A couple of weeks ago, I wrote a blog analysing the distributional effects of tuition reductions vs. targeted grants, and concluded that the latter was far more progressive in their impact than the former. In response, Carleton professor Nick Falvo wrote a piece on OCUFA’s Academic Matters website saying that I was “wrong about tuition”. Because some of his arguments are interesting – to his credit, he didn’t reach for the appalling argument that a regressive distribution of benefits is OK because the rich pay more taxes – I thought I would take some space here to respond.
Although Falvo claims to be demonstrating that my thesis about regressivness is wrong, at no point does he actually address the distribution issue. Rather, he essentially concedes this point, and then make a series of arguments about why tuition reduction is preferable to targeted grants despite their regressiveness.
Falvo makes five separate arguments about the superiority of a free-tuition arrangement over a tuition-plus-grant arrangement. The first is that free tuition is more “efficient” than grants because the administration costs are lower. But this is silly. In fact, SFA administration costs in Canada run about five cents on the dollar. Why you’d spend billions of dollars on one type of subsidy, just to save a few tens of millions by getting rid of the few hundred public servants who administer the existing programs, is a bit beyond me.
The second argument is, essentially, that grants don’t work because sometimes tuition rises faster than grants. But the more efficient solution to this – were this indeed a problem – would of course be to spend more on grants, not decrease tuition.
His third and fourth arguments are mutually contradictory. One is that targeted subsidies create disincentives to work (the “welfare wall” argument); the other is that targeted grants are too complicated to understand, and that free tuition is more effective because it is easier to understand than a fees-plus-aid strategy. The first implies that families have quite a good understanding about how subsidies work, and adjust their behaviour accordingly; the second implies that they don’t. My view is that the second theory is more likely to be the correct one. Sticker prices are simpler to understand than net prices. The question really is whether this actually matters. How much damage does poor communication actually do to access? Is it sufficiently bad that we should spend an extra couple of billion on it? For that to be the case, one would need to prove not simply that some people are deterred by financial barriers (undoubtedly true), but that they are deterred in large numbers because of their misunderstanding of extant financial incentives. On the basis of existing evidence, I’d guess that’s not the case.
Falvo’s final point is that free tuition is a more politically saleable proposition than grants – because more people will benefit, it is easier to create and maintain voting coalitions in favour of it. Even if that’s true, it is an appalling argument. Stephen Harper certainly sold the Universal Child Care Benefit much easier than Paul Martin sold the (targeted) expansion of daycare spaces, but that doesn’t make it good public policy.
The argument that the only way, politically, to get a dollar to the youth from the poorest quartile is to give three dollars to youth from the richest quartile is an awfully convenient one… if you’re from the top quartile. I simply don’t believe we have to settle for a system where the only way to get money to the needy is to buy-off the rich. And I remain completely baffled why people who claim to be progressive actively promote such an idea.