HESA

Higher Education Strategy Associates

Did CIBC Really Just Call for Lower Tuition?

Last week, HuffPost ran a story highlighting a newsletter from CIBC Economics about higher education.  It was actually a pretty meandering letter (CIBC Economics pieces on higher education are usually notable for their interesting use of data and somewhat shallow understanding of actual policy – here’s an earlier example).  The newsletter touched on a number of issues around educational supply and demand, but what HuffPost glommed on to was what a point about tuition in STEM programs and led with the headline “CIBC argues against “Free Market” education, calls for lower tuition”.

So, true or false?  Is CIBC joining CFS on the barricades?

Well, sort of.  What the newsletter actually said, after noting with approval that enrolments in STEM programs were rising (indicating, in their view, greater student responsiveness to economic signals) and that tuition fees are rising faster in high-demand programs such as Engineering, was:

(This) price appreciation can slow or even derail the positive momentum observed in recent enrolment trends. If Canada wants to have more graduates in STEM or any high-paying field, the country needs to work to make it affordable. This type of pricing only exacerbates already ingrained income inequalities across the country.

So, two issues here.  The first is that contrary to what HuffPost implied, CIBC is not blanket anti-tuition fees.  It’s against higher tuition fees in STEM programs (particularly Engineering) because it likes STEM programs (particularly Engineering) and is under the impression that lower tuition will attract more students to the fields.  HuffPost’s headline was thus misleading at best.

But there’s a second issue, too; namely, that CIBC’s argument is pretty much bollocks. Here are four reasons why:

First: it’s flat-out wrong about the nature of the problem.  The problem of filling more engineering spots was always about supply, never about demand.  Engineering is an expensive discipline and ramping up the number of spots is expensive and in the absence of new money from government, funds basically have to be wrung out of the system through various types of program/admin savings and retirements.  That takes time.  And it’s this, more than changes in student demand, that account for the lag in enrolments.  I know CIBC is used to markets that clear, but higher education is not one of those markets and they shouldn’t analyse it as if it were.

Second: Because adding Engineering spots costs money, fees are part of the solution, not part of the problem.  If you reduced fees in Engineering, I guarantee you there would be fewer spots.  And how would that help?

Third: there’s zero evidence that increasing fees, in the context of a fairly generous student aid system where grants are significant and loans are easily available, have had or will have any noticeable effect on demand. Indeed, as the paper itself notes, these programs are growing in demand as fees rise.  It’s a Yogi Berra-esque “nobody goes there anymore, it’s too crowded” kind of argument.

Fourth: it’s wrong on equity grounds.  These are high-demand, high-reward occupations.  Why in God’s name would we want to increase private rates of return on these, when demand for spaces in these programs are already in excess of supply?  That would just increase windfall gains to the future wealthy.

In short: HuffPost exaggerated its headline.  But CIBC did make a suggestion about reducing tuition, one that suggests they don’t pay a whole lot of attention to the actual underlying dynamics of higher education beyond throwing a stat-heavy newsletter together on the subject once a year.

Do better, guys.

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