For most of the past 30 or so years, big Canadian universities have all been working off more or less the same business model: find areas where you can make big profits and use those profits to make yourself more research-intensive.
That’s it. That’s the whole model.
International students? Big profit centres. Professional programs? You better believe those are money-makers. Undergraduate studies – well, they might not make that much money in toto but holy moly first-year students are taken advantage of quite hideously to subsidize other activities, most notably research-intensity.
Just to be clear, when I talk about “research-intensity”, I am not really talking about laboratories or physical infrastructure. I am talking about the entire financial superstructure that allows profs to teach 2 courses per semester and to be paid at rates which are comparable to those at (generally better-funded) large public research universities in the US. It’s about compensation, staffing complements, the whole shebang – everything that allows our institutions to compete internationally for research talent. Governments don’t pay enough, directly, for institutions to do that. So, universities have found ways to offer new products, or re-arrange the products they offer, in such a way as to support these goals of competitive hiring.
Small universities do not have quite the same imperatives with respect to research, but this business model affects them nonetheless. To the extent that they wish to compete for staff with the research-intensive institutions, they have to pay higher salaries as well. Maybe the most extreme outcome of that arms race occurred at Laurentian, whose financial collapse was at least in part due to the university implicitly trying to align itself to U15 universities’ pay scales rather than, say, the pay scale at Lakehead (unions, which like to write ambitious pay “comparables” into institutional collective agreements, are obviously also a factor here).
Anyways, the issue is that for one reason or another, governments have been chipping away at these various sources of profit that have been used to cross-subsidize research-intensity. The situation with international students is an obvious one, but this is happening in other ways too. Professional master’s degrees are not generating the returns they used to as private universities, both foreign and domestic, begin to compete, particularly in the business sector. (A non-trivial part of the reason that Queen’s found itself in financial difficulty last year was because its business school didn’t turn a profit for the first time in years. I don’t know the ins and outs of this, but I would be surprised if Northeastern’s aggressive push into Toronto wasn’t eating some of its executive education business).
Provincial governments – some of them, anyway – are also setting up colleges to compete with universities in a number of areas for undergraduate students. In Ontario, that has been going on for 20-25 years, but in other places like Nova Scotia it is just beginning. Some on the university side complain about these programs, primarily in polytechnics, being preferred by government because they are “cheap”, but they rarely get into specifics about quality. One reason college programs are often better on a per-dollar measure? The colleges aren’t building in a surplus to pay for research-intensity – this is precisely what allows them to do revolutionary things like not stuffing 300 first-year students in a single classroom.
In brief then: the feds have taken away a huge source of cross-subsidy. Provinces, to varying degrees (most prominently in Ontario), have been introducing competition to chip-away at other sources of surplus that allowed universities to cross-subsidize research intensity. Together, these two processes are putting the long-standing business model of big Canadian universities at risk.
The whole issue of cross-subsidization raises two policy questions which are not often discussed in polite company – in Canada, at least. The first has to do with cross-subsidization and whether it is the correct policy or not. I suspect there is a strong majority among higher education’s interested public that think it probably is a good policy; we just don’t know for sure because the policy emerged, as so many Canadian policies do, through a process of extreme passive-aggressiveness. Institutions were mad at governments for not directly funding what they wanted to do, so they went off and did their own thing. Governments, grateful not to be harassed for money, said nothing, which institutions took for approval whereas in fact it was just (temporary) non-disapproval.
(I should add here – precisely because of all the passive-aggressiveness – it is not 100% clear to me the extent to which provincial governments understand the implications of introducing competition. When they allow new private or college degree programs, they likely think “we are improving options for students” not “I wonder how this might degrade the ability of institutions to conduct research”. And, of course, the reason they don’t think that is precisely because Canadians achieve everything through passive-aggression rather than open policy debates which might illuminate choices and trade-offs. Yay, us.)
The second policy question – which we really never ever raise – is whether or not research-intensity, as it is practiced in Canadian universities, is worth subsidizing in the first place. I know, you’re all reading that in shock and horror because what is a university if it is not about research? Well, that’s a pretty partial view, and historically, a pretty recent one. Even among the U15, there are several institutions whose commitment to being big research enterprises is less than 40 years old. And, of course, we already have plenty of universities (e.g. the Maple League) where research simply isn’t a focus – what’s to say the current balance of research-intensive to non-research-intensive universities is the correct one?
Now add the following thought: if the country clearly doesn’t think that university research matters because the knowledge economy doesn’t matter and we should all be out there hewing wood and drawing water, and if the federal government not only chops the budget 2024 promises on research but then also cuts deeply into existing budgets, what compelling policy reason is there to keep arranging our universities the way we do? Why not get off the cross-subsidization treadmill and think of ways of spending money on actually improving undergraduate education (which the sector always claims to be doing, but isn’t much, really).
I am not, of course, advocating this as a course of policy. But given the way both the politics of research universities and the economics of their business models are heading, we might need to start discussing this stuff. Maybe even openly, for a change.
6 Responses
In response to your assertion that “Maybe the most extreme outcome of that arms race occurred at Laurentian, whose financial collapse was at least in part due to the university implicitly trying to align itself to U15 universities’ pay scales rather than, say, the pay scale at Lakehead”, please read Section 7 of the Office of the Auditor General of Ontario’s Special Report on Laurentian University titled “Faculty Salaries and Academic Programs Were Not the Cause of Laurentian’s Financial Deterioration.”
Specifically, the report states: “In 2018/19, the most recent year information is available from the Council of Ontario Universities (COU), Laurentian’s average salary for full-time faculty was $147,940. This was less than both Lakehead University and Nipissing University, comparable institutions, which averaged $152,705 and $172,806, respectively.”
The report outlines the actual reasons for the financial deterioration which are capital expansion, shortfall in external funding, inappropriate and significant increases for senior administrators.
https://www.auditor.on.ca/en/content/specialreports/specialreports/LaurentianUniversity_EN.pdf
In the spirit of verifying sources before publishing and fairness to the over one hundred faculty that were laid off, please consider a correction of that line in your blog post.
Admittedly, there is a lot of inconvenient truth (and maybe a bit of polemics?) in here. Anyway, maybe one thing that we need to change is the current standard breed of senior administrators, who tend to overload universities with a lot of ancillary initiatives and activities. All these ancillary activities come at net costs, and sometimes at very significant net costs. Maybe we need scholars to step up to the plate to strongly and unapologetically refocus our activities on our core missions of teaching and research (which is what the public expects us to do anyway), instead of embellishing CVs with costly initiatives (some of which may be worthwhile from a social or political perspective – but why us if nobody wants to fund this anyway?).
Truth be told, the number of new ancillary initiatives has subsided somewhat under the current cost pressures, but, man, do we carry overload because some VP had some grand idea fifteen years ago, or some former President thought that this is the one problem of the future that we need to address “at all cost”. “This is what we will be known for”. Hearing that phrase from administrators is about as annoying as faculty colleagues dwelling on the need to improve “telling our story”.
And then, on top of that, we pour funds into fads like “microcredentials” because those “make money” 🙂
It’s so funny, it hurts.
Do we have any good data on how heavily cross-subsidized research is across institutions? Faculties? It’d be messy, certainly, but I wonder if there’d be some trends ‘loud’ enough to break through that noise (e.g. Faculties of Health Science in particular would be likely outliers)
Universities in the UK and Australia face similar pressures, although the details differ. UK and Australian universities have adopted many strategies, but the most common has been to make redundant academics in departments which don’t attract enough students to fund academics with moderate teaching loads. This is possible because tenure is not nearly so strong in the UK nor Australia, and universities now have various standard procedures for identifying academics for redundancy.
This piece, from the UK’s analogue of the U15, demonstrates that at least amongst those universities, thinking is not as advanced as that advocated by Alex.
Smith, Stephanie (2025, September 18) As cross-subsidisation falters, the UK must rethink research funding. Times Higher Education.
https://www.timeshighereducation.com/opinion/cross-subsidisation-falters-uk-must-rethink-research-funding
Ooh, looking for a fight Alex? For starters, significant benefactors of the international student bonanza were the colleges (and you know the worst perpetrators) who, last time I looked, weren’t ploughing those surplusses into state of the art research facilities. Secondly, how do universities compete for attention (and students)? Assuming there is a somewhat important “attractable” fraction of students, that is. They all provide a pretty high standard of educational opportunities. But to attract “headliner” faculty and positive PR they rely a lot on research (sciences and humanities). Delivering Business Planning in High Education courses doesn’t exactly make news. Moreover, the provinces are, as you have tattooed on your inner eyelids, responsible for education and, as an unreliable source of funding at the best of times, can only be mitigated by tickling the interests of the federal government through its research reponsibilities. Yes, that may be similarly precarious, but at least it comes with the territory if you have assembled a bunch of people to write your funding requests for you. And those tricouncil grants come with other bonuses including research support funding, Canada Research Chairs, JELFs…
Perhaps a more pressing quesiton is not whether Univerisities (capital U intended) should indulge their budgets to support research, but what national capacity is desirable/supportable by the country? We don’t seem to have that conversation, ever, and isn’t that important if oen is to attempt to apply a business plan strategy? Instead we have a predator-prey relationship where the resources available are scant and precarious and so result in a constantly teetering system despite its reliance on longer term investments. With the radical cuts to research in the US, they are still, per capita, spending 4-5 times what we invest. Maybe it will fall further but that is hardly a consolation for Canada.
Lastly, the universities are having their lunch stolen in the health research field by larger hospitals – to the degree that this is causing significant shifts in geographical concentrations. Ah, but health is only a subset of research, you might say. Yes, but combined with philanthropy and the pharma sector, health research is around half of all research dollars, especially if the large scale facilities support of NSERC is taken out of the equation.
I of course, will argue until the cows come home that research is an inherent and essential part of university “business”. It is aspirational, provocative, yields many benefits and is not a profit centre. Indeed, university (and hospital) research is a subsidy for industry and the economy. We just don’t understand the math.
I think the major problem with this business model is that it implies a separation of teaching and research, with the most productive (and therefore, presumptively best) researchers doing the least teaching. If we’re true to the idea of a university as a place where research and teaching come together, we’d want Nobel laureates to bring their star power to first-year lecture courses, not leave that to the precariat.