Higher Education Strategy Associates

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January 07

Student Aid in Canada: Tectonic Shifts Ahead

The details of the Canada Apprentice Loan, announced in last year’s federal budget, are now public. It’s a straight $4000 that any apprentice can get, once per technical training period for up to five technical training periods for a total of $20,000 per apprentice. And as we predicted in our 2014 Budget Commentary, the loan is in fact going to be completely means-test free. An apprentice could be making $18/hour all year, plus about $1800/month on EI for the duration of the training period – that is, about $35,000 per year – and the government is still prepared to hand you a $20,000 loan, interest free for the duration of the apprenticeship, repayable on the same basis as an ordinary student loan. Because skilled trades.

At this point you’re probably asking yourself: why give loans to apprentices earning $35,000/year but deny them to community college students earning $15,000/year (which is more or less where loan eligibility runs out) via part-time jobs? If a learner’s income or current standard of living is no longer a barrier to receiving financial assistance, why not make student aid universal, the way it is in Australia or the UK or Sweden? Why not just open student loans up to anyone?

Student leaders will hesitate before taking up the cudgels on this one, since many are pretty heavily invested in the “loans = Satan” narrative. But on the other hand, eliminating the means-test will certainly benefit at least some of their members. So it seems likely that at some point this will become one of their demands.

Given that it’s an election year, this might come about fairly quickly. Easier loan terms could be on any party’s manifesto. My personal bet is the Liberals will pick this one up first because they seem to find it so hard to resist gimmicky education platforms that benefit the upper middle-class, but there’s no ideological bar for any party to take up this idea. And precisely because you could see almost any party picking up this idea, it’s a dead certainty that at some point one of them will. It’s inevitable. And once that happens, big changes will be afoot.

The problem is that the costs associated with a move like this could be high. Alberta moved to eliminate parental contributions a couple of years ago and their loan portfolio has increased by something on the order of 50%. That’s OK in an essentially loans-only system like Alberta’s, but try that in a system with more substantial grant or remission amounts and money starts going out the door pretty fast. Most provinces wouldn’t be able to match that kind of generosity, and we could see student loans become yet more complicated with different federal and provincial need assessment mechanisms in each province. Even the feds might find it too rich eventually, and the worry would be that other programs for the needy would be cut in order to maintain this upper middle-class benefit.

There is a way to square this circle, however. And that is to apply a very simple principle: if a loan is universal, it should not come with interest subsidies. Subsidized loans to poorer students? No problem. But subsidized loans to all comers? That way madness lies.

If that simple principle is adopted, we could still preserve a decent system: means-tested subsidized loans for those who need them, and universal non-subsidized loans for those who want (but probably don’t need) them. That way, we would solve the problem of how to help the occasional student whose parents have high income (and hence disqualify a student from receiving student loans) but who won’t contribute to their kids’ education.

It’s probably not the best way to spend new aid dollars – you would probably get more bang for your buck spending that money on aid to First Nations students, for instance. But it’s also not a terrible idea, provided that the loans are unsubsidized.

December 12

End of Term

Hi all.  Today’s blog will be the last for 2014.  Normal service will resume on Monday January 5th.

End of term is always a time for stick-taking.  And so I’d like to offer a few thoughts on what’s happened in 2014.

First, the positive stuff.  I think we should note an enormous and fairly positive shift in the tone of the discussion regarding education and the labour market.  The fact that I was not able to offer a “worst back-to-school” article this year is in large measure a reflection of the decline in people talking absolute crap.

In 2013, it was all sociologists vs. welders, why weren’t universities producing the “right” kind of graduate, and why couldn’t we all be more like Germany?  British Columbia, unfortunately, is still largely in the grip of this nonsense, but in the rest of the country this kind of talk has diminished substantially.

Jason Kenney himself seems to have understood that while Germany’s interesting, you can’t get there from here; moreover, the main reason you can’t get there from here isn’t because of recalcitrant institutions, it’s because Canadian employers are genuinely retrograde when it comes to training.  That’s progress.

Second, I’m starting to see real evidence that institutions are getting serious about reining-in costs.  More institutions, for instance, are introducing Responsibility-Centred Budgeting, which will gradually align incentives within the university towards fiscal balance.  And at Windsor, we’ve seen the first example of a university really taking a hard line with extravagant salary demands.  So there is some hope.

But there’s still more to be done.  I don’t see much sign yet that most institutions are even trying come to grips with the Arts problem(s); on the contrary, in many places the strategy seems to consist of heroically ignoring the problem.  That’s bad.  So, too, is the continued impoverished state of our discussion on costs & affordability, and their relationship with access. This discourse remains in the knuckle-dragging, mouth-breathing stage largely because “progressive” groups like the Canadian Centre for Policy Alternatives and the usual suspects in the student movement insist on pretending subsidies either don’t exist or have no effect.

We’re doing well recruiting international students, but I don’t think we’re doing all that well by them once they’re here.  I’m convinced one institution somewhere is going to sleepwalk into some kind of reputation-shredding catastrophe soon for precisely that reason.  And finally, there is still disappointingly few signs of a sustained, useful dialogue between higher education and employers.

Closer to home at HESA Towers, we’ve had an excellent year, and I’d like to thank my whole team here who have all worked incredibly hard.  My particular thanks go to Jacqueline Lambert, who does an awful lot of the data work for this blog (what, you thought I did all the crunching myself?).  It’s a privilege to work with a team this good, just as it’s a pleasure to be writing about a sector filled with so many hardworking, dedicated people.

But I’ll leave the last word to you, readers.  How has the blog been this past year?  Better than before? Worse?  Anything I haven’t been writing about, but should?  Anything I have been writing about, but shouldn’t?  Please let me know in the comments below, or email me directly.

Happy holidays.  Rest well, and come back strong in January.  Na’zhdravie!

October 24

Scenario Planning Outside Ontario and Quebec

After a one day hiatus, we’re back to the topic of scenario planning.  You’ll recall that on Wednesday, I showed some pretty pessimistic projections for what could happen to university financing in Quebec and Ontario.  Today, I have some better news for people in seven of the eight other provinces: your futures aren’t nearly so disastrous.

When scenario-planning at the provincial level, four things matter:

1)      The forecast for nominal GDP.  Over the long-run, government budgets tend to remain pretty stable with respect to the size of the economy.  And within the budget, the share to any given field of expenditure – with the signal exception of health – stays pretty constant, too.  So, a rough rule of thumb for what’s going to happen to government income is: it’s going to stay in-line with projected nominal GDP growth.  For this reason, it’s much better to be a university in a province like Alberta, where average nominal GDP growth over the period 2014-2016 is expected to be about 5.5%, than it is to be Memorial in Newfoundland, where the projected figure is just 2%.  In most provinces, though, the outlook is between 3 and 4%.

2)      Deficits. The only reason growth might not be equal to nominal GDP growth is if there’s a deficit to get rid of.  Here, there’s good news: BC, Alberta, Saskatchewan, and Newfoundland are essentially deficit-free.  Universities in other provinces are going to find the going somewhat tougher.

3)      The percentage of total income coming from fees.  In all provinces, nominal increases in fee income is outstripping increases in GDP; in other words: fees are becoming more important everywhere.  Obviously, this is better news for provinces that are already relatively fee-dependent than for those that are not; a 5% increase in fee income means a lot more in Nova Scotia (where fees make up almost half of all income) than in Newfoundland (where they make up about 15% of income).  In this sense, the Maritime provinces and BC are in better shape than the rest of the country.

4)      Whether salary mass is rising faster than total income.  If so, you’re in deep trouble.  It’s not true in most provinces; but it’s clearly been the case both in Alberta and Newfoundland over the past few years.

If we simply multiply out expected increases in nominal GDP, and assume that current trends for tuition revenue growth remain stable, we get the following projections for income:

Figure 1: Projected Real Annual Operating Income Increases, Based on Stable Increases in Tuition Revenue and Government Revenue Increases Based on Nominal GDP














(*indicates a province with a significant budget deficit, meaning institutional income will likely be lower than indicated)

Alberta looks set for a good few years, with real income increases of 4.5% or more, while Saskatchewan and BC look set for annual increases of 3%, or so.  Manitoba and the Maritimes are, in theory, set for increases of 2-3%, but given that all four provinces are carrying deficits the strong likelihood is that their governments will not increase their budgets at the same pace as nominal GDP, and so actual results will be somewhat smaller.  Newfoundland, where projected economic growth is shaky, and the university has little in the way of tuition income to fall back on, looks in deep trouble.

Figure 2 shows what happens if current rates of salary growth are subtracted from growth rates in income.  Provinces with positive numbers can – assuming their income numbers hold up – afford current rates of salary growth, while provinces with negative numbers cannot.  Nova Scotia and New Brunswick appear to have the most sustainable numbers, but recall that both their governments have deficits to eliminate, so in fact their position is likely not nearly as good as this graph makes it seem.  Prince Edward Island and Manitoba are headed for trouble, and Newfoundland’s prospects resemble the Titanic.

Figure 2: Difference Between Annual Projected Percentage Rate of Operating Budget Growth and Current Annual Percentage Rates of Salary Mass Growth














(*indicates a province with a significant budget deficit, meaning institutional income will likely be lower than indicated)

To sum up:

i)        Generally it’s better to be in the west than the east

ii)       Memorial University in Newfoundland is in for one heck of a shock pretty soon.

iii)     Most provinces appear to have relatively stable finances if you assume continued growth in tuition revenue, which implies continued international student numbers.  It’s not at all clear how stable an assumption that is.

We’ll wrap-up this topic on Monday, so stay tuned.

June 12

Arigato, Sayonara

With election night, the World Cup getting under way, and tomorrow being Friday the 13th, it seems like as good a time as any to shut down the blog for the summer – I apologize to those of you who were hoping for one last rant on election results (though you can probably catch my thoughts over on twitter, where my handle is @AlexUsherHESA).  Starting Monday, this blog will be on a once-a-week schedule until August 25th,  when normal daily service will resume.

We’ve got an interesting program of research going on at HESA Towers over the summer, and we’ll have some very interesting material for you come the Fall, especially around internationalization.  I’ll be spending a  bit of time Down Under to get the skinny on some of the big changes currently happening there in higher education, and will report the findings back to you.  And we’ll have some new work on affordability that I think you’ll rather enjoy (or, at least those of you who don’t hate-follow me will enjoy it).

But before I sign off, two very quick requests:

1)      My summer reading project is to read as many institutional histories as possible (thrill a minute at HESA Towers, never a dull moment).  If you know the name and author of your university or college’s history, could you send them my way so I can find a used copy online?

2)      You guys read my stuff every day (well, most days, anyway).  Are there subjects you want to hear more about?  Less?  If you can take a couple of minutes to let me know, I’d really appreciate any feedback you can take the time to provide.

Have a great summer, everyone.

April 23

The Implications of Net Zero Tuition

Over the past two days, I’ve been explaining how Canada spends as much on non-repayable aid as its PSE institutions collect in tuition fees for domestic students – meaning, in net terms, that Canadian students pay zero tuition.  Today I want to explore the implications of this.

Let’s start with what it doesn’t mean: it doesn’t mean that many people are going to school for free.  All this funding is pretty lumpy. Many Quebecers and Newfoundlanders are receiving significantly more money than they are paying – ditto First Nations and students in Quebec CEGEPs.  On the other hand, education is pretty expensive in Alberta because of the way the provincial government chose to slash student aid funding at the outset of the recession.

Another group also making out pretty well is graduate students in non-professional fields.  They make up about 10% of the post-secondary student body, yet with their hold over the bulk of government and institutional merit scholarships, and their being nearly all independent students (and hence receiving more generous student aid packages), they are likely taking home something like 25-30% of the entire non-repayable available aid (of course, one could make the case that money for graduate students shouldn’t really be thought about in the same way as student aid, since it’s really support for research.  There’s no hard-and-fast line here, but it’s worth a debate).

But here’s what it does mean: at over $7 billion in aid, 90-95% of it going to full-time students, we are spending something on the order of $5,500 per full-time student in non-repayable aid – and that includes those full-time CEGEP students who are paying $0 in tuition.  Pure and simple, it makes a mockery of the idea that there is some sort of generalized affordability crisis.   Nobody – absolutely nobody – is paying sticker price for tuition, and a substantial proportion of students are paying nothing at all (or very close to it).  The next time someone (say, the Canadian Centre on Policy Alternatives, for instance) tries to peddle an “affordability crisis”, they need to be refuted vigorously.  Insufficient student aid money is not the problem.

What is a problem is that not enough of this money gets to the right students.  Sometimes, this is because the money is geographically restricted (e.g. too much aid in Quebec, not enough in Alberta), but the main reason is that our tax credit system, which puts $2.5 billion in the hands of students and their parents each year, is a colossal waste of potential.  Re-distributing that money more according to need (as Quebec, in the one decent thing to come out of the Red Square movement, did back here) is long overdue as a policy measure.

That some students need extra funds is not in doubt, as all serious observers of Canadian higher education know.  What separates the serious people from the cranks and the dilettantes, however, is precisely the ability to believe this without concluding that the problem is a generalized one, or that the only solution is to freeze or reduce tuition.  Net zero tuition makes that position completely untenable.

April 09

A *Tiny* Statscan Mistake on the National Graduates Survey (NGS)

OK, everyone. Gather ’round for a kind of mind-bending story, which totally invalidates much of what I was saying earlier this week about the NGS.

So, NGS is a two-year follow up of graduates, done every five years. So, the 2002 survey looked at the class of 2000, 2007 surveys looked at the class of 2005.  Now, as I noted yesterday, for reasons unknown, Statistics Canada chose to wait until 2013 to do its follow-up of 2010 graduates.  My strong suspicion is that it was because Employment and Skills Development Canada (ESDC) was yanking their chain on funding for so long that they missed their 2012 window, but I don’t know for sure (NGS, like many surveys, isn’t actually funded by Statscan – it’s paid for by an Ottawa line department.  Yes, it’s ridiculous, but that’s the way Ottawa works.)

Now, waiting a year creates a problem because it screws with the time-series.  If the 2010 class is interviewed  three years out, it’s basically useless because you can’t legitimately compare it with the 2005 or data.  But of course Statscan’s not stupid, I thought to myself: they’ll just ask the questions with respect to a period twelve months earlier and get comparable data that way.  Because who in their right mind would deliberately screw with a time-series that goes back 30 years?

And when I asked someone about this a few months ago, that was more or less the answer I got – the survey would be changed to adjust for the difference in timing.  So when the first NGS release tables appeared late last week from Statscan, and they were labelled “2012 labour force activity of 2010 graduates”, I naturally assumed – hey, Statscan’s done the right thing.  And so I published it.

Then, yesterday AM, we received an email from Statscan.  It contained a new set of tables, with a note saying that while the data they published April 4th was correct, some “mislabeling” had occurred, and that I should destroy the earlier data.

Turns out that what Statscan actually published was data from 2013 data – that is, three years after graduation, not two.  This made me review the 2013 NGS instrument and realize that their re-adjustment of the instrument to account for the gap in surveys was half-assed at best. With a little bit of fooling around with the data, it might be possible to get numbers on employment and income two years out – but since Statscan has declared that it’s not going to put out a Public Use Microdata File (PUMF) for NGS, that’s essentially impossible for anyone to do independently.  Meanwhile, the only data Statscan’s giving out for free is data that is completely non-comparable with any other data in the survey’s 30-year history.

Bra. Vo.

The upshot is: ignore anything you read about comparative-over-time graduate labour market outcomes from NGS from me or anyone else.  Thanks to Statscan (and possibly ESDC), it’s all worthless.

If there were ever a time to just cut funding to NGS and replace the whole thing with administrative data linkages, it’s now.  The argument for keeping it on the grounds of it being a great time-series just disappeared.

March 21


If you’re ever bored and playing around with CAUBO data (what do you mean, “no else does that”?) you may have noticed that in 2011 there was a significant (roughly 3%) decrease in university expenditures – which is weird, because no province significantly reduced funding to universities that year, and universities never voluntarily reduce their spending.  So what the heck is going on?

The quick answer is: the Knowledge Infrastructure Program (KIP) ended, and so institutions lost a nice little source of income that they could devote to making newer, nicer, and more energy-efficient buildings.  But a deeper look at some of the numbers on capital spending makes for interesting reading.

Here’s the overall story on capital expenditure at Canadian universities:

Figure 1: Capital Expenditures at Canadian Universities, 1992-2011, in $2011
















Obviously, this graph shows the enormous effect of KIP – an enormous two-year spike in spending in 2009 and 2010.  But to me, the more interesting thing is the long-term increase in capital spending.  Back in the 1990s, we basically kept capital spending at around a billion dollars/year.  Come the millennium, we changed tack.  Over the next three years, capital spending jumped by 150%, nation-wide, and stayed there.  Part of that was of course the result of Ontario going on a double-cohort-related construction spree.  But it wasn’t just Ontario – remember that enrolments went up by about half between 1997 and 2009.  And of course, from 1999 onwards, Canada Foundation for Innovation money started flowing into institutions across the country to upgrade institutions’ research infrastructure.

Here’s what happened to spending in the four big provinces which make up 90% of the country’s post-secondary expenditures:

Figure 2: Capital Expenditures at Universities in Ontario, Quebec, British Columbia and Alberta, 1992-2011, in $2011














Figure 2 shows that although the big increases were in Ontario and Alberta; Quebec stands out for having a policy of very steady investment in capital.  It had a one-off increase in 2000 (one assumes this is mostly due to CFI), but other than that the expenditures were quite stable.  That means Quebec wasn’t a stand-out performer in 2010, but it also means that for most of the 90s, Quebec was outspending Ontario 2:1 (and thus it probably didn’t have the same kind of infrastructure deficit going into the 2000s).

But maybe the mind-blowing thing here is what happened in Alberta post-2000, which is best seen by isolating the later years in the previous graph and indexing provincial spending:

Figure 3: Capital Expenditures at Universities in Ontario, Quebec, British Columbia and Alberta, 1999-2011, indexed to 1999














Figure 3 illustrates two extraordinary spikes in spending: BC, where capital spending quintupled between 1999 and 2005, and Alberta, where capital spending triples in just three years after 2006.

The long and the short of it is that in the 2000s, for a variety of short-term reasons (double-cohort in Ontario, having more money than God in Alberta), capital expenditures settled at a level about 2.5 times where it was in the 90s.  Can we stay at this level, or are we doomed to give in to short-termism and start diverting this money to shorter-term priorities?  Certainly, a number of faculty unions (particularly in the Atlantic) have been making the case that capital expenditures should be re-directed to higher faculty salaries.

One can’t predict the future, of course.  But these figures really do remind you that the mid/late 00s were the Golden Years for Canadian higher education financing.  Makes you wonder how many people now feel silly for not having seen it at the time.

February 12

HESA’s 2014 Federal Budget Commentary

Hi all,

The team at HESA towers was up late last night putting together – as we do every year – a review of the Federal Government’s Budget measures, as they relate to higher education and training.  Far from being the snooze-fest many had predicted, it turned out there was a whole bunch of crazy stuff in there, from vast but slightly hazy research funds, to largely inexplicable apprenticeship loan programs.  You can read all of our budget coverage, HERE. Still not 100% sure what to make of it all, to be honest: but we’d love to hear  your reactions.




November 29

Unorthodox Dropout Statistics

Every once in awhile, some policy-maker or journalist gets their knickers in a twist about dropout rates.  And whenever that happens, people start looking for data.  Which, in this case, basically doesn’t exist.

Institutions have their own non-completion data, but since lots of people switch institutions for one reason or another a non-complete doesn’t equal a “dropout”.  Our national unit-record system – Statistics Canada’s Post-Secondary Student Information System – is supposed to be able to solve this precise problem, but for reasons too boring to relate is unable to do so, except in Atlantic Canada (see my colleague Ross Finnie’s report on this, here).  Quebec, Alberta, and BC all have provincial/regional data systems in place to look at this, but to my knowledge none have done so.

There is, however, one data source that allows people to track dropouts over time; namely, the Labour Force Survey (LFS).  If you simply take all Canadians between the ages of 25-34 who are: a) not in school; and, b) indicated that they have “some postsecondary education”, and divide them by the total number of Canadians aged 25-34 who are: a) not in school; and, b) either have a degree, or indicate that they have some postsecondary, then what you get is an estimate of the percentage of 25-34 year-olds who are dropouts from the postsecondary system.

This method obviously doesn’t provide precise year-to-year estimates of dropouts; some of the 34 year-olds in the numerator might have dropped-out as many as 15 years previously, for instance.  And due to the nature of the data source, one can’t derive separate rates for universities and colleges.  But it does provide a sense of general trends over time in non-completion.

So, what does the evidence say?  Check out the figure below.

Figure 1: System-wide Non-completion Rates, 1980 to 2010












Source: Labour Force Survey

It turns out that the percentage of former postsecondary students in the 25-34 year old population who dropped-out of school has declined steadily over the past three decades, reaching an all-time low of 9.4% in 2010. This is almost a 50% decline from the 1990 value of 17.1%.  While a definitional change means that pre-1990 data is not directly comparable to post-1990 data (hence the permanent downward shift indicated by a dotted line in the Figure above), it appears that the decline began sometime around 1986 – prior to that date, the dropout rate hovered fairly steadily at just under 25%.

A wise man once said that if a result is big enough, even a really bad experiment will pick-up that result.  It’s the same thing here: using LFS to look at dropouts is, at best, a third – or fourth – best option.  But the result is unequivocal: dropouts have been going down for nearly three decades.

July 29

Looking Forward to 2017-18

Last week we looked at likely paths for government funding in the big four provinces.  Today, I want to look at how that might translate into actual changes at institutions.

The outlook for government funding, if you’ll recall, looks like this:

Figure 1 – Nominal Non-Health Dollars Available by Province, indexed to 2013.


But governments only account for about 54% of total revenue.  Students make up 39% and “other” makes up about 8%, so to look forward, one needs to look at these other two sources as well.

It’s hard to discern a historical pattern for “other revenue” (mostly because endowment income rises and falls like a yo-yo), so let’s just assume for the sake of argument that it will grow at 4% for the next few years.  Tuition is more predictable:  Ontario has locked in 3% annual increases for the foreseeable future, while Quebec’s tuition will be linked to inflation (roughly 2%).  Western provinces are more volatile on policy, but a reasonable guess is that BC’s path will be similar to Quebec’s while Alberta, being more populist and with cash to spare, will average something just below inflation (say, 1% p.a).  Of course, aggregate tuition dollars have very little to do with average tuition limits, but for the moment let’s assume no increase in student numbers.

So, add all those dollars together and what do we get? 

Figure 2: Net Income Projections for Post-Secondary Education, by province, to 2017-2018


That’s a little better, no?  See what a little tuition can do?

Still, this is only income. We still need to look at expenses.  Here, let’s assume that universities are able to keep their operating budget increases to 3% per annum (tight but do-able).  In that case, assuming no enrolment growth, institutions in Alberta should have a very small surplus in 2017, while Ontario institutions will face a collective deficit equal to 11% of expenditures, or around $950 million.

Figure 3: Budget Gap Projections, to 2017-18

Now, clearly, that Ontario scenario can’t actually happen; long before institutions get to that point, they will cut spending and find more revenue.  What figure 3 really represents is the size of the fiscal gap institutions will need to close over the next few years.

There are many ways to fill such a gap, but the main ones are wage freezes, hiring freezes and increased international enrollments.    But $950 million is a big gap to fill.  By my back-of-the-envelope reckoning, it’s equivalent (roughly) to a combination of a 4-year pay freeze and a 50% increase in international students.  Do-able but painful.

There is of course a very simple way to make most of these problems go away: just give institutions a little more room on domestic tuition. Unfortunately, that’s probably too sensible a solution for our times.

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