HESA

Higher Education Strategy Associates

Incentives

A lot of policy discussions in higher education really just amount to “why don’t universities and colleges just ‘do the right thing?’” It seems to me that these discussions would be a whole lot better if they were informed by an understanding of how incentives work.

For instance, a couple of weeks ago after I was giving a talk on the general intensification of institutions’ overseas recruitment effort, when an audience member asked “why don’t institutions put that kind of effort into recruiting Aboriginal students?” Excellent question. From a public policy point of view, Aboriginal and First Nations students are an important target population. In much of the north and west, these students are the only segment of the youth population which is growing. So why aren’t they sought more assiduously?

The answer, simply, is “incentives.” International students bring in more money than domestic ones and, moreover, Aboriginal/First Nations students often have additional costs associated with them. It may be excellent governmental policy to prioritize First Nations students over international ones, but the actual financial incentives facing institutions make them favour international students. If governments paid institutions per Aboriginal student it would be a whole other story.

(I should add that I think nearly all universities in the north and west of the country are in fact doing a pretty good job of seeking out and accommodating First Nations and Aboriginal students. The question was why they aren’t putting money into the recruitment on the scale they do for international students.)

Similarly, I had a discussion last week about branch campuses abroad, which are much the rage in various parts of the world. My interlocutor thought they were pretty cool: they extended institutional and national brands around the world, they made money for universities (she thought) and generally they were an interesting “soft power” tool. So why doesn’t Canada have more of them?

Again, it’s about incentives. “Canada” doesn’t have those because it is institutions, not the government, that run overseas campuses. And our institutions don’t have them because – unlike their badly-funded Australian and British counterparts – they are not sufficiently desperate for money to deal with the very uncertain risk-reward ratio those kinds of entail (our most successful campus abroad – College of the North Atlantic-Qatar – is nearly risk-free because the Emir is paying all the bills). Canada’s universities are well-enough supported that they don’t need to chase dollars in places like Malaysia – so why bother? Innate conservatism plays a part, too, of course, but the basic issue is a lack of incentive.

If governments want institutions them to behave a certain way, they need to structure incentives accordingly. Too often, they prefer to hector rather than incentivize. Why is that?

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