician costs are a major item in the health care budget.  And so saving money in this area is to be welcomed, even if it is at the expense of physicians – who are a politically tricky group to offend.

So what might the provincial government think of the post-secondary sector handing its employees raises of 3-4% per year, on aggregate?  Do you think aggrieved doctors won’t point to this anomaly during this pay round?  Can you imagine any possible rejoinder the government could offer that would make the least bit of sense?

Don’t you think maybe this situation is about to come to a rather sudden end?

For whatever reason, universities in Ontario have not been able to resist rising wage pressure from full-time faculty.  Despite money getting tighter, they have felt compelled to sign agreements that are plainly beyond their means (Hel-LO, University of Ottawa!).  Some university presidents, unable to deal with this problem on their own, are saying that they need government to step in to play “bad cop”.

What does the “bad cop” look like?  Well, take a look at how BC has handled wage negotiations over the last few years.  There, universities (and all other public sector entities) are given a biennial mandate with respect to employee negotiations.  In 2010 and 2011, the deal was: negotiate what you like, but the net cost of any new compensation deal cannot exceed zero.  In 2012 and 2013, that was changed to: there could be increases, but they had to be balanced dollar-for-dollar with efficiency savings in other areas.  The 2010-11 arrangements, in conception at least, are close to the approach Ontario has taken with its physicians.  And it worked pretty well, at least in the sense that it has kept costs down with a minimum of political fuss.

Not everyone in Ontario agrees that the province needs to take the bad cop approach.  Quite a number of university presidents (you can probably guess which ones) oppose asking the province to legislate on their behalf; not only do they feel it morally incumbent on universities to manage their own books, but also it is tactical suicide to ask governments to legislate – once you go down that road, there’s no telling where they’ll stop micromanaging universities’ affairs.

The problem is, those presidents haven’t exactly been too successful at reigning-in costs, either (hello again, University of Ottawa!).  So it seems almost inevitable that some sort of BC-like solution is on the cards.  The idea that profs could gain 15% in salary over four years, while physicians get zero, simply isn’t politically tenable.

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