Here’s a way the new Ontario Minister of Training Colleges and Universities, Reza Moridi, could do everyone an enormous service, and win political capital at the same time: force institutions to cut back radically on automatic merit-based entrance scholarships.
Here’s the background: at some point in the 1990s, Canadian institutions hooked onto the idea of giving out entrance awards as a way of managing enrolment. It was a nice trick to help lock students in early in the admissions process – you register with me by a certain date, and I give you $1,000 (or whatever). To keep costs down, “merit” was redefined as being exclusively in terms of high school grades and awarded according to a grid – $1,000 if you had over a 90, $750 if you had an 85, etc. These were dubbed “Automatic Academic” awards by Franca Gucciardi in her 2004 paper Recognizing Excellence.
In the aughts, institutions in Ontario started getting truly stupid about this “merit” money, and an arms race broke out. Here’s roughly how it worked: one year, school X would decide it was going to try to steal some smart science and engineering students from school Y, and would raise its offer to students with grades over 85% from (say) $1,500 to $2,000. This worked, and school Y would see its yields go down. But the following year, school Y would decide to up its offer by $1000, and the pendulum would swing back! And so on, and so forth. By 2007, Ontario institutions were handing out something on the order of $70 million in this fashion, and there is every reason to think this amount has increased since then.
There is no durable way an institution can get out in front of the pack in such an arms race – others would always match the awards, and an equilibrium would be restored. All institutions are making themselves worse off because their net tuitions are all declining, yet no one can disengage because they are afraid they would lose share to others. And into the deal we get a complete devaluation of the word “merit” because institutions are giving these awards to about 70% of incoming freshmen.
This is a classic collective action problem. And collective action problems have solutions: imposed government rule-making. In this case, the Government of Ontario should restrict the ability of universities to give away money based on grades alone to, say, 1% of what they take in via tuition. If they want to run more complicated merit schemes – things that take into account service, innovation, and what have you – great. Let ‘em knock themselves out (they won’t of course, because those take actual effort to organize, but whatever). Or, if they want to give out more money based on need, that’d be OK too. Just end the insanity around academic awards.
You think universities would oppose this on grounds of competitiveness or institutional autonomy? Think again. They’d love for someone to get them out of this arms race, because they’re clearly incapable of doing it themselves. And of course the Ontario Undergraduate Student Alliance has already called for essentially the same thing, so the student constituency is already covered off.
So, how about it Dr. Moridi? Are you up for a quick win? Just end the merit arms race.
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Disengaging from the automatic entrance scholarship ‘arms race’ is, of course, remarkably difficult to do if it’s left to the institutions to determine the way out. CASFAA board members were talking about the folly of this competition between universities in the late 80s and early 90s, when these awards were being built by the early adopters. We also raised the topic at our conferences, and I remember a presentation on the topic where everyone in the audience agreed that we should stop this nonsense and agree on a solemn pact. We also realized just how futile that effort would be, so all of our talk came to nothing more than that.
I think you’re right; disengaging from the competition in any given province would require the intervention of the provincial ministry. And, obviously, disengaging across the country would require the intervention of many ministries.
I wonder about your suggestion concerning the one percent rule. If the ministry is going to step in, why not simply disallow the use of tuition (or operational budget dollars) for the purpose of merit awards. This would still allow universities the ability to help students in need with need-based bursary plans, but it would force them to fund all merit-based awards from private donations.
Hi Alex,
This seems like a very bizarre argument. How is it bad to have universities competing for good students? How can I interpret this proposal you’ve made as anything other than Adam Smith’s warning about people in the same industry meeting in order to raise prices against the common good? How is it a ‘win’ for students to tell uni’s they can’t compete for them?
Worse, if uni’s want to compete for good students and you outlaw price competition, the result is that they will end up competing in other dimensions which may be still worse–building fancy dorms or spa/gyms in order to attract students.
This seems to be a very bureaucratic–communist approach to things. Outlawing ‘wasteful’ competition? Really? Has Alex Usher been replaced by Galbraith of the ‘New Industrial State’ era?
I say, bring on the competition for good students. That’s good for students, and keeps the supply side (universities) on their toes. That’s what competition does, right?
“This is a classic collective action problem. ”
Soda industry profits are too low. Coke and Pepsi are spending too much discounting their soda for consumers. Clearly, we must collude to stop price competition and raise prices so that soda industry can be awash in cash and consumers will pay much more.
–> How is this a win for soda consumers?
My basic point here is that you seem to have the goal in your analysis of maximizing the producer’s surplus of the university sector. Why is that the right goal?
Hi Kevin,
Why is price competition the only thing we should be concerned about? How about using some of that money to invest in educational programs at the institution? Why can’t the institutions compete on quality or student services?