HESA

Higher Education Strategy Associates

Category Archives: Tuition

July 10

England has lost its damn mind over tuition fees

Ok, I said I wouldn’t write over the summer unless someone of importance said something titanically stupid.  Andrew Adonis, architect of former UK Prime Minister Tony Blair’s education policies crossed that line on Friday with a – yes – titanically stupid column about tuition fees, so here I am.

First, some background.  Prior to 1998, the UK had a free tuition system.  From 1998 to 2006 it had a system of varying tuition fees – £1,000 if your family made over £30,000 per year, and then a sliding scale down to zero if family income fell below £20,000.  From 2006 to 2012, it was a flat £3,000 (rising with inflation) accompanied by the (re)-introduction of means-based grants for living costs.  Loans were available to all to cover fees, meaning no one need pay a cent up-front (“free at the point of delivery” in the UK parlance), and said loans were recovered via the tax system as in Australia and New Zealand.  Required repayment rates were a modest 9% of income above the threshold, which started at £10K in 1998 and rose to £15K in 2006.  Loans not repaid within a given time frame were to be forgiven.

(If you’re trying to work out what those numbers mean in Canadian dollars, for most of the past 15 years PPP equivalent has been pretty close to £1 =C$1.70, so just multiply everything in this piece by 1.7 and you’ve got it).

Shortly after the 2006 went into effect, the bottom fell out of financial markets, and one of the worst-hit countries was the UK.  Anticipating that major reductions in public spending were going to be necessary, then-PM Gordon Brown convened a commission to look at university finances and tuition fees which, conveniently, would not report until after the 2010 election.  The resulting Browne (not the PM, another guy) Review became the basis for the post-election Tory-Liberal coalition government’s policy of i) reducing government funding to universities by over 40%, including a total elimination of per-student subsidies for teaching in the social sciences and humanities and ii) allowing universities to raise fees to up to an eye-watering £9,000 per year.

What this meant was that between loans for tuition and loans for living costs in in ludicrously-pricey London, “debt” for a three-year degree could quite easily end up at over £50,000.  But to “compensate”, loans were made more generous with the repayment threshold jumped from £15,000 to £21,000 while retaining the debt forgiveness policy.  In other words, the government increased student debt massively while simultaneously it harder to recover (see here for a comparison of repayment burdens in UK vs. other countries).

The results of this were predictable.  Though student “debts” rose enormously, these debts were in some sense purely nominal; most predictions showed that something like three-quarters of graduates would never repay the debts and hence the government would assume their balances.  What most students were signing on to was therefore not a loan but a marginal tax of 9% on income over £21,000 lasting 30 years; that is, a so-called graduate tax.  The problem was that no one knew in advance whether they were signing on for a graduate tax or a loan – that would only become apparent a decade or two into one’s working career.  Oh, and government would eventually end up picking up about half the total cost of loans.

Remarkably, this proved unpopular among students.  So much so that Labour leader Jeremy Corbyn’s pledge to abolish fees altogether – a move which while wiping away some obvious policy lunacy would also be a massive gift to the future wealthy – was widely credited with a big upswing in the youth vote which in turn was widely credited with denying Agent Teresa May a majority in last month’s election’s, despite the fact that Corbyn’s stance on Europe and Brexit is diametrically opposed to theirs.  And now that Corbyn no longer looks vulnerable to an internal coup, various Blairite Labour types are now busy re-writing the history of the last two decades to justify a 180 on a fees policy they either wrote or agreed with in spirit.

Which is where this Andrew Adonis article in last Friday’s Guardian comes in.  Adonis helped draft the ’98 and ’06 fee policy changes, and he would surely have agreed with the direction (if not the full extent) of the post-Browne Review changes.  Yet now, apparently, fees must be abolished.  Why?  Because the beautiful Labour vision, in which allowing tuition fees to rise “up to” £3,000 (up to £9,000 post-Browne) would create a functioning market in which institutions would compete like mad and multiple price-quality points would emerge was stymied by evil university vice-chancellors (i.e. Presidents) who “formed a cartel” in which all of them charged the maximum, thus stifling competition.

This is a strange and bewildering argument for two reasons.  First, in none of the three fee hikes was quality-enhancing competition a primary policy goal.  System expansion (and to a lesser extent, increasing per-student resources) was the primary goal in ’98 and ‘06; income maintenance in the face of swingeing public cutbacks was the goal in ’12.  The policies succeeded very well in both instance without damaging access for lower-income students.  Inter-institutional competition might have been a secondary goal in 2006 and a rationalization (though not a rationale) in ’12, but never the central aim.  To advocate dismantling policies because they didn’t meet some secondary goal is…bizarre.

Second, and more importantly, WHAT IN GOD’S NAME DID YOU THINK WAS GOING TO HAPPEN WHEN THE FEE CAP WAS LIFTED?  Higher education is a Veblen good, for God’s sake: in the absence of obvious measures of quality (rankings notwithstanding), consumers tend to judge the quality of education on things like cost and so cost and demand are not negatively correlated – in fact in some ways, higher costs drive higher demand (look at George Washington University’s fee policy and admission rates over the past couple of decades if you don’t believe me).  For Adonis’ competitive fantasy to have taken place, there would have had to have been institutions eager to signal that they might have lower quality by pricing significantly below the rest of the herd -and what university would want to do that?  Perhaps Adonis should name the institutions that he thought should have adopted a Walmart pricing policy.

Now to be fair, Adonis is hardly alone in his delusions about higher education competition.  England is one of those rare places where the term “neo-liberal higher education policy” actually makes some kind of sense.  There is a touching faith among policy makers there that a genuinely functioning competitive market is just one set of transparency tools around the corner.  League tables and key information sets didn’t create a functioning market in which quality is rewarded with greater pricing power?  Well, then, we’ll create the Teaching Excellence Framework (TEF), in which government will decide what quality is, and create a fee regime which will gradually create differentiated pricing by fiat.  Take that, Thorstein Veblen!

But the difference between Adonis and the TEF crowd is that the latter isn’t trying to roll back two decades of policy to ingratiate themselves with Jeremy Corbyn.  They aren’t running away from a policy which has been mostly effective just because they’ve suddenly realized students don’t like fees and debt (which of course is nonsense – they don’t pay up-front fees and for the most part they sign up to a 9% graduate tax/contribution not “debt” per se).

Does English fee policy need changing?  Of course.  The 2012 changes and subsequent amendments were as dumb as a bag of hammers.  But it’s a hell of a leap from that to “time to abolish tuition”, at least for someone with pretensions to being taken seriously in policy debates.  If that’s not something Adonis aspires to any more, that’s his business.  But the fact that this step is being considered seriously not just by Labour but by Tories as well should be worrying to everyone.  It means reasonable policy making is being thrown out the window for reasons of currying short-term favour with specific voter demographics.

In this policy field as in so many others, England appears to be losing its mind.

 

May 31

The Financial Landscape of Canadian Universities

I was updating some old charts on sources of university income for a presentation last week and they are kind of interesting so I thought y’all might want to have a look.

The first is the total income of Canadian universities over the past 35 years, in constant dollars.  What it shows is that total income has increased in a relatively steady fashion ever since the late 1990s (the slight spikiness of the last decade has more to do with uneven endowment income than anything else).  Total income for 2014-15 was around $35 billion, or more than double the figure of twenty years earlier, even after accounting for inflation.

Figure 1: Total Income of Canadian Universities, 1979-80 to 2014-15, in $2013

May 31 Fig 1 Total Income of Cdn Unis

But of course, student numbers have increased substantially over the past two decades.  In the late 1990s, we had about 650,000 university FTEs; in 2014-15 those numbers had increased to nearly 1.1 million.  So if we calculate income on a per-student basis the gains are less impressive.

Figure 2: Per-student income of Canadian Universities, 1979-80 to 2014-15, in $2013

May 31 Fig 2 Per student income

Income per student stayed roughly stable through the 80s and 90 at around $23,000 per student per year in constant dollars.  Income then began to rise sharply.  For most of the last decade the figure has hovered around $31,000, or about one-third higher than it was in the 1990s.

Now, this flies in the face of conventional wisdom.  Cutbacks are everywhere, right?  So how can there be so much money in the system?  Well, a few reasons.  The main one is that there actually hasn’t been much an increase in dollars available for operating funding.  On a per-student basis, government funds are now lower than they have been at any point this century, and if research funds are removed from the equation, then they are more or less lower than they have been at any point since these records began.  What has offset this is a rise in income generated from tuition (more on that in a second) and income from other sources (which is not the same as net income, so not all of this is available to the academic enterprise).

Now, a quick peek back at figure 1 shows that the big trend of the last few years has been a decrease in government funding (the blue area) being offset by an increase in student contributions (the green area).  That’s a real trend: after a decade of student contributions sitting at around the 20% mark, they have increased in the last few years to 25%.

Figure 3: Tuition Fees as a Percentage of Total Income, Canadian Universities, 1979-80 to 2014-15

May 31 Fig 3 Tuition Fees as Percentage

But before anyone goes around yelling about the evils of tuition fees, it’s worth remembering that tuition fee increases for domestic students over the past few years have been roughly inflation plus one percent.  The increases in tuition income per student, however, have been rising at about inflation plus three per cent.  How is this possible?  Simple.  International students and – to a lesser extent – increased enrolment in higher tuition programs.

This is the very simple lesson of the past half-decade.  Governments can allow public funding to erode quietly, keep domestic tuition relatively stable and institutions can make up for it all by enrolling more and more international students.  So far, it’s worked as a strategy, even if no one owns up to it actually being a conscious strategy.  But there are limits to this policy and eventually, something has to give.

It would be helpful if we started having out-loud grown-up discussions about what those limits are, and what we do when we hit them, rather than playing it all out in silence with nods and winks.  But that implies maturity among our politicians.  Based on their recent performances, I have my doubts.

May 24

The Rock

No, not Dwayne Johnson (though You’re Welcome is indeed a great song).   I’m talking about Newfoundland (and Labrador), where the Minister of Advanced Education, Gerry Byrne, has decided to pick a fight with Memorial University of Newfoundland (MUN).

Why, you ask?  Good question.

MUN is in a position somewhat like the one the University of Alberta faced a couple of years ago, only worse.  Up to about 2012, a decade of hydrocarbon-fueled provincial budgets made MUN a pretty fun place.  The provincial government drenched the institution in money, which allowed it not only to keep tuition low (this year, $2,759 vs. Canadian average of $6,373), but also allow MUN to receive over $40,000 per FTE student, higher than the average in any other province (note this is not to say that MUN’s income per student was higher than that of any other Canadian institution.  It wasn’t.  But it made the top ten).

But of course, we all know the oil boom party came to a halt a few years ago.  Since then, it’s been cut, cut, cut – as I noted back here last week, provincial spending on post-secondary education has fallen by a remarkable 21% over the last six years). Some may want to accuse the provincial government of savagery in its cuts, but to be honest I’m not sure what choice they had.  Outside of OPEC countries, few jurisdictions’ budgets were as geared to the price of oil as Newfoundland’s, so when the price started to fall, across-the-board cuts were pretty much inevitable and there wasn’t much prospect of higher education being spared much pain.

So, MUN had to face cuts.  But the problem with cutting budgets at a university is a little thing called tenure.  Salaries of tenured faculty eat up about 30% of most Canadian universities’ budgets.  Throw in benefits and you’re up to around 40%.  If someone tells you to cut 20% the budget, but 40% of the budget is essentially untouchable, that means the rest of the budget has to be cut by about one-third.  And I don’t care what business you’re in, that stings.

But wait a minute, you say.  Doesn’t Newfoundland have the country’s lowest tuition, both for domestic ($2,759 vs. national average of $6,373) and international ($9,360 vs. $23,589) students?  Actually, aren’t international students only paying about 40% of the cost of their education?  After all, students there can afford a fee increase: only Manitoba has a smaller percentage of students receiving student aid.  There must be some flexibility there, right?

Well, as it turns out, no.  That would of course be the right thing to do, but the government doesn’t want to take the blame for raising tuition for middle-class students (though it doesn’t seem to have a problem cutting student aid to the poorest by 78%).  It flirted with allowing MUN to raise fees last year, but the university could see through that trap and refused.  This year, it ran out of room to manoeuvre and so proposed a set of fee increases which fell harder on out-of-province and international students than they did on domestic ones.  Cue grumbling about administrative waste, inefficiency, and high administrative salaries, not just from the usual suspects internally but from the Minister himself, who clearly wants to pose as a defender of students against the mean old administrators.  First, he says, MUN needs to wring out every bit of efficiency possible out of current structure – to that end, he says, the university needs to go back to “zero-based budgeting”.

Now, I don’t know any specifics about MUN, but it’s a fair guess that after ten years of having a firehose of money pointed at them by the provincial government, the institution had probably grown flabby in some areas.  It would be against human nature if it hadn’t.   But here’s the thing about university overspending: when it happens, it’s like blowing up a balloon.  The extra funds don’t cluster in one area, they are spread pretty evenly throughout the institution; like a balloon, the institution looks the same only bigger.  Did you really need to hire six people in student services instead of five?  Did you really need that extra tenure line in economics?  Could our profs maybe make 5% less than those at Dalhousie rather than exactly the same?  So fair play to the Minister – there are almost certainly efficiency gains to be had.

But note that most of the “extra costs” listed above are salary costs.  That’s normal because most universities spend 70%+  of their money on salaries.  And a lot of these salaries are covered by collective bargaining agreements which are pretty tightly worded to prevent job losses   How do you zero-base budget in that environment?  You can’t.  At best you wait for people to retire and then restructure around those who are left.  The Minister knows all of this perfectly well and that the idea of zero-based budgeting in this context is as dumb as a bag of hammers, yet for some reason he pretends otherwise.

It’s not that MUN doesn’t need to keep a lid on costs and restructure.  It does, and is already doing it.  But without breaking collective agreements (is that what the minister wants?  he should say so), cuts of this magnitude are very difficult to implement.  What MUN needs is some breathing space, something that a rise in fees would provide.  The Minister should stop trying to pick fights with the university, and try working constructively with it to mitigate the problems that the 21% cut his government’s cuts have created.

 

May 19

Free Tuition, Sea of Japan Edition

To Tokyo, where the ruling Liberal Democrats are considering adopting a proposal from a small right-wing party (Nippon Ishin no Kai – roughly, Japan Restoration Party) to enshrine a constitutional right to free tuition.  This is not, it is safe to say, because of any principled attachment to accessible education – the party opposed free secondary education (which the Democratic Party implemented during its brief, mostly hapless, stint in government which ended five years ago) as recently as a couple of years ago, calling it “an unprincipled policy to buy votes”.

So what’s behind Shinzo Abe’s new ploy?  Two things.  First, Prime Minister Abe’s attempts to kick-start Japan’s long-stalled economy have had only middling success.  Free tuition would in effect be another Keynesian stimulus, freeing lots of family savings to be spent on other things.  Now, technically that doesn’t require a constitutional change, but some observers think Abe would not be able to get a free-tuition proposal worth 5 trillion Yen (C$60 billion) through a normal budgetary approval process; a constitutional amendment would make the spending automatic, thus circumventing the budget process.

But the bigger reason is much more Machiavellian.  Abe’s fondest political wish is to alter the Japanese Constitution, written in 1945 by US occupying forces, to remove Article 9, which bans Japan from having armed forces.  Though Abe himself if popular, this proposal is not: since World War II the Japanese have become about as peacefully-minded nation as one can imagine.  And so, Abe is trying to tie a constitutional amendment on free-tuition to a constitutional amendment on the armed forces to sweeten the deal.

A couple of points here.  First, this would be a policy reversal on a massive scale.  As R. Taggart Murphy noted back here Japan deliberately kept tuition, along with land values, high in the postwar period as a form of industrial policy (note: if you are interested in Japan and not reading R. Taggart Murphy, especially his magnificent book Japan: The Shackles of the Past, you’re doing it wrong).  High savings meant low interest rates, which gave Japanese industrialists access to cheap capital, which in turn gave them a big manufacturing cost advantage, and Japan rode this to economic success in the 1960s.  Basically, short term pain for long term gain. Now, Abe wants to reverse this process.

The bigger question, though – and not one I have seen discussed anywhere in the Japanese press – is how on earth one implements a free tuition promise in a country where somewhere between 75 and 80% of all students attend private universities.  Making tuition free at national (public) universities is a cinch, but – as Chile discovered a couple of years ago – trying to do the same with private universities without outright nationalization is kind of difficult.  Fees vary from one institution to another: how would each be compensated in a consistent manner?

There’s something similar going on the other side of the Sea of Japan, where new Korean President Moon Jae-in has promised to halve tuition fees.  This isn’t the first time Koreans have heard such a pledge.  In 2011, months of student protests forced then-President Lee Myung-bak to make a similar pledge; however, in the end nothing was done and fees stayed the same (fee levels in Korea are similar to those in Canada).  But again, it’s not entirely clear how once can effectively deliver on a fee-reduction pledge in a system which is dominated by private universities without partial or outright nationalization, which seems unlikely.

If I had to guess, I’d say Korea’s the likelier to implement policy change because a) I don’t think Article 9 is going anywhere, free tuition or no and b) the Korean government is just a lot better at getting stuff done.  But we’ll see.  Two stories to watch, for sure.

March 14

The Free Tuition Impulse

A few weeks ago I presented yet more evidence about why free tuition was mostly a subsidy for the rich and was unlikely, on its own, to do very much with respect to equalizing access (scroll through here and here if you really want to read me on this subject, though I imagine most of you are pretty familiar with my spiel by now). Someone asked me: “why don’t people like the Canadian Center for Policy Alternatives (CCPA), the Canadian Association of University Teachers (CAUT) and the Canadian Federation of Students (CFS) get this?  Surely they can read the evidence, why would they persist in touting a solution which is manifestly regressive”?

There are two possible answers to this question.  One is that in fact they have not read the evidence.  It exists, and they know it exists, but just haven’t read it.  As long as they don’t read the work which falsifies their notions, they can continue to hold these notions. To  paraphrase Upton Sinclair “It is difficult to get a man to read something, when his salary depends upon his not reading it”.

I actually got confirmation of this the other day on Twitter.  I was trying to get CCPA’s chief economist David MacDonald to explain why CCPA holds diametrically opposed positions on universal electricity subsidies (bad because they go disproportionately to the rich) and PSE subsidies (awesome, because they benefit the poor – which actually they don’t always, but that’s their story and they are sticking to it).  Basically, his two lines of defense were “it’s a public good” and “it doesn’t matter if most benefits go to rich because if we make education cheaper more poor students will go”.  The first, even if you assume he meant “there are positive externalities to higher education spending” (which is true) rather than “it fits economists’ description of a public good” (utterly false), is not a 100% sensible rationale as it arguably also applies to electricity to some degree (i.e. “there are positive externalities to people not freezing to death in their homes”).  But the second is ridiculous.  We know for a fact that tuition levels have almost nothing to do with access rates in part because targeted student aid actually works.  So I pushed him on it.  “Have you really read nothing about access problems in zero-tuition jurisdictions?  I asked.  Have you never looked at the rather substantive literature on finances and access”?  No reply.  Which, I think, tells you what you need to know.  People like David MacDonald and the CCPA simply do not want to know.  But that’s only half an answer: why don’t they want to know?  If they know that free tuition is ineffective as a remedy and regressive in distributional outcomes, why support it?  What other agenda is at play?

Well, a few years ago, when I was at a small event on Chile looking at the issue of tuition, I finally came to understand this problem.  A colleague and I were asking our Chilean counterparts: why do you want to make tuition free?  You must know it will make very little difference in access to higher education.  To which one of our counterparts replied:  the point is to get rid of the market.  The market must not decide in higher education.”

And so it is in Canada, I think.  The anti-tuition people are not fundamentally pro-access (though that is how they rationalize their position), so much as they are pro-state.  I suspect it’s partly due to a left-ideological stance which generally favours greater state involvement across the economy, but also partly to a naïve view about what would happen inside universities if the need to satisfy the market ever disappeared.  Such as: that public money would magically replace private money and continue to grow at a pace vastly outstripping inflation forever after.  Such as: nasty private sector Board member would be replaced by bureaucrats or more sympathetic public appointments or – better yet – make academics a majority on governing boards.   And magically, contrary to every bit of evidence from continental Europe, government running 100% publicly-funded universities would be less intrusive and meddling in institutional affairs than they currently are.

Once you realize that the free tuition argument is really a government vs. market argument and not a “how do we best equalize opportunities argument”, it becomes perfectly clear why evidence on the efficacy of tuition in promoting access doesn’t faze the usual suspects.  They don’t actually care about access.  They care about resisting the market.   The access stuff is just sheep’s clothing.

February 22

Notes for the NDP Leadership Race

As contestants start to jump into the federal NDP leadership race, it’s only a matter of time before someone starts promising free tuition to all across the land.  Now, I’m not going to rehash why free tuition is both regressive and undesirable (though if you really want to take a gander through the archives on free tuition, have a look here).  But I do think I can do some public service by talking about federalism and higher education, or rather: what the feds can and cannot do in this sphere.

The entire Canadian constitution is based around a compromise on education dating from 1864.  Upper Canada came to the Quebec conference with one overriding aim: representation by population in Parliament, so that their superior population would give them the most seats in Parliament.  Lower Canada agreed if and only if a second, local, and equal tier of government was created which would have jurisdiction over education and health, because over-their-dead-bodies were a bunch of (mostly) Orangemen going to get their hands on a hallowed set of (mostly) French catholic institutions.

There’s nothing in there that stops Ottawa’s ability to give money to individuals for the purpose of education.  This is why, despite all the sturm und drang, Quebec never put up a legal fight to the Canada Millennium Scholarship Foundation: Ottawa can give cash to whoever it wants, whenever it wants.  But when it comes to dealing with institutions, their ability to direct money to areas of provincial jurisdiction is subject to provincial veto.  The provinces accept (with limits, in Quebec’s case) that the feds can flow money to institutions for the purposes of academic research.  Hence the Canadian Foundation for Innovation.  They do not accept that it can send money to institutions for operating purposes.

(Historical footnote: there was a period where nine out of ten of them were prepared to accept this.  Back in the mid-1950s, there was a ruse in which the federal government handed tens of millions of dollars every year (a lot back then) to Universities Canada – then known as the National Conference of Canadian Universities and Colleges – which it would then distribute to institutions.  In theory this was a canny work-around to the constitution.  In practice, it stalled because Duplessis blew a gasket and told Quebec universities that if they touched a dime of that money, he’d take it out of their provincial funding.  Pierre Elliott Trudeau then wrote a wonderful article in la Cite called “Federal Grants to Universities” explaining why Duplessis was 100% right and St. Laurent was in kookooland, constitutionally speaking.  It’s a great article, read it if you can.  Anyway, this arrangement lasted into the 1960s, when the feds got out of this arrangement and moved into per-capita grants instead.  And that door is now shut: there is no going back through it.)

Politically, there is a fantasy shared by some on the political left that the federal government can simply re-acquire policy leadership in the post-secondary field by passing an act of Parliament and adding great wodges of cash to existing transfers… with strings attached.  I’ve previously (here) torn a strip off the idea of a federal Post-Secondary Education Act, but let me focus here specifically on the idea that a generalized fiscal transfer could actually affect tuition fees.  Let’s just imagine how that discussion would go.

Ottawa: we want to give each of you money so that you bring your tuition fees to zero.  Quebec and Newfoundland, your fees are about $3000, so we’ll give you that per student…

Ontario: Our fees are $7500 a student or so.  Fork it over.

Quebec and Newfoundland: Hold it.

I could go on here about the nuances of fiscal federalism, but basically that’s the problem in a nutshell (for my American readers: in some less disastrous timeline, Hillary Clinton is facing exactly this problem as she attempts to implement her free tuition promise for public universities). There are ways the federal government could bribe provinces into lowering tuition.  In fact, something like that actually happened in Nova Scotia as a result of the NDP-Liberal budget deal in the minority Parliament of 2005.  But you wouldn’t necessarily get them to lower by an equal amount, and you definitely wouldn’t get them to go to zero because they have vastly different starting points.

So, here’s the quick heads-up to all prospective New Democrat leadership candidates: even if it wanted to, the Government of Canada has no sensible way to eliminate tuition nationally.  If you do manage to form a government, this will be broken promise #1.  So don’t promise it.  Instead, think about ways to support students which don’t involve tuition.  There is a whole whack of things you could do with student assistance instead.  And the best part is: if you use student aid as a tool instead of tuition, you can channel aid to those who actually need it most.

February 08

New York, New York

With the Republicans in control of both Congress and the White house for at least the next two years, the fight for “free tuition” is moving to the state level.  And so to New York, where Governor Cuomo has proposed a form of “free tuition” for anyone attending the City University of New York (CUNY) or the State University of New York (SUNY) and whose family earns less than $125,000.  So what does this mean exactly?

Well, to be clear, it’s not the same kind of free tuition Hillary Clinton was offering back in the election campaign.  (There are many kinds of free tuition, as I noted back here; refresh your memory, if you like).  Clinton was offering – with scant details – a vision where with enough federal funds, states and their public university systems would agree to stop charging tuition fees to students from families below $125,000 in income (or, roughly, 80% of the student population.  That idea was always a little bit pie-in-the-sky: the impracticalities of it were well covered by Kevin Carey at the time.  What Cuomo is offering instead is a top-up plan to make tuition “net free”.  Basically, he’s going to offer students below the cut-off line whatever amount of grants it takes to equal the amount they pay in tuition.  This payment, to be known as an ‘Excelsior Scholarship” (really), is thus equivalent to tuition minus any grants the student is already receiving from the federal or state governments via the Pell grant system.

Now, you might be saying to yourself: hey, that kind of sounds like the Ontario model.  That’s good, isn’t it?  To which the answer is: yes, it is a lot like the Ontario model.  It’s income-targeted net free tuition.  Except a) in some respects it’s going to be more like New Brunswick, with a big step-function (link to: ) at $125,001 instead of a nice smooth slope of benefits like Ontario and b) the threshold for getting full benefits is ludicrously high and has perverse consequences.

What do I mean by perverse consequences?  Well, the thing is that for students at the low-income level of the spectrum, federal and state grants already equal tuition.  So literally none of the money involved here is going to help them.  The biggest winners in the Cuomo proposal are precisely those people who get no grants right now – basically from families with about $80K and up in family income.  And yet these are the people who have the least trouble going to college right now.

The question here is: if you have a couple of hundred million dollars to spend, why would you give it to a group of people who have no issue attending in the first place?  Why not put money where it will be most effective? Columbia University’s Judith Scott-Clayton suggests there’s good evidence that money going to institutions creates better access outcomes than simply limiting the price.

Even Chile, once very keen on full “gratuidad”, has belatedly come around to this realization.  For budgetary reasons, the government was forced to limit its recent introduction of “free” tuition to students from families in the bottom six deciles of income.  This summer, the Chilean Treasury Department published cost estimates for the program.  In its present state the fully-phased in cost of the program will be 607 billion pesos (about $1.25 billion Canadian, or about $950M American).  Adding each of the next four deciles raises the price by about 350 billion, or 58%.  That is to say, free tuition for everyone would cost over 2 trillion pesos, or over three times as much as it costs for the bottom six deciles.  That difference is equal to 1.5% of GDP.  And what would be the purpose of spending all that money?  The very fact that it costs so much is a reflection of the fact that participation from these groups is already so high they don’t really need government help.  What kind of socialist government prioritizes handing over 1.5% of GDP to families in the top four income deciles?

In short, while targeted free tuition makes a great deal of sense, it really does need to be targeted.  If targeting weakens, the program becomes more expensive and less effective.  New York’s plan, clearly, suffers from insufficient targeting.  Ontario’s plan has it about right.  But beware: the Premier occasionally muses about extending the plan to higher income groups and there’s certainly a chance such an idea will make it into the policy conversation as the provincial election approaches.  That way madness and much wasted public funding lies.

February 06

“Xenophobia”

Here’s a new one: the Canadian Federation of Students has decided, apparently, that charging international students higher tuition fees is “xenophobic”.  No, really, they have.  This is possibly the dumbest idea in Canadian higher education since the one about OSAP “profiting” from students.   But as we’ve seen all too often in the past year or two, stupidity is no barrier to popularity where political ideas are concerned.  So: let’s get down to debunking this.

The point that CFS – and maybe others, you never know who’s prepared to follow them down these policy ratholes – is presumably trying to highlight is that Canadian universities charge differential fees – one set for domestic students and another, higher, one for students from abroad.  Their argument is that this differential is unfair to international students and that fees should be lowered so as to equal those of domestic students.

It’s not indefensible to suggest that domestic and international tuition fees should be identical.  Lots of countries do it:  Norway, Germany and Portugal to name but three and if I’m not mistaken, both Newfoundland and Manitoba have had such policies within living memory as well.  But the idea that citizens and non-citizens pay different amounts for a publicly-funded service is not a radical, let alone a racist, one.  A non-citizen of Toronto wishing to borrow from the Toronto Libraries is required to pay a fee for a library card, while a citizen does not.  This is not xenophobic: it is a way of ensuring that services go in priority to people who pay taxes in that jurisdiction.  If an American comes to Canada and gets sick, they are expected to pay for their treatment if they visit a doctor or admitted to hospital.  This is not xenophobic either: the price is the same to all, it’s just that we have all pre-paid into a domestic health insurance fund but foreigners have not.

It’s the same in higher education.  American public universities all charge one rate to students from in-state and another to those out-of-state.  Not xenophobic: just prioritizing local taxpayers.  In Ontario, universities are not allowed to use their tuition set-aside dollars – collected from all domestic tuition fees – to provide funding to out-of-province students.  Irritating?  Yes.  Xenophobic?  No.

International students are in the same position.  Their parents have not paid into the system.  Only a minority of them will stay here in Canada to pay into it themselves.  So why on earth should they pay a similar amount to domestic students?  And it’s not as if there’s massive profiteering going on: as I showed back here, in most of the country international fees are set below the average cost of attendance.  So international students are in fact being subsidized; just not very much.

In any event, even if we were charging international students over the going rate, that wouldn’t be evidence of xenophobia.  Perhaps it has escaped CFS’ notice, but there is not a single university in the country which is turning away undergraduate students.  According to every dictionary I’ve been able to lay my hands on, xenophobia means irrational fear and hatred of foreigners; yet now CFS has discovered some odd variant in which the xenophobes are falling over each other to attract as many foreigners as possible.

My guess is that most people at CFS can distinguish between “xenophobia” and “differential fees”.  What’s happened, though, is that part of the brain trust at head office simply decided to use an emotive word to try to stigmatize a policy with which their organization disagrees.  That kind of approach sometimes works in politics: just think of the success Sarah Palin had when she invented the term “death panels” to describe end-of-life counselling under American federal health care legislation.

But effectiveness is not the be-all and end-all of politics.  Sarah Palin is a cancerous wart on democracy.  You’d kind of hope our own student groups would try to avoid imitating her.

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

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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

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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

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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

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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.

October 03

Peas in a Pod

A few weeks ago, there was an absolutely hysterical story on CBC about a Fraser Institute report on carbon taxes.  You can read the article for yourself, but the argument was basically this: carbon taxes are bad because they would have a disproportionate effect on people in lower income brackets.

Assuming you believe the Fraser Institute actually gives a rat’s hairy behind about people in lower income brackets, this is not an entirely stupid point; multiple studies in the US have come to this conclusion. But it depends quite a bit on the design of the tax: if you use part of the revenue to fund lump-sum transfers to poorer families to offset the effects of the tax, one can actually develop a tax which is relatively progressive (see this paper from Resources for the Future for some simulations on the incidence of different types of carbon taxes).  So yes, if you design a bad carbon tax, it probably will have regressive effects.  But design a good one and you’re off to the races.

You may at this point be asking yourself “why is Alex droning on about carbon taxes in what is ostensibly a higher education blog”?  Fair question. And the answer is: because the Fraser Institute’s argument about carbon taxes is EXACTLY the same as the CFS/CAUT/Usual suspects on the left argument against tuition.  Fees are seen as regressive because they represent a higher proportion of family income to the poor than the rich (see here for example)

Now, if we believe that CFS and the usual suspects on one side and the Fraser Institute on the other both actually believe their own argument, then we have a possibility of some radical political re-alignment in Canada.  The hard left should oppose carbon taxes, the hard right should oppose tuition fees – after all, who would want to hurt the poor?

But, as you may suspect, that isn’t the whole story.  In precisely the same way that the Fraser Institute assumes away any sensible attempt to hold the poor harmless for a carbon tax through rebates or transfers, the usual suspects on the left completely ignore grants and scholarships as an offset to tuition fees, and so exaggerate – and occasionally entirely misrepresent – the actual distributional impact of net tuition.  One of the reasons I was so pleased last year about the Government of Ontario’s decision to make net tuition “free” for low income students was not so much because it improved students’ welfare (net tuition was already less than zero for many thousands of students), but precisely because it makes this rhetorical BS harder to maintain.

Anyway, even if students grants or energy tax rebates didn’t exist, objecting to putting a price on something because any non-zero price “impacts the poor more than the rich” is insane.  You could object to every product in a market economy that way: beer, popcorn, baby formula, pistachios – they all “impact the poor more than the rich”.  The point is to raise incomes at the bottom to help people purchase more goods at less of a burden, not get rid of the price mechanism.  You’d think that a right-wing pro-market think-tank might actually grasp that.

But then of course, said right-wing think tank does understand this.  Their argument is an argument of convenience and not conviction.  In the service of defeating carbon taxes, no argument is too stupid to make.  As is the case for the usual suspects and their hatred of tuition.  Peas in a pod.

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