Higher Education in Canada
Charles M. Beach, Robin W. Boadway and R. Marvin McInnis
(eds.),
2005 (Paper ISBN: 1-55339-070-9
$49.95) (Cloth ISBN: 1-55339-069-5 $90.00)
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| Contents | |
| Introduction | |
| Preface | . . . | vii |
| Introduction Charles M. Beach, Robin W. Boadway and R. Marvin McInnis |
|
|
| Section I: Introduction: Key Issues in Postsecondary Education | ||
| Key Issues Currently Facing American Higher
Education Ronald G. Ehrenberg |
|
|
| Incentives Facing Canadian Universities: Some Possible
Consequences David Laidler |
. . . |
|
| Section II: Role of Colleges and Universities and the Value of Postsecondary Education | ||
| The Case for Giving Greater Attention to Structure in
Higher Education Policy-Making Michael L. Skolnik |
. . . |
53 |
| Total and Private Returns to University
Education in Canada: 1960 to 2000 and in Comparison to Other
Postsecondary Training Herb Emery |
. . . |
77 |
| Universities as Drivers of Regional and National
Innovation: An Assessment of the Linkages from Universities to
Innovation and Economic Growth Julian R. Betts and Carolyn W.B. Lee |
. . . |
113 |
| Section III: Role of Government in Financing and Overseeing Postsecondary Education | ||
| "Muddy" Data: University Financing in Canada Ken Snowdon |
. . . | 161 |
| Financing Higher Education: Commentary on the 2004 UK
Higher Education Act Nicholas Barr |
. . . | 181 |
| Collaborative Federalism and Postsecondary Education: Be
Careful What You Wish For David M. Cameron |
. . . | 205 |
| Demystifying Quality Assurance David Leyton-Brown |
. . . | 229 |
| Thoughts on Financing Postsecondary Education Clιment Lemelin |
. . . | 249 |
| Section IV: Problems Faced by Postsecondary Education Sector in Canada | ||
| Family Income and Participation in Postsecondary
Education Miles Corak, Garth Lipps and John Zhao |
. . . |
255 |
| Who Goes? The Direct and Indirect Effects of Family
Background on Access to Postsecondary Education Ross Finnie, Eric Lascelles and Arthur Sweetman |
. . . |
295 |
| Do the Maclean's Rankings Affect University
Choice?: Evidence for Ontario Richard E. Mueller and Duane W. Rockerbie |
. . . | 339 |
| Rising Tuition and Supply Constraints: Explaining
Canada-US Differences in University Enrolment Rates Nicole M. Fortin |
. . . | 369 |
| Section V: Student Financing and Postsecondary Education | ||
| Recent Changes in Effective Tax Rates on PSE Level Human
Capital in Canada Kirk A. Collins and James B. Davies |
. . . |
417 |
| Comments John B. Burbidge |
. . . |
453 |
| Who Uses RESPs and Why Kevin Milligan |
. . . | 467 |
| Meeting the Need: A New Architecture for Canada's Student
Financial Aid System Ross Finnie, Alex Usher and Hans Vossensteyn |
. . . | 495 |
| How Best to Fund Postsecondary Education: A Graduate Tax? H. Lorne Carmichael |
. . . | 537 |
| Section VI: Wrap-Up Panel on Alternative Perspectives, Directions and Innovations | ||
| Financing Quality in Ontario Universities Peter George |
. . . |
557 |
| The Challenge, the Issues? Elizabeth Parr-Johnston |
. . . |
569 |
| Higher Education in Canada: Perspectives and Directions
for the Future Douglas Auld |
. . . |
573 |
| Report on learn$ave and the Millennium Pilot
Project John Greenwood |
. . . | 581 |
| University Accountability John Chant |
. . . | 587 |
| Contributors |
| Return to Top |
INTRODUCTION
Background Context and Major Issues in
Postsecondary Education in Canada
Higher education has been under strain for a number of years in
Canada
and
has reached the point where the system is fraying. Years of underfunding
have threatened the quality of university education and research. Large
increases in student tuition levels have threatened access to a
university
education in Canada and dramatically increased student debt levels upon
graduation. And there is a looming shortage of new faculty to sustain
the
system as large numbers of older faculty retire over the next ten years.
Governments in Canada and abroad are re-examining their policies
towards higher education. Ontario has recently set up the Rae Review to
report in January 2005 on the design and funding of Ontario's
postsecondary education system, the largest in Canada. This follows the
earlier oft cited Smith Report, Excellence Accessibility
Responsibility:
Report of the Advisory Panel on Future Directions for Postsecondary
Education (Smith, 1996). Other comprehensive reviews have been
recently
undertaken in the United Kingdom (The Future of Higher Education
[2003]
White Paper on postsecondary education reform), as well as in Australia,
New Zealand and the Organisation for Economic Co-operation and
Development
(OECD). In 2004, the United Kingdom passed legislation to bring in major
changes to student support and the funding of their university system.
In
the United States, cut-backs in state budgets have forced re-examination
of how public universities there are funded and their implications for
access, and a full issue of the Journal of Economic Perspectives
has been
devoted to a symposium on "The Economics of Higher Education" (Winter
1999).
Several major trends or factors are driving this re-examination
and are discussed in the papers in this volume. Governments and analysts
are paying much greater attention to possible linkages (and the channels
through which these linkages operate) between growth of colleges and
universities on the one hand and innovation, productivity, and economic
growth on the other, so a healthy postsecondary education sector is
viewed
as a contributor to prosperity and economic growth in the country, both
locally and to the economy at large. As the economy shifts away from
traditional primary sectors and old-line heavy manufacturing,
individuals
increasingly see the growing need of a postsecondary education to get
ahead and make use of the new job opportunities opening up in the
economy,
so that college and university enrolment rates among university-age
cohorts have been steadily rising in Canada, the United States, and
other
industrialized countries. Thus even for a stable population, there is a
growing demand for college and university training. Between 199091 and
200001, university participation rates among Canadians aged 18 to 24
rose
from 15.4% to 18.4% (specific figures in this section come from the
CAUT
Almanac of Post-Secondary Education in Canada, 2004). There is also
a
great deal of evidence across all
these countries that the graduates of colleges and universities
benefit
substantially from their education through better jobs, higher earnings,
and less time unemployed. So in a period of severe pressures on the
public purse, graduates should be expected to help shoulder the costs of
their postsecondary education. Studies have also documented a growing
shift of emphasis in university research towards science, technology,
and
medical areas and of rising costs of equipment and personnel in these
areas. Universities thus face rapidly rising costs of just maintaining
quality of research and training. If external research funding does not
fully cover these costs, then incentives arise to reallocate internal
funds to support these activities which can have the effect of
increasing
student-faculty ratios and reducing quality of education elsewhere in
the
universities.
In Canada itself, additional factors are at work. Provincial
government budgets are being continually squeezed by the growing costs
of
health care and other infrastructure and social needs while trying to
maintain competitive tax rates, so the proportion of their budgets being
allocated to higher education has been declining for some years. This
has
meant the real value of government funding per capita to universities
has
markedly declined and the costs of program delivery are increasingly
being
borne by students through rapidly rising tuition fees. At the same time,
provincial student support programs have become less generous, student
financing options are becoming complex when linked with federal sources,
and the students are increasingly turning to private sector borrowing
and
are graduating with dramatically higher debt loads than even a few years
ago. Canadian universities face competition from United States schools
for
top talent and have experienced a considerable brain drain of their best
scholars to the United States as they have been hobbled by ongoing
provincial funding cuts and a low Canadian dollar. Provincial funding
rules are also geared to squeezing more students into the classrooms
rather than improving the quality of the education that is delivered,
and
support uniformity of product rather than differentiation and
specialization of universities into different areas or missions. There
is
also a large number of older faculty at Canadian colleges and
universities
who will be retiring over the next decade and the Canadian postsecondary
education system is simply not producing enough replacements for them.
Where the needed new faculty will be found is a very severe problem that
has not at all been adequately planned for.
A number of recent studies and commentaries have highlighted
various of these concerns. In the United States, concern has been raised
about the growing commercialization and marketing of universities (Bok,
2003; Kirp, 2003). In the United Kingdom, The Economist (2002,
2004) has
repeatedly highlighted the situation of British universities. In Canada,
a
flock of recent books has drawn attention to the growing problems in
Canadian universities (Axelrod, 2002; Bercuson, Bothwell and
Granatstein,
1997; Laidler, 2002, including Paul Davenport's commentary on the
challenge of accessibility and quality, 2002; and Pocklington and
Tupper,
2002), an entire issue of Policy Options (September 2003) has
been
devoted
to papers on concerns about Canadian universities (e.g., Shapiro, 2003),
and Maclean's magazine, the source of Canada's annual university
rankings,
has repeatedly raised the alarm about declining quality on Canadian
campuses (e.g., Johnston, 2002a,b).
The major problems facing higher education in Canada, and the
motivation for the research studies appearing in this volume, can be
gathered under three broad headings: underfunding, student access, and
faculty shortage. First is the funding shortfall under which the
postsecondary sector and especially universities in Canada have
been
operating for more than a decade now. Provincial funding transfers to
universities and colleges have significantly declined in real
(inflation-adjusted) per-student terms, in per capita terms, as a
percent
of the gross domestic product (GDP), and most markedly relative to
public
universities in the United States. Indeed, funding levels in Ontario
have
slipped from being among the highest in Canada to being at the bottom
among all provinces and among the lowest across all ten provinces and 50
states in the United States. Since the early 1980s, real per-student
funding transfers in Canada as a whole have fallen by about 30% while
increasing by about 20% in the United States. In Ontario, for example,
between 199293 and 200203, provincial (real dollar) transfers to
colleges and universities per full-time equivalent (FTE) student
enrolment
fell by 36%. As a result, classes are overcrowded, numbers of full-time
faculty have declined or barely held constant, student-faculty ratios
have
shot up dramatically, and methods of teaching have shifted to
accommodate
large student numbers, so that quality of undergraduate education has
noticeably declined. For example, between 199192 and 200001
university
students per full-time faculty rose in Canada from 17.5 to 22.5 while
the
number of full-time university teachers declined from a peak of about
33,000 to under 30,000 by the late 1990s. Universities could not offer
positions to all those students seeking entrance and, with student fees
being capped, rationing of positions has been done on the basis of
entrance grades, so that entering grade point averages have risen to
historic levels, particularly at the most selective institutions.
Growing
Canada-US faculty salary gaps and reduced resources and opportunities in
Canada have resulted in many of the best faculty being attracted to
positions in the United States especially in the mid-1990s and
especially in the most internationally marketable disciplines such as
computer science and economics. When scholars left the country, moved
out
of academics or retired, their positions were often closed down in the
name of salary savings. Many of the faculty leaving or retiring were
experienced researchers and supervisors. There are distinct signs of
slippage in the quantity and quality of research produced again in the
most marketable disciplines. As the economy prospered and offered lots
of
jobs to university graduates, fewer students carried on for doctoral
training with an eye for academic work. In order to be sustainable
without
continuing severe declines in quality, clearly greater resources need to
be directed to the operations of the postsecondary education sector in
Canada.
The funding environment also came with non-neutral incentives.
Universities faced tuition caps and uniform funding rules which
inhibited
differentiation of focus and specialization of programs, so institutions
could not readily compete on the basis of price and product delivery and
concentrate on what they could do best. Recent federal research funding
has largely been concentrated in the science/technology/medical areas
and
not in the humanities and social sciences where most students are
located.
Federal programs such as the Canada Foundation for Innovation or
provincial programs such as Ontario's Super-Build and its Research and
Development Challenge Fund require universities to find funding partners
or matching grants such as from the private sector (so-called
public-private partnerships) or internal funds. These have the effect of
privileging applied practical scientific research, diverting funds away
from fundamental and long-horizon research, leveraging university
activities to become more aligned with specific corporate research
priorities, and shifting resources from non-science/technology/medical
areas which have traditionally provided liberal education training and
where most undergraduates and faculty are located. Granting council
policies that do not fully cover overheads and indirect costs again
require universities to short-change undergraduate training in order to
ease up funds for prestige research projects. It has also long been the
case that it is easier to raise funds for bricks and mortar than for
people, programs, and general operating expenses.
The second broad set of issues that needs to be addressed revolve
around student access and affordability of a postsecondary education. On
average, tuition fees have more than doubled over the past decade in
Canada, with even higher increases in some provinces. Between 199192
and
200304, average undergraduate arts tuition rose by 122% for Canada as
a
whole, by 138% in Ontario and by 187% in Alberta. But the job
opportunities and income benefits of a higher education are so great
that
it is still an excellent investment in the future to graduate from a
college or university. So the problem is how to allow all qualified
students the opportunity to gain these benefits in spite of the greatly
increased expense. The worry is that a postsecondary education may
simply
be unaffordable for students with the requisite ability, so the higher
fees (and associated costs of books, computers, residence fees, etc.)
will
limit access. As well, students from low-income households may face
psychological barriers to taking on heavy debt loads in order to meet
these high costs. Comparing Canada and the United States, Swail (2004)
finds that, while the postsecondary participation rates are very similar
between the two countries, university participation rates are
considerably
higher in the United States (29.4 versus 22.8% in 2000). He also finds
that, while costs of attendance at universities are still considerably
lower in Canada, student aid (from all sources) covers only 48% of the
bill in Canada compared to 60% in the United States, so that
out-of-pocket
expenses to be covered by the student (and family) are 25% higher in
Canada than in the United States.
This situation has both an efficiency cost to the economy if some
of the most productive members cannot attain their full potential, an
equity concern if access is effectively unavailable to the poor and even
middle class, and an individual dimension if one of the most traditional
channels of personal advancement and improvement and social inclusion
falls into jeopardy. Modern advanced economies are all experiencing a
rising demand for postsecondary education by a growing fraction of their
university-age workforce, and now is not the time for Canada to throttle
down this advance by restricting student access through unaffordable
fees.
This is not to say that if postsecondary graduates are the principal
beneficiary of such training, they should not make a major contribution
to
covering its cost. Indeed, it has been argued that making tuition fees
the
major source of postsecondary funding would make universities and
colleges
more responsive to student needs and work to provide better quality
programs as they compete for student revenue.
The issue should be how to overcome credit constraints and help
students to afford a postsecondary education. The current system of
overlapping provincial and federal student support programs is
inadequate
to the current level of fees, overly complex, and in the case of
Ontario's
Student Assistance Program (OSAP) has faced substantial funding cuts and
more restrictive eligibility criteria. A number of suggestions should be
examined. While again we need to be mindful of overlapping
federal-provincial roles, one should work towards a simpler student
funding program that would include, perhaps, a mix of grants,
fellowships,
and publicly provided loans that would meet certain criteria. For
example,
initial funding for each eligible student could be in the form of a
grant
(with fellowships available for the most able) and additional support in
the form of government loans. Repayment conditions on the loans could be
made income-contingent and payable by graduates. The size of the initial
grant, for example, could be means-tested for family income as reported
in
income taxes, so students from poorer family backgrounds benefit from a
degree of progressivity in the system. Just such a system has been
passed
into law this year in Great Britain and extensive discussions have
undertaken on variations of such a scheme.
The relationship between colleges and universities should also be
reexamined. Colleges (with their lower fees and less academic admission
requirements) could serve some students as conduits into the university
system where they might not go in directly. This could involve
rethinking
the greater differentiation of programs, possibly wider eligibility for
student support at colleges, and broader university recognition of some
college programs. Income-tax-based educational saving incentives, such
as
the current Registered Education Savings Plan (RESP), could be enhanced,
again perhaps with a progressive component. Finally, Canada could do a
better job of attracting international students and enhancing
foreign-exchange programs so that Canadian schools and programs become
better known internationally.
The third major concern is the challenge of faculty renewal over
the next decade. Retirement of the large wave of faculty hires in the
1960s and 1970s has already begun, indeed it began early because of
early-retirement buy-out packages offered by universities in the name of
salary savings in the 1990s. On the other hand, rising numbers of
postsecondary students are being driven by the demographics of the
baby-boom echo and ongoing large immigration flows, especially in the
large cities, and by rising Canadian participation rates in
postsecondary
education. Projected demand figures for new faculty have been estimated
at
30,000 to 40,000 by 2020. But where are the new faculty to come from?
While the number of undergraduates has burgeoned, the number of doctoral
degrees awarded by universities in Canada over the last decade has
barely
remained constant and in many disciplines has significantly declined
since
PhD-training is very resource-intensive. Of these numbers, a large
fraction of Canadian-produced PhDs have moved to the United States where
there has been much more faculty hiring due to greater resources at
American universities and to a stronger and slightly earlier baby-boom
echo than in Canada. Also, a substantial proportion of new PhDs in more
marketable disciplines move out of academics to better job opportunities
elsewhere. Thus there is a problem of retention as well as production of
PhDs in the Canadian academic sector. Also as already noted, in the
fields
where most students and faculty are, funding incentives have been to
shift
resources away from them, and many graduate-training capabilities in
these
programs have been significantly weakened. Recreating good
graduate-training programs does not happen over night and may take years
of effort to rebuild. American schools have already started on renewal
programs to hire new young faculty, so international competition for new
young scholars will be a challenge to Canadian schools.
Incentives and initiatives need to be put in place as soon as
possible to attract good students into PhD programs in Canada and to
help
retain them in academics once they graduate. For example, the number and
value of doctoral fellowships could be increased and they could be made
more readily available to non-Canadian citizens so as to attract more
international graduate students to Canadian universities. If some form
of
income-contingent loan system is brought in, more generous and flexible
terms could be made available to those who continue studying for a PhD
and
enter academic positions (Great Britain currently does this to attract
young people into the teaching profession). More generous university
funding grants could be directed to graduate faculties or graduate
programs, so it becomes worthwhile for universities to build up their
capacity to run such programs.
The papers in this volume have been selected to throw light and
further policy debate on these three major sets of issues.
Overview of the Contributing Papers
In setting the scene, the two contributions by Ronald Ehrenberg and
David
Laidler identify some key issues facing higher education in the United
States and incentive concerns facing universities in Canada. Academic
trends in the United States provide a background academic environment
within which Canadian schools must operate and compete. Ehrenberg points
out four major trends affecting higher education in the United States.
Tuition and costs in the postsecondary education sector have for some
while been rising at rates significantly higher than the rate of
inflation. The increased costs are being driven by higher costs of
technology, student services and financial aid, increasing institutional
contributions to scientific research and the ongoing withdrawal of state
support to public schools of higher education. Second, the share of
state
governments' budgets going to public academic institutions has declined
over time as states devote a greater share of their higher education
expenditures to providing grant aid directly to students, and
increasingly
this aid is non-needs based. This affects who gets higher education and
increasingly students from lower-income families are being financially
forced to enter higher education through public two-year colleges rather
than directly into universities. Third, scientific research in areas
such as genomics, advanced materials, and information technology has
grown in importance in American universities with real average research
and development expenditure per faculty member doubling since 1971. Over
the same time, average institutional expenditures per faculty member
paid
out by the universities themselves has more than tripled. So individual
academic institutions are bearing a greater share of the rising costs of
the scientific research activity. In order to do so, they have increased
student-faculty ratios and substituted part-time and full-time
non-tenure-track faculty for tenure-track faculty. Ehrenberg's work
suggests that these changes result in higher undergraduate attrition
rates and lower student graduation rates, not signs of increased quality
of undergraduate training. Fourth, a major problem facing American
higher
education is where the next generation of faculty will come from to
replace the wave of on-coming retirements since the total number of PhDs
produced in the United States has been declining and the share of
Americans among out-coming PhDs has also been declining, and quite
dramatically so in key science areas. Consequently, there will be a
rising
demand by US institutions to hire faculty from abroad to fill their own
needs.
David Laidler focuses on incentives facing Canadian universities
within the current funding environment. He notes the shift in basis
behind
government funding of universities towards arguments around the
"knowledge economy" and an economic productivity agenda. While such a
linkage has yet to be convincingly demonstrated in the research
literature, this shift in argument has resulted in a broad shift in
funding emphasis towards science and technology fields. It has also
created worrisome incentives for resource reallocations within
universities as emphasis is focused on applied and results-oriented
research, interdisciplinarity and a corporatist agenda as government
research and building grants require matching funds from other sources
such as the business sector. Science and technology research also
involves
substantial overheads and maintenance budgets which result in resources
being drawn away from elsewhere within universities. This sets up
incentives to operate humanities and social science programs, possibly
at
lower academic standards as "cash-cow" sources of internal subsidies to
support activities favoured by governments and donors.
Laidler also considers ways to foster greater efficiency in
resource allocations in universities. Allowing tuition revenue to become
the main source of universities' income would allow students to seek out
good quality academic programs and universities to compete more directly
to offer such programs as a counterweight to current reliance on
government and business sectors in setting universities' priorities.
Allowing fees for different programs to better reflect actual program
costs while allowing students to choose among these differently priced
programs would end up allocating resources within universities
efficiently
without the need for central or ministry direction. This would also
foster
greater differentiation and specialization across different universities
with students playing a significant role in this resource-allocation
process. If the higher tuition fees in such an approach were addressed
by
some form of income-contingent loan scheme, the scheme would also need
to
be supplemented with student grants that vary with the students' income
background so that qualified students from low-income backgrounds are
not
priced out of the system by unaffordably high tuition levels.
Michael Skolnik in his paper reminds us that, in the recent
attention to performance and financing of postsecondary education, an
earlier concern for what should be the make-up of the postsecondary
sector
by type of institution may have slipped out of view. This issue is now
reasserting itself as governments are being pressured to alter the
structure without consideration of the whole picture. Skolnik draws our
attention mainly to two issues. One is accrediting the granting of
degrees
by private, mainly for-profit institutions. The other is the blurring of
the lines between universities and community colleges. Both are being
driven by demands for more technically sophisticated, market-oriented
education in the postsecondary sector.
Throughout the world, and notably in Canada, there is a burgeoning
demand for accreditation and technically-sound, marketable training at a
level sufficiently advanced to claim degree status. Private, for-profit
organizations claim to be able to provide that. Governments have come
under pressure to allow them, and first steps are being taken in several
Canadian provinces.
The second issue concerns the division of postsecondary education
between traditional universities and community colleges. Two models of
the
latter have been pursued. British Columbia has opted for a model that is
well-developed in the United States in which the colleges offer a
cheaper
and more convenient way of providing the first two years of
university-level education. They accord a modest accreditation to some
of
their students and pass others on to the universities to complete the
baccalaureate. An alternative model has been pursued by Ontario and
other
Canadian provinces. There the colleges were intended to offer more
technically-based, career-oriented training beyond secondary school.
Some
of the programs have been eminently successful in doing just that. Yet,
overall, college graduates appear to have lower earnings than university
graduates. That has led some critics to argue that Ontario, especially,
has overinvested in colleges and underinvested in universities. But the
debate does not adequately take into account that universities have long
had a strong career-orientation and still have a lock on preparation for
the traditional, high-paying professions medicine, law, engineering,
and
accountancy. The colleges have picked up on the technical side of career
preparation. The question remains: How far should the general education
go
of students who wish to pursue fairly specific technical careers? Many
students should perhaps do two years of liberal arts at a university and
then transfer to a college for technical training. That would strengthen
the claim that colleges would like to make on the offering of
baccalaureate degrees.
At present, the colleges turn out some well-trained,
technically-oriented graduates. They also keep up their enrolments by
accrediting students in trade courses that formerly were offered by high
schools and by proprietary colleges. The large number of these
lower-level
accreditations serves to considerably depress the reported earnings of
college graduates. For many students the college has been made the
vehicle
for a significant economic transfer as it provides publically subsidized
training of a sort that formerly was done, for a price, by the private
sector. The upshot is that the colleges are providing a mix of outcomes
that have not yet been fully evaluated by careful economic analysis.
As Skolnik points out, the assessment of resources directed to
postsecondary education calls for good estimates of rates of return to
investment in both university and community college education. For
economists, the natural way to look at the allocation of resources to
higher education is in an investment framework. It focuses on whether
the
rate of return to resources invested in college and university education
compares favourably with what might be returned in other uses. A
complication is that the higher education sector turns out two products
educated graduates (human capital in current parlance) and new
knowledge.
These are joint products and there is no unambiguous way of separating
the
costs of the two functions. The more developed literature concerns the
rate of return on instruction. That is reviewed in the paper by Herb
Emery
who offers an overview and synthesis of a relatively large number of
estimates of the rate of return to postsecondary education.
Emery tackles the subject first by examining the component
elements of rate-of-return estimates. Those are the employment and
income
benefits to graduates, and the costs of becoming graduates. Previous
studies have almost all found postsecondary education to be worthwhile
in
purely economic terms. Emery's concern is more with trends. Has the rate
of return on higher education declined as the number of graduates
increased so greatly? His answer is "no". The returns to university
education may have sagged a bit after the big enrolment increases of the
1960s and early 1970s, but in recent years they have risen. A rise in
the
ratio of earnings of university graduates to those who had only
completed
high school has enhanced the income gains from a university degree while
at the same time lowered the opportunity cost of acquiring the degree.
From the point of view of the individual prospective student, a
university
degree is a worthwhile investment and has become even better in recent
years. That is, the private rate of return to university education
remains
strong. The labour market has not, evidently, become overly-crowded with
university graduates, as some observers have supposed.
University education is quite heavily subsidized. Tuition costs
are well below the overall costs of instruction. Hence, what Emery calls
the "total" returns to higher education are lower than the private
returns. These total rates of return are still well above what could be
obtained on alternative investments generally and so publically
supported
higher education appears still to be a worthwhile use of resources. The
qualifications that one might apply to Emery's calculations suggest that
the, albeit healthy, rates of return that he reports may be lower-bound
estimates. There are two reasons for this. One is that there are
consumption benefits to a university education. Few who have had the
experience would deny that it carries with it considerable enjoyment.
Those benefits are overlooked in the calculation. The second reason is
that, at least in the opinion of many observers, there are intangible
and
probably unmeasurable benefits to society of having a highly educated
population. A skeptic might want to see a more careful and thorough
articulation of those supposed benefits. They do not lie just in the
provision of highly educated manpower to private and public enterprises.
Those benefits are very largely captured by the educated persons and are
counted in the income gain. What is also involved are uncounted
spillover
effects. One suspects that many of the claims made for them are
overblown.
Nevertheless, they are frequently claimed by commentators on higher
education so we should presume that they have positive value at least.
If
so, the true "social rate of return" on university education would be
above the levels that Emery reports as the "total rate of return". His
principal conclusion is that, however one looks at it, university
education continues to be a worthwhile investment.
Much less has been done in the way of estimating rates of return
to community college education. College programs are highly varied and
so
it is especially difficult to generalize about them. Emery makes a stab
at
it by using very aggregate information. He points out that in recent
years
public funding has shifted away from universities towards colleges. This
has been in response to a widespread perception that college programs
are
"more relevant", particularly as viewed in the labour market. The rates
of
return reported by Emery do not support that. Universities still appear
to
be the superior investment. What we do not know is the extent to which
the
overall rate of return to a college diploma is pulled down by the
inclusion of shorter, vocational courses that used to be offered by high
schools, such as secretarial training. There are other popular, but
relatively low-paying programs offered by the colleges, such as infant
daycare and hair dressing, although the shorter duration and lower costs
of some of those may offset the smaller income gain. There are also some
college programs that may be as remunerative as university education.
What
is seriously needed is a thorough study of the outcomes of narrowly
specified college courses.
Universities also produce new knowledge. It is widely recognized
in the economics literature that therein lies the major rationale for
their subsidization. That much is well known, although it has not yet
effectively permeated Canadian policy on the support of universities.
The
external benefits of university research accrue to the nation as a whole
(or for that matter to the world as a whole). That should make the
support
of research a federal government responsibility. It should be pointed
out
that the facts of the case in Canada have not really been carefully
explored. That could well be the topic for further research.
Quite apart from the broad national, or even international,
benefits from university research, there has been increasing recognition
that university research may have important local benefits as well. That
is the topic taken up by Julian Betts and Carolyn Lee in their
contribution. They identify five avenues or pathways by which
universities
may benefit the local economies in which they are situated: as a trainer
of skilled young graduates; as an innovator through the direct
generation
and commercialization of knowledge (working fairly independently of the
private sector); as a partner to the private sector through providing
technical know-how, consulting advice or joint ventures; as a regional
talent magnet that increases the general attractiveness of a region to
bringing in talented and innovative personnel; and as a facilitator to
foster networking among those involved in the local high-tech community.
The last four of these involve primarily the role of universities as
producers of new knowledge. The first is that universities may
contribute
to the local supply of highly educated manpower. The authors review the
evidence for each of these pathways and find extensive circumstantial
evidence supporting the four knowledge pathways "in short,
universities
appear to matter importantly". But the evidence leads them to be
skeptical
about the training effect. The mobility of highly educated manpower is
high, and in the absence of other attractions, local universities see
their graduates readily drain away to other locales. Universities' local
impact, then, is largely through their research function.
However, Betts and Lee point out that there appears to be no
single or simple recipe for success. They put considerable emphasis upon
the interaction between cutting-edge research and the transmission of
knowledge to local workers and entrepreneurs. They draw evidence from
the
experience of the successful case of San Diego, California, where the
University of California, San Diego is located. More broadly, in the
United States, universities have attracted talent at the faculty level
who
have played an important role in local industrial development. This has
often been by spawning new enterprises through the entrepreneurial
activities of either faculty members themselves or persons with whom
they
have direct interaction. Just having a research university is not
sufficient. Some American universities have stimulated their nearby
economies much more than others. There are some great research
universities that have had little local impact in the way of generating
new, high-tech, economic activity. Others have done famously. Quite
evidently it is not research output per se that matters but the
interaction between research success and other factors "such as smart
sources of financing that understand the needs of emerging high-tech
firms, managerial talent savvy in these industries, as well as the
scientists and engineers who innovate in these firms. Technology
commercialization is a very different beast than knowledge creation; a
region needs both to survive. To be blunt, if anything, there is
a
tendency in the literature to perhaps overplay the role of universities
and underplay the role of the private sector in generating innovative
technology clusters".
The postsecondary education sector relies heavily on both the
federal and provincial governments for financial support. This support
comes in a variety of ways and has a significant influence on the way
that
postsecondary educational services are delivered. The next set of papers
address various dimensions of the role of governments in postsecondary
education. A prerequisite for any assessment is to have accurate and
transparent information on the sources and adequacy of finance, a topic
that is explored by Ken Snowdon for the university sector. He begins by
expressing caution about the quality of data that is available on
university financing. This generally leads to an understatement of the
already precarious financial position of universities. For example,
costs
of raising trust revenues and the requirement for a portion of fee
increases to be devoted to student aid have not been included:
university
finances are in worse shape than they appear to be. This leads him to
plea
for better financial accounting of university financing, with more
consistency imposed across institutions and sources of finance.
Nonetheless, some trends and stylized facts can be discerned from
the data that is available. Snowdon focuses on three funds: operating
funds, trust funds, and research funds. Operating funds, which in Canada
are mostly provincial grants and tuition fees, have grown considerably
less than research funds, and much less than trust funds. By source of
funds, federal finance, which is largely devoted to research support,
has
increased relative to provincial government finance, which tends to
support operating expenditures. A serious concern of this is that
research
funding carries with it additional overhead and indirect costs that
encroach on operating costs. This, combined with the fact that
provincial
operating grants are not even keeping up with inflation, puts
considerable
financial pressure on the university sector. Moreover, as governments
provide more and more financing to the universities, the demand for
accountability increases. Snowdon argues that universities would do well
to take it upon themselves to improve their financial reporting.
The role of the federal government in postsecondary education and
the manner in which federal funding has been made available are
chronicled
in the contribution by David Cameron. Despite the fact that education is
a
provincial responsibility in the Canadian federation, the federal
government has over the postwar period used its spending power to
provide
financing directly to universities and to students, and indirectly via
transfers to the provinces. The national interest in postsecondary
education arises from the fact that there are interprovincial spillover
benefits from postsecondary education. Students and graduates are mobile
among provinces: residents of any one province may attend postsecondary
institutions in any other, and graduates of institutions in one province
can seek employment in any other. Moreover, research undertaken in one
province creates knowledge that is available to residents in other
provinces. More generally, the constitutional commitment of provincial
and
federal governments to equality of opportunity implies a federal
interest
in postsecondary education.
Federal support has evolved over the years. Originally, the
federal government made direct contributions to postsecondary
institutions
and operated training programs. During the 1970s, direct contributions
gave way to virtually unconditional grants to the provinces in support
of
post-secondary education, and later the federal government began to
withdraw from the training field in favour of the provinces. More
recently, unconditional grant support has waned, but the federal
government has increasingly taken an array of more direct initiatives.
These include direct support for students (e.g., the Canada Millennium
Scholarship Foundation), tax assistance for educational financing,
enhanced student loans, the competitive funding of faculty research
chairs, and increased support for research and infrastructure.
Cameron cautions that, with the federal government having set the
agenda for universities in recent years and the universities having
willingly accepted that, the provinces might have ceded too much
responsibility. In the end, it is they who have the legislative
responsibility for postsecondary education, and it is they who will
ultimately bear the cost if federal funding takes another abrupt turn
for
the worse.
Accountability for university spending is the theme of David
Leyton-Brown's paper, with the focus on quality assurance. He argues
that
quality assurance is a necessary feature of university governance. Not
only does it serve as a check that value for money is being achieved,
but
it also encourages those persons, units or institutions being evaluated
to
discover ways of improving the work they undertake and the programs they
offer. He sets out in a systematic way the role of quality insurance,
the
activities to whom it should apply, the authority responsible for
quality
assurance, and the elements of good quality-assurance processes,
including
best practices. Above all, quality assurance will work best when those
being evaluated believe in the benefits of the process and participate
in
it with enthusiasm rather than resentment.
Problems of financing postsecondary education are universal, and
lessons might be learned from experience elsewhere. A particularly
pertinent case is that of the United Kingdom, where universities have
faced comparable funding problems to those in Canada. Nicholas Barr
outlines the recent comprehensive reforms undertaken in the UK to
improve
the quality of the universities and their financial viability and to
improve student access to the postsecondary system, and to do so in a
way
that is fair to those who do and do not attend while ensuring that
financial constraints do not preclude able students from attending. His
discussion reviews the lessons from the UK debate. The approach taken by
the reforms is multi-faceted. It reduces the central direction of
universities by allowing them freedom to set their own fees. It commits
more public resources to universities while at the same time allowing
fees
to rise. Most significantly, it introduces an income-contingent loan
system whereby a generous amount of loan financing is made available so
that students can obtain upfront funds to cover the cost of fees and
living costs, with repayment based on a fixed proportion of earnings
after
graduation. Barr identifies a well-designed student loan program as
having
three core characteristics: income-contingent repayments, loans that are
large enough to cover all fees and student living costs, and a repayment
interest rate that is broadly equal to the government's cost of
borrowing.
Finally, there are supplementary grant funds and fee remissions
available
to students from low-income families to ensure their access. He sees
income contingency of the loan repayment as fundamental to the politics
of
implementing such a reform. People making low earnings after graduation
make low or even no monthly repayments, so that repayments operate like
an
income tax or payroll deduction. Student loans should thus be regarded
not
as a lump-sum debt but as a tax on future earnings. Barr outlines
carefully the rationale for such a system and compares it with
alternatives. He comes down foursquare in favour of the UK reforms.
In a commentary on the session, Clιment Lemelin offers some
cautionary views about income-contingent loan schemes such as that
introduced in the United Kingdom. He wonders, for example, if the scheme
is self-financing as an insurance scheme would be, and if not, who is
responsible for the payment of unpaid loans, which could be sizable. He
asks some pertinent questions about the details of the scheme, such as
what interest rate should be charged on the loans, what income should be
used as the basis for repayment, whether all students should be forced
to
participate, and whether the funding terms should differ by type of
study.
These are all details that need to be addressed explicitly when
designing
such a scheme.
The next four papers examine, in different ways, factors affecting
access to, demand for, and participation in postsecondary education in
Canada. The study by Miles Corak, Garth Lipps and John Zhao looks at the
relationship between family income and participation of youth (age
1824)
in postsecondary education, and how this has changed since the 1980s.
Using several Statistics Canada data sources, the authors find that
overall participation rates (in higher education) reached historic
highs,
but their rates of growth have flattened or stalled over the 1990s,
particularly for universities, while college participation rates have
continued to grow. In response to rapidly rising tuition fees during the
1990s, student debt levels rose significantly; and for male students
there
was a tendency to choose (lower-cost) community colleges rather than
universities as university participation rates for men declined steadily
after 1993 and college attendance went up.
Their Figures 9 and 10 document participation rate changes by
level of (real) family income. University participation rates increase
with family income. Participation rates in the top broad family income
group ($100,000 or more) varied from year to year at around 40%, but
have
not changed much since the later 1980s. The lowest income group ($25,000
or less) participation rates are much lower but have been rising fairly
steadily over the entire period from less than 10% in the early 1980s
to
19% by 1997. So the gap in participation rates between top and bottom
income groups has noticeably narrowed. University participation rates
among the three middle income groups, however, trended up through the
1980s then stopped growing in the early 1990s and have noticeably
declined
since 1993. Thus the fall off in university participation rates over the
1990s was felt most among middle-class families. The pattern for college
participation is very different. College participation rates are quite
similar across family income groups. And while college rates are not as
closely tied to family income as university participation rates, it is
again the case that the lowest income group experienced the most
consistent growth over the full period. The authors also use regression
analysis to find that the association between family income and
university
participation became stronger over the 1980s up until the early to
mid-1990s. But from the mid-1990s, when borrowing limitations were eased
on a number of loan programs, the strength of the relationship weakened.
The second paper on family background effects on access to
postsecondary education by Ross Finnie, Eric Lascelles and Arthur
Sweetman acts as a companion piece to that of Corak et al., but takes a
more structural approach of identifying direct and indirect channels
through which family background effects can operate. Using Statistics
Canada's 1991 School Leavers Survey and its 1995 Follow-Up Survey of
youth
aged 18 to 20 in 1991, the authors find that family background variables
such as parental education levels, family type, ethnicity, and location
have important direct and indirect effects on postsecondary
participation.
The indirect effects of family background operate through a set of
intermediate variables including high-school outcomes (such as grades)
and
related attitudes and behaviours. They look at both university
participation and all postsecondary participation and find much stronger
effects on university participation. For example, "each additional year
of
parental education increases the likelihood of university attendance ...
as much as about five percentage points. The relative university
attendance rates for those whose parents have a high-school diploma and
those with at least some university education are 29 versus 53% in the
case of men, and 37 versus 65% for women (holding other factors
constant)". Approximately 40% of these effects operate indirectly
through
the various intermediate variables. The major direct effects indicate a
continuing role for policy measures to expand postsecondary
opportunities
for those from less privileged backgrounds. The sizeable indirect
effects
point to important inequalities being generated during high school and
even before, consistent with postsecondary access being affected by
social
and economic factors well before issues of affordability arise at time
of
entrance to postsecondary education.
Richard Mueller and Duane Rockerbie look at how Maclean's
magazine
rankings of Canadian universities affect students' choices and hence
enrolment demand at the universities. They develop a simple
demand-supply
model where tuition does not adjust to clear the market for university
admissions resulting in excesss demand for university positions. As a
result, rationing is based on high-school grades to fill the limited
number of positions relative to demand. The authors estimate their model
from applications and admissions data over seven years for Ontario, and
find that the Maclean's rankings do have a statistically
significant and
strong effect in determining excess demand for positions across
universities and hence the height of average high-school entrance grades
among universities. An "improvement in the ranking increases the mean
grade point average and thus improves the average quality of admitted
students ... The effect is the strongest for medical/doctoral schools
where a one-position improvement in the ranking increases the mean GPA
of
those admitted by 0.96 percentage points for males and 0.85 percentage
points for females. The effect of the ranking is reduced as we move to
comprehensive schools (0.70 percentage points for males and 0.60
percentage points for females), then primarily undergraduate schools
(0.33
percentage points for males and 0.29 percentage points for females) ...
The Maclean's rankings appear to have a strong effect on where
students
choose to apply to (and end up)".
The study by Nicole Fortin looks at access restrictions arising
from both sides of the higher education market both higher
tuition fees
and lower university funding levels are found to have restricted
enrolment
rates at Canadian universities. Underlying these policy levers are the
ongoing demographics of the changing size of the college-age population
and the upward trending demand for greater postsecondary education by
the
college-age population. Fortin uses US state and Canadian provincial
data
over 197399 in a reduced-form regression analysis to obtain estimates
of
the effects on university (four-year college) enrolment rates of (i)
higher tuition fees and (ii) provincial/state funding levels to
universities, while controlling for ongoing demographic shifts. Her
analysis looks both at demand-side effects for university positions by
potential students for whom higher tuition levels may result in a
reduction in demand for university positions, and at supply-side effects
on university positions by the university system itself for which
reductions in provincial funding levels (their largest revenue source)
result in fewer university positions being made available than
otherwise.
Fortin notes that total enrolment at Canadian universities increased at
an
annual rate of 4.1% from 1973 to 1990, but basically stalled to no
growth
in the 1990s. In the United States, on the other hand, enrolment growth
at
four-year colleges continued to grow over the 1990s though at a lower
rate
than in previous decades. Like Mueller and Rockerbie, she takes the
higher
education system to be in disequilibrium where tuition does not adjust
to
clear the market, rationing of university positions is done on the basis
of grades, and total enrolment rates are determined by the short side of
the market. If tuition levels are too low to clear the market because of
the high demand, the short side of the market will be the supply side
and
provincial/state funding to universities will, in effect, determine
enrolment rates.
Fortin estimates that (i) an increase of 1% in university tuition
levels reduces university enrolment rates by about 0.15%, while (ii) a
1%
decrease in provincial funding levels to universities (measured by
provincial funding per college-age person in the population) yields a
0.25% decrease in enrolment rates. The negative funding effect to
universities is almost twice as large as the negative tuition effect on
students. The latter effect on students is found to be virtually the
same
in Canada and the United States. The negative funding effect on
universities, however, is found to be about three times larger in Canada
than in the United States. So a 50% increase in (real) tuition levels is
estimated to reduce university enrolments by about 7%, and a 20%
reduction
in (real) university funding levels is estimated to reduce enrolments by
about 5%. She thus finds that supply-side institutional restrictions had
a
major constraining effect on enrolment growth of Canadian universities
in
the 1990s, quite different from the experience in the United States over
this period where student-faculty ratios actually declined.
Students are bearing an increasing financial burden in meeting the
costs of postsecondary education, and there is no indication that this
is
likely to change. At the same time, there are a large number of ways
that
provincial and federal government policies mitigate these costs. These
include direct grants and scholarships, loans at preferred rates, and a
number of measures in the tax system, including tax credits, tax
deductions, and tax-assisted schemes to save for postsecondary
education.
Naturally there is concern with the effectiveness of these measures. Do
all able students have adequate access to funds so that they are not
deterred from higher education? Do the schemes systematically favour
some
groups over others? Will students be left with large levels of debt on
graduation that they will find burdensome to repay? To what extent are
those fortunate enough to attend postsecondary education to be
subsidized
by those who are not? Will the current schemes be able to support the
increased tuition costs that are likely to be imposed on students in the
future? The next set of papers assess the current complex system of
student financing, and propose some alternatives.
The careful study by Kirk Collins and Jim Davies focuses solely on
the manner in which the tax system influences the incentive to undertake
postsecondary education. The tax system includes some specific measures
aimed at supporting the financial costs of education, including
educational tax credits, Registered Educational Savings Plans (RESPs),
and
Canada Educational Savings Grants (CESGs). At the same time, since a
significant part of the cost of education is foregone earnings and part
of
the reward for education is increased earnings, the manner in which the
system of personal and other taxes impinges on earnings can influence
the
incentive to undertake higher education. Collins and Davies devise
measures that capture the cumulative effect that the tax system has on
the
incentive to invest. In fact, they devise two such measures. One, the
effective tax rate (ETR), measures the difference between the before-
and
after-tax rate of private return to education, comparable to effective
tax
rates that have been calculated for physical investments. The ETR
measures
that disincentive or distortion that the tax system imposes on the
private
decision to invest in human capital, taking into account only the
private
costs of education. The second measure, the effective subsidy rate
(ESR),
measures the difference between the public versus private return to
education, now taking into account the costs borne by the public sector.
The difference between ETR and ESR measures the overall net effect of
the
fiscal system on the incentive to invest on higher education.
Collins and Davies find that private rates of return on education
are lower than in previous studies, and are lower for males than for
females, but that the ETR is higher for males. Moreover, between 1998
and
2003, ETRs decreased substantially from about 19% to 11% for males
and
from 13% to 8% for females owing both to the introduction of CESGs
and
the flattening of the income-tax structure, which reduced the penalty
from
increased future earnings. At the same time, the ESR exceeds the ETR,
implying that there is a net subsidy on higher education. The authors
discuss at some length the sources of these effects and their
consequences
for student financing policy.
In a commentary on the Collins-Davies paper, John Burbidge puts
the tax treatment of human capital accumulation into a broader context
by
noting that tax support for human capital investment is part of a larger
system of incentives for asset accumulation that includes Registered
Retirement Savings Plans and Registered Pension Plans. He argues that
taking account of how these programs interact with incentives for human
capital accumulation may well mitigate the incentive effects of the ETRs
that Collins and Davies have measured. Moreover, he argues that RESPs
may
in fact serve to distort household asset accumulation decisions by
contradicting the effects of tax-sheltered retirement-savings systems.
Kevin Milligan studies RESPs and CESGs from the perspective not of
their effect on the incentive to invest in human capital that is,
their
efficiency effect but of their effect on households of different
income,
wealth, and family types. Using very detailed data from the Survey of
Financial Security, he finds that the use of RESPs, and therefore CESGs,
is highly concentrated in high-income households and in households in
which parents are highly educated. He argues that this is in direct
conflict with the intent of the program of increasing access to
postsecondary education, as well as with the goals of the Canadian
Opportunities Strategy, which is to direct aid to lower-income families.
His results constitute a serious indictment of these programs as
vehicles
for improving access to higher education. He suggests, provocatively,
that
Canada might be better served by abandoning CESGs and diverting the
funds
saved to those who truly need them.
Lorne Carmichael's paper is also concerned with both accessibility
and fairness. He explores an innovative approach to student financial
assistance that is designed to ensure that all students who are capable
of
achieving a postsecondary education have the resources to do so, and
that
the burden of financing those resources is primarily borne by those who
stand to benefit rather than society at large. The idea is disarmingly
simple in concept. Students would have access to a sufficient sum of
money
to finance their education (or at least that part of their education
that
is deemed to provide private benefits to them rather than general
benefits
to society). This sum would be provided by the government directly to
the
student, who would then be responsible for making tuition payments to
the
institution in which they enrol. Then, on graduation, all students would
pay a "graduate tax" that would be based on their earnings. The tax rate
would be such that the scheme is self-financing, so the burden is borne
by
those who take advantage of postsecondary education. Carmichael makes a
persuasive case for such a system, which bears much resemblance to an
income-contingent loan system discussed earlier.
A final paper by Ross Finnie, Alex Usher and Hans Vossensteyn
takes a very broad and ambitious perspective. They argue that the
existing
system of financial support to students is unnecessarily complicated. It
includes far too many different elements that taken together do not
succeed in meeting the basic objectives of ensuring accessibility to all
potential and able students regardless of need. They propose a sweeping
overhaul what they refer to as a "new architecture" in which the
myriad of existing programs is replaced by an overarching one that
targets
funds better to those in need and ensures that all able students have
sufficient funds to cover the full costs of attending a postsecondary
institution. The program would first assess each student's financial
need,
taking account both of the costs they bear as a result of attending a
postsecondary institution and the resources, including parental, that
they
potentially have. This would be made available to all students by a
combination of loans and grants. They discuss the details of such a
scheme, including how the federal government and the provinces could be
persuaded to accept a single comprehensive scheme in place of their
currently very different and fragmented ones.
The volume wraps up with the reflections of a panel of persons
with substantial experience in the Canadian postsecondary scene. There
was
a common note of concern for the present state of affairs and for the
little public concern for the deteriorating quality of the universities.
Peter George, the president of McMaster University, and speaking from
the
viewpoint of the chair of the Council of Ontario Universities' Task
Force
on Quality and Financing, describes the endeavour of the task force to
articulate the dimensions of quality. He also recounts optimistically
the
findings of an Ontario Task Force on Competitiveness, Productivity, and
Economic Progress which has placed a strong emphasis on the value of
higher education. One may hope that his optimism is borne out with
beneficial changes in government policy.
John Chant, a panelist with long experience at several Canadian
universities, raises the matter of research quality in Canada. But as
Chant points out, the overriding concern of governments, and with public
discussion of the university issue, has been access, and the policies
being pursued are aimed at promoting access at the expense of a
continuing
dilution of the university education being offered. Little attention has
been devoted to the question "access to what?".
Panelist John Greenwood takes up the question of access in a more
narrowly focused way. His concern is with ways of assuring access by
those
with low-income backgrounds who tend to think of university as not being
an option. He sketches two experimental approaches to drawing in
students
who might otherwise not attend university. The issue is not just one of
transcending financial barriers but of inducing people to think beyond
those barriers.
Elizabeth Parr-Johnston, having completed terms as presidents of
two universities in Atlantic Canada, reviews some problems that have
already been identified as well as raising several other important
issues
on the direction in which we are headed. She argues that we are no
longer
in a world where there will be large increases in government funding. It
is a world in which governments are determined to play a more directive
role. In that context she raises an issue, where a greater emphasis is
being placed on applied research of ownership of intellectual property
which will become increasingly important.
All of the panelists agree that the universities currently are
seriously underfunded. Peter George explains that one of the main
objectives of the task force which he chairs is to generate proposals
for
appropriately augmenting the funding of the universities. John Chant
argues, however, that the real problem lies in the centrally-directed,
overly-regulated nature of the Canadian university system. Major
pressures
are being exerted by provincial governments whose objectives are more
concerned with seeing that large numbers of young people get admitted to
some sort of higher education and that they receive substantially
subsidized education which has broad voter appeal.
Chant's point is that, in the area of higher education, Canadian
governments continue to engage in central planning long after the
failure
of central planning has been made evident. The simple solution that
Chant
puts forward is for governments to fund students, not universities. In
his
role as final speaker, Douglas Auld, president of an Ontario community
college, concurs with Chant and sees value in incorporating more
market-type influences into the higher education system. Auld also
raises
the matter of the mix of institutions. Sorting out the division of
resources between colleges and universities is not something that can be
satisfactorily done by central planning. A task for economic policy
analysts will be to convince governments that competitive market-like
solutions have some advantages in getting resources efficiently
allocated.
However, access to higher education is strongly influenced by the
existing
distribution of income and it has an important bearing on the future
distribution. It is only appropriate, then, that much of the attention
of
the presentations is directed to mechanisms for better financing of
students so as to ensure that they obtain the type and extent of higher
education that allows them to achieve their opportunities.
The scope of topics that can be covered in a two-day conference on
which this volume is based is necessarily limited. We have chosen to
focus
on those topics that are of immediate interest to current policy
debates,
and that therefore are amenable to remedial action. There remain,
however,
some overriding issues that, even if they are not resolved, should
inform
that debate. One concerns the very role of the public sector in the
financing and delivery of postsecondary education. In principle,
education
could be left to the private sector. Arguments for public intervention
ultimately rely on failure of the private sector to achieve socially
acceptable outcomes. Such arguments include (i) classic market failures
arising from external benefits provided to society from the
dissemination
of knowledge associated with university education, whether resulting
from
research or embodied in graduates; (ii) shortcomings in credit markets
or
markets for risk-sharing that inhibit potential students from acquiring
a
postsecondary education; and (iii) social objectives like equality of
opportunity and redistributive equity that private provision cannot
address. Then, given that a case is made for public intervention, what
are
the most appropriate forms of that intervention? Should postsecondary
institutions be public, private, or some combination of both? Should
finance be directed to students or to institutions, or both? To what
extent should universities be regulated? More generally, what kinds and
mixes of services should these institutions provide? Finally, given that
postsecondary institutions are partly publicly funded, how should they
be
made accountable for the use of those funds? This raises issues of
university governance that the conference only briefly addressed. What
policies can ensure that the interests of universities are aligned with
those of all other stakeholders, including the students? This volume
only
scratches the surface of these important issues. Clearly there is more
work to be done.
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©2002 John Deutsch Institute, Queen's University