Let’s not forget: students, not taxpayers, benefit most from their education

Brian Lee Crowley

The beginning of the academic year is marked, yet again, with both much self-congratulatory rhetoric about the inestimable value of university education to society, and much hand-wringing about rising tuition fees. Both attitudes are hugely overblown.

Look at tuition fees, for example. Supposedly rising fees are a bar to getting the education that is so valuable to us all; hence the tiresome calls for tuition fee reduction, or outright elimination.

But if tuition cost were a real bar to university education, the faster-than-inflation rises in fees of the past few decades would have seen a decline in enrolments. The reverse is true. Students have flocked to universities across the land. By their own actions, students have put the lie to the notion that university access has been reduced by higher fees.

They have not done so by indebting themselves to the eyeballs, whatever the highly politicized leadership of the student movement in Canada would have you believe. Half of students graduating with a first degree in Canada do so entirely debt-free. High debt numbers are achieved by excluding the majority who have no debt at all.

In any case, the highest cost of attending university is not tuition fees but the income that students forgo by attending university. Universities genuinely concerned with the economic well-being of their students and improved access would find ways to accelerate their education. If a four-year degree could be got in three years, that extra year of work would, in most cases, handily make up for higher tuition fees.

But since universities are chiefly run for the convenience of their professors and administrators, who might have to work harder and at less convenient times to get students through faster, this solution finds less favour than making the taxpayer pony up more money.

Of course low tuition fees subsidize equally the children of billionaires and of single mothers on low incomes, hardly a policy that promotes social equity.

A study done for Queen’s University’s board demonstrated quite conclusively that a policy of setting aside 30 per cent of all tuition fee increases for scholarships and bursaries would result in increased equity of access compared to free tuition. And it has the added advantage of lowering the cost of university education on the basis of merit, and not just showing up.

But the best argument against massive subsidization of tuition fees (and we still subsidize them handsomely) is that the students themselves are the biggest beneficiary of their education, not taxpayers.

This is quite different from the situation for elementary and secondary education. Society as a whole realizes a huge benefit from having a population that is literate and numerate. That benefit flows to us all through higher levels of civic participation and economic efficiency. But the benefits to each individual in terms of future income are less than they are to society. That’s why it makes perfect sense for us to provide free primary and secondary education.

It’s the reverse at the university level. People with university degrees make higher incomes than other workers. In fact it is perfectly possible to calculate the return to taxpayers on their investment in post-secondary education and to compare it to the return that individual students earn on the money they invest in their own university education. In many cases, the students themselves get a return twice as high or higher than that flowing to taxpayers.

A 2001 paper by John Philippe for my institute calculated these public and private returns to university education. The results are startling.
In Newfoundland and Labrador, there isn’t a single discipline where the public return on a dollar spent is as big as the return flowing to the student who gets the education, in terms of future earnings. The biggest
differential is for engineering and applied sciences students, who earn a return 10.6 per cent higher on their investment in their education than the taxpayer does.

Some degrees even destroy value for taxpayers. The taxpayer earns a positive return of 5.4 per cent on money spent on a social science degree and 6.1 per cent on a math and physical science degree, but has a rate of return of minus 3.7 per cent on average on doctorates.

Low tuition fees thus represent a socially regressive policy. The average taxpayer does not have a university degree, and certainly has a lower income than the average university grad. By getting a university degree, students capture for themselves a large private benefit – much larger than that generated for the taxpayer.

It is rightly said that university students are not all middle-class by origin, but they are all middle-class by destination. There’s little evidence that higher fees restrict access, and lots of evidence that the value of the education more than compensates students for the cost.

Brian Lee Crowley is president of the Atlantic Institute for Market Studies (www.aims.ca), a public policy think tank in Halifax. He can be reached by e-mail at BrianLeeCrowley@aims.ca.