For the last eighteen months or so, I’ve been working on a project with colleagues Dominic Orr and Johannes Wespel of the Deutsche Zentrum für Hochschul- und Wissenschaftsforschung (DZHW) for the European Commission, looking at the effects of changes in tuition fees and fee policies on institutions and students.  The Commission published the results on Friday, and I want to tell you a little bit about them – this week I’ll be telling you about the effects on institutions, and next week I’ll summarize the results with respect to students.

The first question we answered had to do with whether or not a rise in tuition ultimately benefits higher education institutions.  Critics of fees sometimes suggest that extra fees do not in fact result in institutions receiving more money, because governments simply pull a fast one on the public and withdraw public money from the system, thus leaving institutions no better off.  Our examination of nine case studies revealed there were certainly some occasions where this was the case – Canada in the mid-90s, Austria in 2001, and the UK in 2012 – but that in the majority of cases fee increases were accompanied by stable or increased government funding.  Moreover, in all the cases where there was an accompanying decrease in public funding, it was signalled well in advance by governments, and indeed the increase in fees was deliberately designed to be a replacement for public funds. We did not find a case where a government “pulled a fast one”.

The second question we asked was how universities reacted to the introduction of fees: did they suddenly start chasing money and becoming much more sensitive to the demands of students and donors?  The answer, by and large, was no, for three reasons.  First, tuition isn’t the only financial incentive on offer to institutions; particularly if they are already funded on a per-student basis, the introduction or increase of fees isn’t likely to change behaviour.  Second, institutions won’t go after fees in ways that they think will negatively affect their prestige.  In Germany for instance, many universities have considerable latitude to raise income via teaching through continuing-education-like programs, but effectively they don’t do this, because they believe that engaging in that sort of activity isn’t prestige-enhancing.  And third, institutions often delay altering their behaviour too much because they don’t believe government policy will “stick”.  In Germany, specifically, the feeling was that the introduction of fees was unlikely to last and so there was no point in getting too invested in attracting new students to take advantage of it.

In fact, although fees in public institutions are often touted as a way to make universities more flexible and more responsive to business, the labour force, etc., this never actually works in reality, because universities are saddled with enormous legacy costs (you can close a program, but you still have to pay the profs), and have a particular self-image that means  they closely-tied to traditional ways.  What does seem to work – at least to some degree – is to allow the emergence of new types of higher education institutions altogether.  In Poland, it was only the emergence of private universities that allowed the system to take on the explosion of demand in the 1990s.  In Finland, an entirely new type of higher education institution (ammattikorkeakoulu or “Polytechnics”) was developed to take care of applied education, and accounted for 80% of all enrolment growth since 1995.

Next week: the effects on students.  See you then.