Republished from Educated Solutions: The Affordability Issue (Issue 8, November 2011)
Written by Hugh Mackenzie, Principal, Hugh Mackenzie & Associates
Over the past 20 years, the cost of attending a college or university in Ontario and in most provinces in Canada has increased dramatically – more than doubling since 1993. For programs in the professions and business, the increases have been off the charts.
The results for students are crystal clear. Students in undergraduate arts and sciences programs are graduating into weak and uncertain employment markets saddled with debts that in many cases exceed the mortgages their parents took out when they bought their home. For students whose families cannot comprehend assuming massive debts before they even enter the workforce, the tuition barrier makes their post-secondary educational choices for them – they don’t attend. For those who attend, many find their education compromised by the need to work heavy hours in part-time jobs just to make ends meet.
Because the tuition increases have been most extreme in business and professional schools, so have the impacts on access and career choices. Most of the professional schools that have jacked up their tuition and other fees have dealt with the access impact by choosing not to study it. Those few studies that have been done paint a stark picture. Studies of medical students at the University of Western Ontario indicate that, since tuition increases began, the proportion of the student body from high-income families has shown a significant increase, while enrolment from lower- and middle-income families has dropped. Students from middle-income families in particular find themselves caught in a squeeze. Their families are too well-off to qualify for bursary support, but not sufficiently well-off to manage the increasing costs.
It also affects career choices. It is hard to find young lawyers who are prepared to work for the government, legal clinics or in areas of law less well-paid than corporate law. Why? Because it is hard to imagine paying off a law school sized student loan from legal clinic wages. A similar problem is affecting medical practice. Faced with crippling levels of debt on graduation, young doctors are increasingly focusing on the higher-paid specialties and shunning less well paid areas of practice like family medicine.
High tuition increasingly means that our universities are focused on serving students from high-income families and those few students from low-income families who can qualify for needs-based assistance.
It’s not fair. One of the foundations of our society is mutual sharing of responsibility among generations. Working Canadians support the education of younger people and the health care and living standards of older people based on the expectation that society will continue to support education when their own children need the help and to support health care and income supports for the elderly when they reach old age. If the Bob Rae government in the 1990s hadn’t debased the meaning of the phrase, one could describe publicly funded education as one of the key social contracts on which modern society depends. Rapidly escalating tuition breaks that social contract.
It is inconsistent with the principles of our liberal-democratic society. That society is based on the equalization of opportunity so that everyone has an equal opportunity to succeed. Ever since free elementary schooling was introduced in Ontario in the 1850s, education has been critical to that process. Public support for education counteracts the natural tendency for the market to transfer one generation’s ability to the next generation by pricing education beyond reach.
Just as important, none of the arguments typically advanced for increasing the share of tuition in university funding make any sense.
Advocates of higher tuition claim that subsidized post-secondary education amounts to a subsidy of the rich paid for by the poor. The claim is based on the fact that (in part thanks to high tuition itself) the post-secondary participation rate among children of higher-income families is higher than that of children from lower-income families. The problem with the argument is that ignores the source of funding for post-secondary education – the tax system. Because our tax system raises revenue from families roughly in proportion to their income, and because income is unequally distributed, it turns out that public funding actually delivers a transfer of resources from high-income families to middle- and lower-income families – exactly the opposite of what the critics say. And that’s before you consider the likely increase in participation from students from lower-income families that would accompany the elimination of post-secondary tuition.
The other key argument from high tuition advocates is that post-secondary graduates earn more, and therefore it is only fair to the rest of society that they pay the full cost of a service – education – that provides them with a private benefit. There are three major problems with this argument. First, it implicitly assumes that every post-secondary graduate gets the same relative income benefit from her or his education. That is factually incorrect. While there is, on average, an income benefit associated with a post-secondary degree, there is a significant number of graduates for whom that is not true. Many of those graduates will never generate enough extra income to match the tuition costs they and their families incurred.
More important, the argument fails on exactly the same grounds as the distributional argument fails – it ignores the impact of the tax system. The fact is, we already have a well-developed and extremely efficient system for sharing the additional benefits derived from subsidized education with society as a whole – the personal income tax. Even if you ignore the broader societal benefits delivered directly through education, in health care and criminal justice costs, for example, the personal income tax ensures that out of every dollar of additional income a graduate earns as a result of his or her degree, between 30 and 40 cents of that additional income is redistributed to society as a whole through the personal income tax.
All of these problems come together perfectly in the proposals for income-contingent loans that are the high-tuition advocates’ supposed answers to these criticisms. High-tuition, by itself, merely transfers poverty from one generation to the next indirectly as access is denied to all but the poorest and most qualified of students from low-income households. Income contingent loans do so directly, as the following thought experiment demonstrates.
Imagine two graduates, working for the same software company in neighbouring cubicles. They are doing the same job, for the same pay. One student comes from a family with enough resources to pay off her student loans as soon as she graduates and has to start to pay interest. The other has to pay off her student loans from her employment earnings. In net terms, these two people are being paid very different amounts: the lower your parents’ income, the lower your net income.
The income-contingent loan advocates also miss one glaring fact. We already have an income-contingent repayment system for publicly subsidized post-secondary education – it is called the income tax system. It ensures that society will get back a significant share of any additional income the graduate earns as a consequence of society’s investment in his or her post-secondary education.
Finally, exactly the same argument could be used to justify charging fees for secondary or even elementary education. The data on income benefits from education are just as compelling for elementary and secondary education. Why do we provide elementary and secondary education at no cost to the student or the student’s family? Because our grandparents and their grandparents understood that public education was both the foundation for a civilized liberal democratic society and an essential prerequisite for a productive working life.
In our modern knowledge-focused economy, education is even more important; increasingly, college and university education is the new high school.
We’re having the wrong debate entirely about the funding of public education. Instead of finding new ways to justify pushing tuition even higher, we should be looking for ways to get rid of tuition entirely.
Our grandparents and their grandparents were wiser.
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Hugh Mackenzie has worked for more than 35 years in a variety of different public policy capacities, at all three levels of government as well as in the non-profit sector. Mr. Mackenzie is a recognized expert on the funding of education in Ontario, and is a frequent contributor in the media on public finance. He holds an Honours BA in Economics from the University of Western Ontario and an MA in Economics (Public Finance) from the University of Wisconsin (Madison).










