Tuesday, May 14, 2002
The Halifax Herald, The Charlottetown Guardian

Shedding light on the university tuition debate

By John Philippe

IN ALL the raucous debate about the appropriate level for tuition fees for post-secondary institutions in Atlantic Canada, no one ever seems to ask the really central questions: Who pays and who benefits from our massive public spending on universities and colleges?

University tuition levels doubled in Canada between 1991-92 and 2001-02. A similar trend prevails in Atlantic Canada, with tuition increases ranging from 74 per cent in Prince Edward Island to 115 per cent in Nova Scotia over that period.

On the other hand, depending on the measure used, provincial taxpayer support per student has either declined or risen only very slightly. Thus, increases in tuition dwarf changes in taxpayer support. No one should be surprised, then, when the debate is consistently framed in terms of government’s “abandoning” students, who find it increasingly difficult to finance their university education. But there is more to the picture than this caricature suggests.

First, taxpayers still finance the greater portion of the cash cost of a student’s university education. The gap is simply narrowing. Consider the fact that taxpayers incur the majority of the costs of a student’s education – approximately 75 per cent of the cost of an engineering degree. Taxpayer support of medical and graduate students is three to five times as much as the students’ contributions. In every major field of study at both the undergraduate and graduate levels, the taxpayer incurs the majority of the cost of students’ education.

Second, students, not taxpayers, are the prime beneficiaries of university education in Atlantic Canada. In every major field of study and at every level of study, students themselves are receiving more value for their education dollars than are taxpayers. Engineering graduates in Nova Scotia and New Brunswick, for example, realize returns on investment of 16.5 per cent, whereas the taxpayers’ returns are in the range of 6.5 to 7.5 per cent. In other words, the benefits received by the graduate, measured by the additional after-tax earnings attributable to a university degree, far outweigh the benefits received by provincial taxpayers, measured by the additional provincial income and consumption taxes generated by the university graduate’s higher earnings.

Since students are the primary beneficiaries of university education, it only makes sense for them to bear a greater share of the cost of that education than they currently do. A common argument used in favour of higher government funding involves social benefits, those intangible benefits of a university-educated population. Research shows, however, that such benefits dwindle as the level of education increases; that is, society realizes the greatest return for its investment at the elementary school levels. “Social benefits” that individual students do not capture through higher incomes and better job prospects are negligible or quite modest at post-secondary levels.

Third, the current regime of relatively uniform tuition levels across disciplines and levels of study is wasteful and inflexible. The policy prohibits universities from shifting money and teaching staff to disciplines that are much in demand, and away from those that few wish to study. The objective of current tuition policy is to ensure broad access to all disciplines, but more effective tuition policies are available without limiting accessibility.
One such approach is to allow tuition levels to fluctuate according to student demand, undoubtedly leading to higher tuition levels for some disciplines. Provided appropriate mechanisms are in place to ensure accessibility and to enable students to repay student loans according to post-graduation earnings, tuition levels determined by the demand for each discipline offer several advantages.

For example, this policy would enable universities to be more flexible and efficient in responding to changes in students’ demands for particular programs. It would act as an incentive for universities to reallocate taxpayer dollars from those programs less in demand to those more in demand. It would let students, not government or university bureaucrats, determine which educational programs offer them the best life prospects. As students increasingly pay a greater portion of program costs, universities will have a greater incentive to heed the interests of those students.

Also, the idea of students paying a greater proportion of program costs would act as a strong incentive for students to make the most of their education, seeking the highest return possible. This would certainly help to alleviate to some degree the troubling problem of student attrition at Atlantic Canadian universities.

Is government abandoning students? Hardly. Are students paying more than their fair share of their education? Not according to the evidence, or the continued strong demand for university places. More government funding is not the best solution. On the contrary, the interests of students and taxpayers would best be served, and efficiency and fairness best promoted, by a more tailored tuition fee policy such as the one proposed here.

John Philippe is author of  “What’s a Degree Worth: Who Pays and Who Benefits at Atlantic Canada’s Universities?” recently published by the Atlantic Institute for Market Studies in Halifax.