HESA

Higher Education Strategy Associates

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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

Capital!

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

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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

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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

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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.

 

Ciao,

Alex

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.

July 23

Go West

The key to understanding what post-secondary education is going to look like a few years down the road – say, 2017 – is to look at what is likely to happen to government funding.   We can’t know exactly what governments will spend on PSE, but we can know  how much money they are going to have available to spend simply by working out how much money each will likely have once health expenditures (which make up just 40% of the budget in most provinces) are accounted for.  Today, I’ll be doing this for the country’s 4 largest provinces, which make up 88% of the country’s population

With the exception of Ontario, most provinces’ governments move more or less in step with GDP growth.  Quebec and British Columbia keep their expenditures steady at around 20% and 15 of the economy, respectively.  Alberta’s fluctuate somewhat, usually in line with changes in hydrocarbon prices.  Since the Liberals took office in 2003, Ontario has been increasing the size of its government quite steadily from 13 to 18% of GDP.

 Figure 1 – Provincial Budgets as a Percentage of GDP, 2000-2013

 

Given this, it seems unrealistic to expect any of these governments to increase overall expenditures much faster than GDP growth.  Alberta and BC could conceivably inch up a bit after 2014 since their spending is currently slightly below the long term average.  For simplicity’s sake, though, let’s assume that growth in those two provinces will be restricted to growth in nominal GDP, which in both provinces is expected to average 4.5-5% for the foreseeable future.

Quebec and Ontario, meanwhile, can’t grow expenditures anywhere near that much because of their abysmal finances.  Quebec’s budget currently projects spending growth to be around GDP growth minus 1% out to 2017; in Ontario, program spending is frozen in nominal dollars through to 2017.

Now, the amount of money available for PSE (and other types of government spending) is limited by what happens to the health budget.  With the overall size of government more or less steady as a percentage of the economy, every time the health budget increases more quickly than GDP, the pool of money available for every other piece of spending – including PSE – must decline. In Quebec and British Columbia, the health budget has been growing at 5-6% annually for the past decade.  In Ontario, the figure is 7% and in Alberta it is a (frankly) ludicrous 9%. 

So, let’s assume that everyone can keep health care increases to just fractionally above expected GDP growth levels (say, 5% per year). Here’s what will happen to the pool of non-health dollars available in each province: 

 Figure 2 – Nominal Non-Health Dollars Available by Province, indexed to 2013.

 

Your eyes do not deceive you: that is indeed a 41% funding gap opening up between Alberta and Ontario over the next four years.  Given the assumptions above, non-health spending in Alberta can grow by 20% by 2017 and BC looks set for an increase as well.  Quebec should hold just about steady; Ontario, thanks to its need to get rid of its deficit without raising revenues, is going to see a fall of a little over 15%.

To be clear: I am not saying that PSE budgets will increase or decrease by these amounts.  What I am saying is that this is a good approximation of how the amount of funds available to PSE will evolve in each province over the next four years and that if historical funding patterns hold up, these kinds of changes in nominal funding are about what we can expect.  But politics still matter, and universities and colleges could still see increases to their budgets relative to the amount of available funding if they are smart in their lobbying (or cuts if they are not).  

A couple of years ago I said that differential patterns of higher education investment meant that the country’s intellectual centre of gravity was moving west rather quickly.  Notwithstanding recent cuts in Alberta and British Columbia, it seems to me that this trend can only pick up steam in the next few years.  

July 08

The Size and Purpose of Government

Ever wonder why it seems like higher education is always in a financial trouble?  One big reason can be found in Agatha Christie’s autobiography.  Reflecting on her station in life as a young woman early last century, she noted in her memoirs how she never thought she would ever be wealthy enough to own a car – nor ever so poor that she wouldn’t have servants. 

In today’s world, of course, this makes no sense at all, since almost everyone has a car and almost no one has servants.  But 100 years ago the relative price of labour was such that it made perfect sense.   The lesson here is that over time, labour tends to rise in price relative to machines. 

Continually improving production efficiency is absolutely fabulous when it comes to consumer durables.  It means that cars are  a fraction of their former cost, while being faster, safer, and more reliable.  It means that for a couple of hundred bucks, anyone in the world can have more computing power in their cellphone that existed in the entire world in 1970. 

But the effect in labour-intensive industries is just the opposite: relative to other sectors, prices rise continually.  If everything were purchased privately, this would be no big deal – people would just adjust their budgets to spend the savings they make in one area (durable, machine-produced goods) and spend it on the other (labour-intensive goods). 

But here’s the problem: a few decades ago, society decided that most of the important labour-intensive industries – mainly health and education – needed to be in the public sector.  This limits the ability of individuals to shift consumption from one sector to the other because we constrain the ability of individuals to spend on their own education and health-care.  So the only way large-scale shifting between labour-intensive and capital-intensive goods can happen is through taxation.  For obvious reasons this complicates things.

So here’s the deal. The cost of providing a given standard of health and education will go up and up and up, no matter what anyone does.   We can either pay for that by taxing a heck of a lot more to fund those services (and hey, why not?  With cheaper consumer durables we require fewer post-tax dollars to keep ourselves clothed, sheltered and fed), or we can ask/allow citizens to pay for a greater part of the services they receive, or some mix of the two.  Those are the only choices.  Despite this, what governments across Canada are doing right now is the exact opposite of this.  They are freezing taxes while preventing these services from raising money themselves through new fees.   

As a long-term strategy, this is leading nowhere but failure and mediocrity.  We need to stop pretending we can avoid hard decisions on this.

June 24

The THE’s Top 100 under 50

So, last week the Times Higher put out one of its two subsidiary sets of rankings called the Top 100 under 50 – that is, the best “young” (under 50 years old) universities in the world.  The premise of these rankings is that young universities don’t really get a fair shake in regular rankings, where the top universities, almost all from before World War I, dominate based on prestige scores alone.  That the THE would admit this is both excellent and baffling.  Excellent because it’s quite true that age and prestige seem to be correlated and any attempt to get rid of bias can only be a Good Thing.  Baffling, because once you admit your main annual rankings exercise is strongly affected by a factor like age which an institution can do nothing about – well, what’s the point?  At least with the Under-50s a good score probably tells us something about how well-managed an institution is; what the main rankings tell us is more of a mystery.

These rankings  interesting because they highlight a relatively homogeneous group of institutions.  Few of these are North American because most of our institutions were built before 1963 (from Canada, only Calgary, SFU and Vic make this list  and they’ll all be too old in a couple of years).  They’re an intriguing look into the world’s up-and-coming universities: they’re mostly European (and exactly none of them are from the People’s Republic of China).

But there is some serious wonkiness in the statistics behind this year’s rankings which bear some scrutiny.  Oddly enough, they don’t come from the reputational survey, which is the most obvious source of data wonkiness.  Twenty-two percent of institutional scores in this ranking come from the reputational ranking; and yet in the THE’s reputation rankings (which uses the same data) not a single one of the universities listed here had a reputational score high enough that the THE felt comfortable releasing the data.  To put this another way: the THE seemingly does not believe that the differences in institutional scores among the Under-50 crowd are actually meaningful.  Hmmm.

No, the real weirdness in this year’s rankings comes in citations, the one category which should be invulnerable to institutional gaming.  These scores are based on field-normalized, 5-year citation averages; the resulting institutional scores are then themselves standardized (technically, they are what are known as z-scores).   By design, they just shouldn’t move that much in a single year.  So what to make of the fact that the University of Warwick’s citation score jumped 31% in a single year, Nanyang Polytechnic’s by 58%, or UT Dallas’ by a frankly insane 93%?  For that last one to be true, Dallas would have needed to have had 5 times as many citations in 2011 as it did in 2005.  I haven’t checked or anything, but unless the whole faculty is on stims, that probably didn’t happen.  So there’s something funny going on here.

A final point: the geographical distribution of top schools will surprise many.  Twelve schools from the PIGS (Portugal, Ireland, Greece, Spain) made the list, but only one school (State University Campinas) from the BRIC countries did.  That tells us that good young universities are probably a seriously lagging indicator of economic growth – not a category to which many aspire.

June 14

Summer Break

Hi all.

It’s time for me to step back from the blogging for a few weeks.  As of Monday, we’ll be switching to a “One Thought to Start Your Week” until the middle of August; that will let me catch up a bit on things and get prepped for the fall.

I want to say thanks to all of you for reading and commenting.  I learn a lot from your feedback and I’m very grateful for all of it, even when you’re (sometime correctly) chewing me out.  The thousands-strong readership is a really interesting cross-section of academia, and includes hundreds of people from outside Canada as well (what, I always wonder, do they make of it? Are they here for the solid policy analysis or just the Glen Murray jokes?  Mysteries abound.)

But I would like, if I may, to make one tiny request before leaving you  alone (mostly) for the summer: if it’s not too much trouble, could you take a minute to tell me what you like and don’t like?  What should I be writing about more?  What should I be writing about less?  I kind of get the impression that most of you enjoy it when I stick it to the “MOOC fetishists” and do my myth-busting thing about labour-market outcomes – but what else do you like?  I’d really love to know.

In any event – have a great summer and get some rest.  I have a feeling next year’s going to be a big one.

Ciao,

Alex

May 03

The End of CREPUQ and its Implications

So, the Conseil des Recteurs et Principaux des Universites du Quebec (CREPUQ) died this week, after the number of institutions pulling-out of the alliance rose to eleven.

The basics of the dispute are simple.  The big research universities are starving for cash; they’d prefer to get it from tuition fees if they can (students are a more dependable source of income than flighty governments), but they’ll take it via the funding formula if they have to.  From the Laval/Montreal perspective: not only did the UQs shaft research universities on tuition by not backing the Charest plan, but now they’re screwing them on the funding formula by cozying up to a PQ plan that rewards institutions based on contributions to access, rather than research.  So instead of “so-so-so… solidarité”, it’s “so-so-so… so long, and don’t let the door hit your behind on the way out”.

I’m sure Pauline Marois and Pierre Duchesne couldn’t possibly be happier.

In Quebec, the main consequence will be that certain elements of the HE quality assurance process, which universities – via CREPUQ – used to manage themselves, will now end up in government hands.  But the impact of this implosion outside Quebec is worth watching, too.

At the federal level, we’re at ease with the idea that colleges and universities can have overlapping memberships: ACCC has been joined by Polytechnics Canada, and AUCC now shares the higher education field with the U-15, the Association of Canadian Comprehensive Research Universities (ACCRU), and, just this week, the U-4.  But representation by separate, non-overlapping agencies hasn’t happened yet.

But now the precedent has been set, both in Quebec and in British Columbia, where the research universities and the rest have had different representation since forever.  As dollars become scarcer and institutions become more concerned with their own slice of the pie, and less with the health of the sector as a whole, could we see the same thing happen in Toronto, or federally?

COU probably isn’t in trouble.  A benefit of having largely ignored calls for differentiation from Ian Clark and Harvey Weingarten is that the university sector sees itself as having a fairly common set of interests (increased graduate students for all!).  Federally, it’s a different story.  Already, there are a number of institutional heads who prefer investing their personal time and energy in U-15 issues rather than AUCC: it may just be a matter of time before a couple of them decide their financial investment should be similarly focused.

If it happens, the instigator will be from Quebec or Alberta.  Bank on it.

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