HESA

Higher Education Strategy Associates

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January 09

Welcome 2017

Sometimes New Year’s messages write themselves.  I mean, it can’t be as bad as last year, right?

The first half of this year is going to be dominated by two issues: Science and Skills.   This month, former University of Toronto President David Naylor will release his review of the Government of Canada’s Science Policies.  There were a lot of high hopes for this report, some of which are likely going to be disappointed when it actually comes out.  Too many people bought into the whole “Harper War on Science” thing and assumed that a new government and a new broom would clean things up and we’d go back to the peaches and cream days of the early-2000s.  The fact is, the problems in Canadian Science run a lot deeper than that.   I have no doubt the report will lay bare how complex the problems are: the question is whether the government is prepared to take the necessary steps to deal with it (though canning CIHR President Alain Beaudet was a hopeful start).

We’re also going to hear a lot about science through the Minister for Innovation, Navdeep Bains.  I’m going to go lightly on this one because I suspect I will have to weigh in on this repeatedly over the course of the next couple of months.  But basically it sounds increasingly like our “innovation” policy is merely a pro-tech industrial policy.  The logic, I think, is contained in a recent David Wolfe piece in Policy Options  and goes something like this.  A) we need a high tech economy, which means adopting tech more intensively throughout the economy (so far so good), B) therefore let’s spend a lot of money on the ICT industry (wait, what?  How does that follow?)  and C) here are a bunch of things we can do to boost the tech industry (all of which are sensible if you accept point B, less so if you don’t).  Universities will no doubt be pleased because there will be money available for tech investments, but as innovation policy it sure looks like a mess.

On the skills side, there are three piece to watch.  On the innovation agenda, skills showed up unexpectedly as a fairly large theme in their consultations.  But these aren’t “skills” in the Tory sense of “we need more apprentices”; it’s much more about having specific highly-qualified personnel in various science and tech fields.  For the most part that’s going to be handled by immigration, but the government is making (frankly idiotic) noises about “more STEM graduates” (even though there’s little evidence that this is a problem) and more coding in schools.  This is part of a long-standing problematic bias in Canada public policy: any time we have a problem in some area, we assume it’s a quantity problem not a quality problem.  This needs to change.

There are two other skill-related pieces coming in the next couple of months.  The first is that the Advisory Council on Economic Growth is meant to have a piece out fairly shortly on skills.  It was supposed to be out in late December, but for some reason it was yanked and delayed until January (one possibility: the initial set of recommendations didn’t test well among the people the government trusts on economic issues).  The second is the Expert Panel on Youth Employment, chaired by Vass Bednar.  I have literally no idea what the  latter will say: there are not a lot of clues in the panel’s interim  report, but it seems certain to bring yet more attention to the skills issue.  Possibly, all this adds up to some early actions on skills in a February budget but that may be a little rushed.

That’s the big stuff for the next couple of months.  On top of that, there will be the usual shenanigans on various campuses (it’s budget season, and that’s always good for some laughs).  The British Columbia election is scheduled for May 9th, and presumably that will be an occasion for opening up the goodie box – we’ll see if higher education gets included.  Globally, the big issues will remain Brexit and its ramifications for UK higher education, and China’s attitude towards foreign higher education.

You’re now completely ready for the new year.  Onwards and upwards!

December 16

Farewell 2016

So another year ended.  This one, few will mourn.  Despite their medieval roots, universities fundamentally serve the enlightenment; and the enlightenment, with is emphasis on toleration, progress, science, empiricism, was under attack this year as in no year since 1945.  Though higher education itself was not the target of populists’ wrath, the part of the culture we inhabit certainly was.  And that could make life pretty uncomfortable over the next few years.

I wrote back here  about how the revolt of the mid-west in the US election was about nostalgia for the days when you didn’t need an education to get a full-time job (one can also make a similar argument about the Brexit vote) .  That is, in part at least, an indictment of the education system.  A significant fraction don’t attend because they hate being in school; another significant fraction don’t attend because they don’t think it provides value.  One doesn’t have to accept wilder propositions about the system being “broken” for those two facts to prompt serious thought about how well the education system as a whole is doing its job.

Some have posited that this new revolt of the masses is about inequality and social mobility.  Higher education is having some problems in this respect, especially in the United States and the UK.  And I don’t think there is much doubt that in America a new form of hereditary upper caste is emerging from increasingly stratified education systems feeding students into (see Lauren Rivera’s quite excellent Pedigree).  Canada, thank God, does not face this problem in so virulent a fashion.  As Joe Heath pointed out a couple of years ago, the top three Ivy League schools enrol about 0.1% of all undergrads nationally while Canada’s top three schools enrol about 14% of all undergrads nationally.  Our bottle-necks are thus wider and that spares us the kind of vicious competition for places in top institutions the way we see south of the border.  But let’s not get complacent: there is still a lot more we could and should do in terms of ensuring fair chances for students from non-traditional background.

But there’s also an issue about economic growth here.  The fact is that part of the social bargain since the Second World War has been about delivering inclusive growth.  Now we haven’t always been very good at that – certainly in the eighties and early nineties there was growth that was perhaps the opposite of exclusive (average and median pay fell in this period, before picking up in the mid-90s and staying positive ever since).  The problem right now, is that our economies simply aren’t delivering growth.  And sure, part of that is the huge post-financial crisis debt hangover in the US, and part of it is due to changing demographics, and part of it is due to a whole bunch of other reasons around having picked the low-hanging fruit of productivity gains (do read Robert Gordon’s Rise and Fall of American Growth over the hols if you get a chance).  But universities the world over have grabbed a whole lot of public money over the past couple of decades by selling the public the notion that that research = productivity = growth.  And so it’s reasonable to ask: where’s the growth?  Now, sure, there’s no good counter-factual that allows us to look at what growth would have been like had investments in research not been made.  Maybe things would have been worse without it.  But the fact that there isn’t a slam-dunk positive story that everyone can recognize makes the sector vulnerable.

The populist case against higher education isn’t that hard to construct.  Universities spend billions on research without much proof that it leads to growth.  Spots at elite institutions tend to go to children of the elite.  Full-time academics are mostly in the top 10% of income distribution and a non-negligible proportion in the top 1% yet for some reason in Canada we see at least one faculty strike per year because as a group they believe themselves to be underpaid.

I know some of you hate-read this blog because I’m always on about unsustainable finances and say not-nice things about how institutions spend their money.  But higher education needs public support.  If the public starts to get the idea that higher education is not good value for money, or worse, that it does not serve the greater public good, that support will erode and with it the ability to support all the activities they currently undertake.

In Canada, we aren’t there yet, and with luck we never will be.  But remaining in the public’s good graces takes constant vigilance.  Pay attention to the dollars and cents.  Pay attention to outputs and impacts.  Do not take the public for granted.  In a populist age, nothing could be more dangerous.

That’s it from me for the term.  Normal service will resume January 9th, though you will probably hear from me once next week if, as is widely rumoured, the Finance Minister’s Advisory Council on Economic Growth puts out a report on “skills and innovation” which is as dumb as a bag of hammers. As always, it’s been a pleasure hearing from so many of you over the past few months.  If you have any thoughts on how to improve the blog, things you’d like to hear more of/less of, or just general feedback, I’d love to hear it.  Just write me.

Happy holidays.

December 14

More on International Fees in Canadian Universities

Due to a few unexpected issues yesterday, we had to postpone the One Thought. With no further ado, here it is:

The day before yesterday we looked at what universities in different parts of the country are charging in terms of international tuition fees.  Here’s a quick graph to refresh your memory:

Figure 1: International Undergraduate Tuition Fees, by Province, Canada, 2016-17

ottsyd-20161213-1

Figure 2 shows the same data but with a different Y axis.  Instead of showing the figure in dollars, let’s show the figure as a percentage of national average total institutional expenditures per FTE students (minus sponsored research), which in 2014-15 was $24,732.

Figure 2: Provincial Average Tuition as a percentage of National Average Institutional Expenditures per FTE student

ottsyd-20161213-2

What figure 2 shows is that on average international students are covering more or less (95%) covering the cost of their education through tuition, but that is mostly because of policies in Ontario, where the figure is 120% of cost.  In the other three “big provinces” the fees are about 85% of cost, whereas elsewhere the figure is lower; as low as 38% in Newfoundland’s case.

Now, let’s think about these figures in terms of how Canada positions itself as an education market.  Are we a bargain player, or a luxury player?  This isn’t quite a straightforward question to answer because not everyone reports data in the same way.  But, basically, here’s the basic story: in the US according to the College Board’s Trends in College Prices 2016, 4-year private non-profits charge US$33,480 (for both national and international students); out-of-state charges at public 4-year universities are US$24,930.  In the UK, international fees vary substantially based on whether the course is a lecture course, a laboratory course or a clinical course; the Times Higher 2016 survey of fees, the average for these three types of courses are, respectively, £13,442, £15,638 and £20,956.  In New Zealand, the most recent data available comes from the Education Counts website; according to this, in 2015, the average tuition at universities was NZ$24,150.  So far as I can tell there is no “official” average for fees in Australia (not even for domestic students), but this 2014 survey shows that the average in “indicative fee” for international students is A$23,521.  Given that a couple of years have passed and fees certainly aren’t going down, we can probably round that up to an even $25,000.

Now, let’s translate all those figures into a common currency.  And let’s do it the way an international student likely would; namely, in $USD, using current exchange rates.  Normally, I do these kinds of comparisons in $PPP but since international students have to convert money to buy in each currency, exchange rates make more sense.  So, at current rates of exchange, here is what the competitive picture in each jurisdiction looks like:

Figure 3: Average International Student Tuition Fees, Selected Jurisdictions, in $USD

ottsyd-20161213-3

In brief, prices for international students in the US are substantially higher than they are elsewhere in the Anglophone world: US privates are charging 85% more than Canadian universities, and the publics are charging about 35% more.   National averages for Canada, Australia, New Zealand and UK (lecture courses) are all very tightly bunched together at between $17-18,000 US.  Only Ontario seems to be trying to play around the same price point as US publics.

One question that arises from this chart is: why exactly aren’t universities in the rest of Canada charging more?  What do Manitoba and Nova Scotia, let alone Newfoundland, gain by having such low fees?  Well, part of the story has to do with the way provincial subsidies work in these provinces.  In both Manitoba and Newfoundland, institutions get block grants and so all money from international students is “additional” to institutional budgets (I have a feeling this is true in Nova Scotia as well but wasn’t able to confirm before publication).  They can set them low because they simply do not need to get income equivalent to cost of education, the way Ontario universities do.  But while that might make sense from an institutional point of view, it’s not as clear why that makes sense from a provincial one: what’s in it for provincial governments to provide this level of subsidy for international students?

One possible argument is that these provinces need to price low in order to attract students (Winnipeg winters are perhaps a tough sell in South East Asia); and since education is a funnel for immigration, maybe the way to think about this money is as a “loss leader” for future population growth.  But then again, we already know that Atlantic Canada has a harder time hanging on to students after graduation than the rest of the country , so maybe this isn’t such a winning idea after all.n

I’d argue in fact that low-pricing is self-defeating in international higher education.  A degree from a (reasonably) prestigious institution is in fact a Veblen good: higher prices drive greater demand because they give an aura of exclusivity.  It’s the one type of good where demand curves don’t slope downwards and institutions would be kind of crazy not to take advantage of that.  There’s a good case to be made that institutions in the Atlantic and prairie provinces could increase international student tuition.

 

December 08

Cluster Theory

Unless you’ve been under a rock for the last twelve months, you’ll have noted that the Government of Canada has become enamoured of “innovation clusters” as a means of raising national productivity levels.  What should we make of this?

For some annoying reason, the Liberals act as if cluster theory is something new rather than something which dates back to the mid-1980s (Michael Porter’s The Wealth of Nations gave the idea its first mass-market outing in 1990; six years later, Saskia Sassen gave us what is probably still the most engaging short book description of cluster formation in Regional Advantage.  In fact what is actually new – in Canada at least – is the idea that the federal government should encourage cluster formation/densification with great huge wads of cash.  $800 million over four years, in fact, according to Liberal manifesto and the 2016 Budget.

There are three reasons to be skeptical about this set of developments.  One is political, the second administrative, and the third is empirical.

The political problem is this: we live in Canada.  There is no way on God’s green earth that doling out money for what amount to economic development (or, say it softly, “industrial policy”) isn’t going to get 100% enmeshed in regional pork-barrelling.  Initially, the Government’s plan was for five clusters (I’ve heard it may now be for as many as eight).  Well, isn’t that convenient – five clusters, five regions.  I mean put away all your crystal balls about what’s going to get funded: It’ll be something Ocean-y in the Atlantic, something aerospace-y in Quebec, ICT-y in Ontario, Energy-y in the Prairies and (probably) life sciences-y in BC.  Whether each of these clusters is equally deserving of, or has the capacity to absorb, public dollars is irrelevant once regional politics comes into play.   Inevitable result is sub-optimal investments

The second issue is an administrative one.  Say you want to spend $150 million (or so) on “a cluster” in a variety of ways which increases research productivity, corporate partnerships, etc., etc.  It’s not just a question of deciding among hundreds of worthy micro-projects within a $150 million budget.  Who actually manages the project?  It’s not like giving money to a university or a hospital – a cluster has no corporate entity.  Occasionally, you get a trade organization that might conceivably act as a co-ordinator of a cluster, like say Communitech in Waterloo, and you could use them to distribute money in a way that made sense regionally.  But i) not every cluster has one of those and ii) even if they do, they’re going to tend to be biased towards established players rather than new ones.  The only alternative is to manage it all from Ottawa, but that’s a frightening prospect for a project that’s meant to improve industry flexibility.

Which brings us to the third, empirical, problem.  I’ve said this before but it bears repeating: a lot of the research on innovation is American, and assumes things like having DARPA around, and being at the technological frontier and having access to lots of venture capital and all that good stuff.  Most countries in the world don’t have that.  In fact, when most countries in the world (including us) think about “clusters” they are thinking about something fundamentally different than what Americans think of when they use that term, because our cluster thinking is designed as much around attracting established foreign companies as it is around developing native entrepreneurial talent.

And here’s a little secret: there are almost no good examples anywhere of clusters having been built on government money.  In fact, to the extent that anyone can work out what it is that makes a great cluster, it’s the presence of one or two industry-leading companies plus one heck of a lot of spin-offs related by disgruntled former employees who want to do their own thing (see especially Steven Klepper’s recent posthumously-published book Experimental Capitalism).  This is actually something most Canadian clusters are really bad at: the OECD Cluster rankings, although now a bit dated, show Canadian clusters generally in the bottom half of clusters across the OECD for new company formation.  Government can do something about this, but it’s not by spending money, it’s about using law and regulation to make sure non-competes are unenforceable.  Surprisingly, given that this is supposed to be a government devoted to evidence-based policy, that issue doesn’t appear to show up at all in our government’s thinking on clusters.

So what are we spending money on, exactly?  And why?  To what end?  Although the government’s had over a year to work on this, it’s really hard to get a sense of what the plan is.  I suspect that a lot of this money will end up in the hands of universities because they know the “apply for government money” game really well and can play to the Minister’s predilection to be photographed in front of a lot of shiny hi-tech gadgetry.

But will any of it have the slightest effect on national productivity?  I have my doubts.

December 07

Two (Relatively) Good News Studies

A quick summary of two studies that came out this week which everyone should know about.

Programme for International Student Assessment (PISA)

On Tuesday, the results for the 2015 PISA tests were released.  PISA is, of course, that multi-country assessment of 15 year-olds in math, science and reading which takes place every three years and is managed by the Organization for Economic Co-operation and Development (OECD).  PISA is not a test of curriculum knowledge (in an international context that would be really tough); what it is instead is a test of how well individuals’ knowledge of reading, math and science can be applied to real-world challenges.  So the outcomes of the test can best be thought of as some sort of measure of cognitive ability in various domains.

In addition to taking the tests, students also answer questions about themselves, their study habits and their family background. Schools also provide information about the kinds of resources they have and what kind of curriculum structure they use, there is an awful lot of background information about each student who takes the test, and that permits some pretty interesting and detailed cross-national examination in the determinants of this cognitive ability.  And from this kind of analysis, the good folks at OECD have determined that government policy is best focused in four areas.

But heck, nobody wants to hear about that; what everybody wants to know is “where did we rank”?  And the answer is: pretty high.  The short version is here and the long version here, but here are the headlines: Out of the 72 countries where students took the test, Canada came 2nd in Reading, 7th in Science and 10th in Math.  If you break things down to the sub-jurisdictional level (Canada vastly oversamples compared to other countries so that it can get results at a provincial level), BC comes first in the world for reading (Singapore second, Alberta third, Quebec fourth and Ontario fifth).  In Science, Alberta and British Columbia come second and third in the world (behind only Singapore which as a country came top in every category).  In Math, the story is not quite as good, but Quebec still cracks the top three.

CMEC also has a publication out which goes into more depth at the provincial level (available here).  The short story is our four big provinces do well across the board but the little ones less so (in some cases much less so).  Worth a glance if comparing provinces rather than countries is your thing.

One final little nugget from the report: the survey taken by students asks if the students see themselves heading towards a Science-based career in the future.  In Canada, 34% said yes, the second highest of any country in the survey (after the US).  I’d like to think this will put to rest all the snarky remarks about how kids aren’t sufficiently STEM-geared these days (<cough> Ken Coates <cough>), but I’m not holding my breath.

Statscan Report on Youth Employment

Statistics Canada’s put out some interesting data youth employment by Rene Morisette on Monday.  It’s one of those half-full/half-empty stories: the youth unemployment rate is back down to 13% where it was in 1976 (and hence lower than it has been for most of the intervening 40 years), but the percentage of youth working full-time has dropped.  The tricky part of this analysis – not really covered by the paper – is that the comparison in both time periods excludes students.  That makes for a tricky comparison because there are proportionately about 3 times as many students as there were 40 years ago.  To put that another way, there are a lot fewer bright kids – that is, the kind likely to get and keep jobs – not in school now than in 1976.  So it’s not quite an apples-to-apples comparison and it’s hard to know what having more young people in school actually does to the employment rate.

Aside from data on employment rates, the report (actually a condensation of some speaking notes and graphs from a presentation made earlier this year) also includes a mishmash of other related data, from differing recent youth employment trends in oil provinces vs. non-oil provinces (short version: they’re really different) to gender differences in graduate wage premiums (bigger for women than men, which may explain participation rate differences), to trends in overall graduate wage premiums.  Intriguingly, these rose through the 80s and 90s but are now declining back to 1980 levels, though whether that is due to an increase in the supply of educated labour or reflects broader changes in the labour market such as the “Great Reversal” in the demand for cognitive skills that UBC’s David Green and others have described is a bit of a mystery.

But don’t take my word for it: have a skim through the report (available here).  Well worth a few minutes of your time.

December 06

Alarm Bells in China

So, in the midst of all the handwringing about the world’s major higher education student destinations all losing their damn minds (Trump, Brexit) and the implications this has for higher education internationalization, I think we’re in serious danger of missing a much bigger story going on in China.

Don’t get me wrong.  Trump and Brexit are big stories, but on a global scale what they are going to do is shift mobility patterns a bit.  The precise English language destination countries will change (Canada, Australia, New Zealand and possibly Ireland) but neither event actually changes the underlying demand for quality English-language education.  And as long as demand holds up, internationalization across the globe as a whole will continue on.

But what happens if demand doesn’t hold up?

Now, we’re not at that stage yet.  Among middle class parents in China, there is still a lot of interest in international education, even if everyone’s first choice remains Peking or Tsinghua.  But the government, for a variety of reasons, has been making study overseas harder.  Last year, they have cracked down on the creation of new 2+2 or 3+1 programs, largely to keep corruption at bay (there were several institutions where found to be embezzling money associated with those programs).  In 2014, the government stopped approving new international programs at public high schools.  Last month, a new law banned for-profit schools from using international curriculum until grade 10.  The Minister of Education has called for a ban on “textbooks promoting Western values.”  (see this Economist story for more).  In short, the Chinese government is making it increasingly hard for Chinese parents to prepare their kids for study in foreign universities.

There is a balancing act going on here.  On the one hand, the Communist regime wants to limit potential sources of ideological contamination.  On the other hand, for many Chinese parents – perhaps especially Communist Party members, sending child abroad to study is still part of the “Chinese dream” (Xi’s daughter, for instance, studied at Harvard).  Moving too far, too fast in this direction could set off a lot of urban discontent, which the regime would prefer to avoid if possible.  But at the same time, the direction is unmistakable and we do not know how far the government intends to go.  If western values in textbooks are undesirable, at what point do individuals educated in the west at institutions steeped in western values also become undesirable?  If it becomes unpatriotic to hire foreign graduates – what then?

Now, I’m not even sure something of that magnitude would shut off the taps: lord knows there are a lot of people in China (again, including Communist Party members) who view having a child studying or working overseas as a pretty good insurance policy if things start to go sour in China.  So you could still imagine a big Chinese market for international education-cum-immigration.  But it might be more difficult to get those kids up to speed to get into a western university.

In that eventuality – and it’s one I definitely think all universities should be prepared for – attracting Chinese students is going require one to mean pursuing one of both of the following strategies.  First: attracting students at an earlier age (perhaps 14 or 15) and putting them through local Canadian high schools.  For wealthier families that means bringing mothers over as well; for everyone else, it would be interesting to for universities and school boards to jointly create some communal living arrangements (including student life personnel) to help Chinese students succeed.  Second: for students who stay in China through to the gaokao (i.e. age 18) and then decided that they wish to try study abroad, there is going to be an increase need for pathways providers to help students get through what will amount to a bridge year.  I suspect my colleagues at IDP and Navitas will be busy over the next few years.

In short: yes, Trump and Brexit represent big short-term opportunities for countries like Canada, Australia and New Zealand because they divert demand.  But there remains a long-term threat to internationalization in that the Chinese Communist Party may move to actively suppress demand.  Keep your eye on the ball.

 

December 05

A Wish List for Budget 2017

A few days ago someone asked me what my wish list would be for the federal 2017 budget.  The science/innovation part of my answer will take a couple of posts to summarize (I’ll start addressing some of the issues related to the Science and Innovation Agendas over the next few days); but today I thought I’d give you my thoughts on the student aid part of the equation.

Briefly, I have three wishes.  They are, in order:

1)      Implement the promise on Aboriginal student funding.  In the Liberals’ 2015 manifesto, there was a promise to increase funding to the Post-secondary Student Support Program (the program which provides funding to bands across the country to send their members to post-secondary education) by $50 million per year.  For whatever reason (I explored this a bit back here), the Liberals chose not to implement that promise in the last budget.  Now, there is lots not to like about this program, and lots of ways it could be improved.  But the funding challenges for First Nations students are real, and we shouldn’t give them short shrift because of a desire to wonk around with program design first.  Fulfill the promise, increase spending on PSSSP by $50 million, wonk later.

2)      Increase Aid Limits for Mature Students.  Canada has a not-very-stellar record of adults getting training.  Part of it has to do with the way we support them while they are in school.  Provincial training programs usually cover programs of less than a year in length, and they tend to provide decent (though not lavish) support for living expenses.  If the program’s longer than a year then you tend to get pushed to provincial/federal student aid programs where the basic assumption is that everyone lives like an 18 year-old.  That’s wrong. People who return to education from the labour market tend to have houses or live on their own in digs considerably above the student norm.  They have credit card debt, they have cars.  Yet student loan rules basically says they need to chuck all that an find a roommate to live with.

 There’s a way to fix this.  As far as calculating student resources, we already have a two-tier system: less four years out of secondary school (or less than two years in the labour market, we assume parents are contributing to a student’s cost of attendance.  After that, we don’t, and students become eligible for more money.  There is no reason we could not do the same for calculating student resources, giving older students higher allowances (and higher aid limits).  I wouldn’t stick the dividing line at four years: I’d probably put the line at doctoral studies or three consecutive years in the labour market or something like that.  But either way: if we want to encourage more adults to return to school, something like this is necessary.

 3)      Improve Repayment Assistance.  As I noted last week , over the income range from the mid-$30,000s to $50,000 and at average levels of indebtedness, Canadian student loan borrowers are paying more on a monthly basis than loan borrowers anywhere else in the world (I didn’t actually include the whole word in that post, but trust me the five countries I did show are the ones you need to care about as debt tends to be higher there than in other jurisdictions).  There’s a simple solution here: tweak the Repayment Assistance Program (RAP) to limit the amount borrowers have to repay to 15% of income rather than 20% over the repayment threshold of $25,000.  For borrowers making less than $25,000 this will make no difference (they still pay zero), and for borrowers making over about $50,000 it won’t change anything either (which is fine because by an large they’re quite capable of repaying loans), but in-between (which is the income-range where most borrowers are for the first couple of years after leaving school) it would make a big difference.

Over to the folks in the Langevin Block.

December 02

Added Thoughts on Faculty Salaries

Back on Tuesday, I published some data on faculty salaries, which always gets people’ attention.  I’d like to address some of the feedback I received and make a couple of additional points.  The comments mostly converged on two areas: the appropriateness of the comparisons to the US and the interpretation of the reason for the rise in Canadian salaries.

First, the US comparisons.  Some questioned the appropriateness of the dollar conversion factor.  I used Statscan’s published US-Canada PPP figure for the start of the academic year for the most recent year for which data was available.  Some suggested I should have used current values (wouldn’t have changed much) or that I should have used exchange rates, which actually would have made Canadian salaries look even higher, as in September 2014 the dollar was at 91 cents.  I think on the whole, since most salary gets used to purchase goods in one’s home market, PPP was the right choice.  Some also questioned whether the AAUP’s public doctoral category, which contains 156 institutions, was the right comparator for the U-13 (that is, the U-15 minus Laval and Montreal, where data was not available), given the diversity of institutions it covers.  There is some truth to this: I think on our U-13 is probably a slightly more elite group than its American competitor.  It’s possible that if I’d added, say, SFU, Guelph, Carleton, Concordia and Memorial, the comparison would be a little closer.  But then I’d probably (rightly) be criticized for arbitrarily including certain institutions.  So I’m prepared to take the rap on that because I’m not sure what other comparator I could reasonably have used.

One point on which I should make a mea culpa is that the way average salaries for “all ranks” was calculated for Canadian and American profs is slightly different.  The American figures include salaries for “no rank” professors (i.e. professors at institutions which do not have ranks, not sessionals) and visiting professors while the Canadian ones do not.  This probably depresses the American figures slightly compared to the Canadian ones.  Not by much, but it’s a caveat I should have noted.

The second area where I received questions and comments is with respect to what caused the run-up in average salaries.  One person suggested comparing average wage gains in the population (inflation + 0.3%) to those of professors (inflation +2.5%) was unfair because the former churned whereas the latter did not; in a similar vein, one person suggested the problem was related to hiring, or lack thereof.  If only more new staff had been hired, the argument went, the average would have decreased.

With respect, this is point-missing on a fairly large scale.  Universities hire based on what they can afford from their total budget, not to hit some arbitrary target on individual salaries.  And if their largest single expense is growing at more than twice the rate of inflation year after year, then they aren’t going to hire a whole lot of new staff (for the record, over the five years at the 38 institutions examined, the number of full professors increased by 9%, the number of associate profs increased by 15%, and the number of assistant profs dropped by 22% for a total gain in size of 3%).

The root cause here is simple.  Professors no longer have to retire at 65 and an increasing proportion of them are electing to remain on the payroll.  That means an increasing number of professors are earning very high salaries.  All full professors in Canada are in the top 5% of wage distribution in the country (threshold = $102,300), and a non-negligible proportion are in the top 1% (threshold = $191,000 which is right about the *average* wage of full professors at the University of Toronto).  Yet they continue to receive annual wage increases of 4% or more – meaning annual increments of $5,000 apiece and up (imagine what that kind of money would mean for grad students).  It’s not just that this crowds out money for other purposes; it also makes institutions really wary about hiring new staff.  Both of these factors contribute, quite understandably, to increasing casualization of staff – though again, note, total full-time staff complements are actually up 3% over the last five years.

But the question of course is: what can be done about it?  The most obvious thing would be to do more to rein in salaries at the top – putting hard ceilings on full professors’ salaries after a certain number of years.  Since faculty unions are always going on about the need to rejuvenate the profession and the travails of young faculty, it would be worth taking them at their word and seeing if they’re prepared to negotiate something that would help achieve that aim.  A more stringent approach would be to make rank progression more difficult.  That wouldn’t have much effect in the short-term because people would continue to get annual progression raises, but over the long run, doing something like capping the number of full professors at 30% of total faculty would do a lot to rein in costs because it would restrict the number of people getting to the highest pay ladders.

We have, through union power and a Charter ruling on retirement, got to a point where we are spending a lot of extra money every year on staff with almost all of it going to existing staff who are already among the country’s best paid workers, and very little going to hire new staff.  It is within the power of both institutions and unions to change this, if they want to.  But first we have to recognize the problem and discuss it honestly.  The question is whether the will exists to do so.

December 01

Important Changes to Canada Student Loans

The last federal budget made one large signal improvement to student assistance: the abolition of the education tax credit, and the re-investment of that money into an improved Canada Student Grant. Less remarked upon was a promise to simplify need assessment. Now the details of that effort are emerging, and they are pretty interesting.

The change has to do with the student contribution rules. In the Canadian student aid system, various forms of student income and assets are considered “resources” and the more resources you have, the less need you have and the less aid you can claim. If you have no resources at all you can usually get maximum aid, but as resources rise, aid is effectively clawed back. Different forms of income have traditionally been assessed in different ways – summer earnings were clawed back at one rate, in-study earnings were clawed back at another. Personal savings in one’s one name (as opposed to RESPs) were clawed back effectively at 100%, as were scholarships (subject to an exemption of $3000). All these different clawback rates were confusing, they required students to provide a lot of data (student aid forms would be a great deal simpler without all this) and – in theory at least – they discouraged work.

The new CSLP need assessment system aims to correct all of this. Instead of assessing all these different sources of income, under the news students will simply be required to make a flat personal contribution of between $1,500 and $3,000, based on family income (Crown wards, students with disabilities, students with dependents, indigenous students will see this requirement waived and not be required to produce even the minimum resources). Any income they earn above that level – whether through work or scholarships or what have you – will be theirs to keep; there will be no further clawback on that income. This of course also provides a lot of scope to simplify student aid forms.

What will the impact of this be? Well, it’s a two-sided coin. On the one hand, there is no doubt that students will have more income at their disposal and that should help with issues of retention and student poverty. At the same time, a reduction in assessed resources will mean an increased in assessed need which in turn will drive higher borrowing. Ceteris paribus, that means higher student debt, although presumably the increase in Canada Student Grants will offset this somewhat. That’s not necessarily bad – as I’ve shown before , student loan burdens are currently a lot smaller than they were fifteen years ago thanks to lower taxes and interest rates. As a result, it’s likely most borrowers would be able to shoulder more debt. But it’s a trade-off: more money today will mean more burden tomorrow.

There are some other changes worth noting as well. The most important – and from a personal point of view the most satisfying – has to do with required spousal contributions. Eleven years ago I wrote a piece called I Love You Brad But You Reduce My Student Loan Eligibility, which outlined the absolutely ludicrous expectations re: spousal contributions embedded in the Canada Student Loans Program. At the time, the clawback was effectively 80% on all income over $12,000 which was – and I am using the technical term here – totally bananas. It effectively cut off anyone with a working partner from student assistance. As of next year, the threshold for contributions will be raised substantially (the exact level has not yet been fixed but my impression is that is probably in the $30,000 range) and expected contributions will only amount to 10% of marginal income over that level. That’s excellent news: it’s going to put much more financial resources at in the hands of adult learners in married or common-law relationships. Similarly, CSLP plans to cease treating money obtained by First Nations students through the Post-Secondary Student Support Program (PSSSP) as a resource – thus giving those students access to much more money as well.

Overall, this is the biggest change to need assessment since the introduction of the Canada Student Financial Assistance Act in 1994. But there is a catch to all this: because student loans are a joint federal-provincial responsibility, for these changes to work smoothly both federal and provincial governments have to agree to assess things similarly. But these changes cost money and provinces don’t have much of it. Ontario and Alberta have already essentially adopted the flat contribution policy, but it’s not clear either will accept the rest of the package, although I have a hard time imagining Ontario not doing so. The others, though: there is at least a chance that some will choose not to go along with the deal, and stick to the current system of need assessment (in program jargon, this is called “dual assessment”). In such provinces, there will be no simplification of the student aid form because the province will still require the various pieces of information about different types of income. And dual assessment makes it harder, not simpler, to explain aid awards. But since Ontario and Alberta make up something close to 75% of the Canada Student Loans Program, the feds may not be that fussed by other provinces not making the leap.

In any case: the Canada Student Loans Program is making things a lot easier for students and that is to be applauded. It might not work out quite as well as it could because of some legitimate difficulties provinces face in following suit. But overall: this is really good news. Kudos to those in Ottawa (and Gatineau) for making it happen.

November 28

Canadian Enrollment Data, 2014-15

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

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

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

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

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

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

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

ottsyd-20161128-3

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

Let that sink in for a bit.  Fifty percent.

There are a lot of implications to that number.

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