The Federal Role in Postsecondary Education:  Are the Stars Aligned?

 

The following is a paper I presented November 29 in Ottawa at the National Dialogue on Higher Education, hosted by the Canadian Federation for the Humanities and Social Sciences.

 

We all owe a great vote of thanks to Don Fisher and his colleagues at the Canadian Federation for the Humanities and Social Sciences for organizing the National Dialogue on Higher Education, which comes at a critical time for Canada and its postsecondary institutions.

During the last twelve months all of Canada’s premiers have declared postsecondary education to be a provincial priority and several have associated that declaration with new investments in the sector.

Last spring’s Ontario Budget is a good case in point: it promised the largest investment in higher education in 30 years, and was followed by a remarkable speech by Premier Dalton McGuinty at Ryerson University, in which he passionately set out the importance of education in general, and higher education in particular, to the future of the economy and civic society for all of Ontario’s citizens.

All four of the major federal political parties have repeatedly stressed the importance of higher education and the need to invest in it. Prime Minister Paul Martin has stated his commitment to higher education and research in numerous speeches, and the recent Economic and Fiscal Update of the Government of Canada contained strong support for Canada’s universities and colleges.

Given the apparent agreement among the major federal parties and the provinces on the critical importance of postsecondary education, are the stars aligned for a major federal investment in Canada’s universities and colleges early in the federal budget which follows the election?  And if so, what form should that investment take? 

In addressing these questions I will focus on Canada’s universities, the sector I know best. Others at the National Dialogue will speak to the key role of Canada’s community colleges, a role I fully respect.

To keep the stars aligned on a major federal investment in university education, we need to deal with three major issues: the federal role in higher education, the adequacy of our country’s current investment in universities, and the allocation of any additional funding among competing university priorities.

My view is that the federal government has a central role in funding Canada’s universities, that overall funding for universities in our country is deficient, and that our national government should play a key role in overcoming the deficiency.

In all countries with significant university systems the national government plays a major role in university funding, for reasons I set out some 25 years ago, at a conference much like this one. In a paper on “Federal Funding of University Education,” I argued that the significant mobility of university graduates across provincial boundaries, and the similar migration of ideas and discoveries, means that there is a true national interest in university education and research.

When a province invests in a dam or a reactor, it gets title to the asset and owns the benefits (financial or otherwise) over the asset’s lifetime. There is no such provincial ownership when a province invests in university education and research; the spillovers from the migration of graduates and research create a strong presumption for involvement by the national government, which is reflected in countries around the world. University education and research is nowhere a purely local or provincial responsibility.   

While Canada’s constitution identifies education as a provincial responsibility, the spillover issue and the realities of a modern economy have led the federal government, often with strong provincial support, to make increasingly large investments in university research and student aid over the last 50 years. We now have a good understanding among the provinces and the federal government that university funding is an area where both levels of government need to be present. Keeping the stars aligned for a major federal investment in universities requires that we keep the critical nature of the federal role before the public and in the minds of our political leaders.

If we accept the important role of the federal government in university funding, we then need to confront a notion heard far too frequently: that we already have enough university graduates in Canada. To keep the stars aligned, we need to set the record straight on this point. In fact, our knowledge-based society requires more university graduates if we are to generate the productivity gains essential to economic growth during the next three decades, when our labour force growth will be much slower than during the previous half century.

The best evidence of that economic demand for graduates is in their high relative incomes. University graduates consistently have significantly lower unemployment rates, higher labour force participation rates, and higher lifetime incomes than those without a degree, and the gaps involved have remained remarkably high despite the strong growth of university graduates in the labour force. The higher incomes after graduation from university apply in particular to graduates in the humanities and social sciences, as work by Richard Allen and other has shown.

Another common misunderstanding in Canada is the use of OECD data on participation rates in “tertiary education,” to argue that Canada has the highest university participation rate in the OECD.    Alas, tertiary means postsecondary, and what the data show is that while we in Canada have by far the highest participation rate in publicly funded colleges, our university rate is in the middle of the pack.

In a recent compilation of data by the AUCC on university participation rates in 20 developed countries, Canada ranked 13th – well behind the leaders. Comparison with the US on enrolment in graduate studies is particularly revealing: a recent study by the Council of Ontario Universities showed that if the Province could double PhD enrolment over the next decade, it would reach the number of PhDs conferred per 100,000 population which the US had achieved 15 years earlier!   There is clearly no cause for complacency with regard to our university enrolment rates.

Keeping the stars aligned also involves an understanding on the need for continued support for research. The federal government deserves great credit for the extraordinary increase in research funding over the last decade, including increases to the Granting Councils, and establishment of the Canada Foundation for Innovation, the Canada Research Chairs, the Canada Graduate Scholarships, and funding for the indirect costs of research. The provinces responded in kind, to their credit. While there may be some tendency in government to say, “Been there, done that, let’s move on to something else,” that strategy simply does not work for university research, which by its very nature requires long term sustained support.

Indeed, there is a real urgency to continue funding research in our country, particularly in view of the extraordinary number of young faculty now being hired in Canada who aspire to research careers and need help getting started. The pressure on the Granting Councils is enormous and must be met with increased funding, including support for the Social Sciences and Humanities Research Council. Research on Canada’s history and culture, on government economic and social policy, and on the social and ethical issues facing our knowledge-based society, has never been more important.

If we make the case for the federal role in university funding, and the urgency of greater support for universities, the remaining element in keeping the stars aligned is determining how additional federal support should be allocated. I will be brief on that issue, because I believe the AUCC has done a masterful job in setting out the framework for new federal investments.

My own four priorities, broadly consistent with those of the AUCC, would be as follows:

  • Significant increases to the Granting Councils and a new investment in the CFI, so we do not lose momentum on the research and innovation agenda. We must avoid at all costs a sense of complacency on this front, given the significant continuing gap between our aspirations with regard to R&D as a share of GNP, and our actual performance, which is well down the list of OECD countries.
  • Funding the indirect costs of research at the 40% level, a level fully justified by numerous studies in Canada and the US. This is admittedly not a highly visible expenditure, but one which encourages competition among universities, rewards successful institutions, and eliminates the perverse outcome of the last three decades in which those Canadian universities most successful in research grant competitions had to cut their teaching resources in order to provide support for the indirect costs of research. This is an important problem, which happily can be solved with a modest annual federal investment.
  • A doubling of merit-based Canada Graduate Scholarships, along with a new program of federal transfers to university operating budgets to help with the hiring of faculty to teach and mentor the additional graduate students. Both the federal and provincial governments need to contribute to the expansion of university operating budgets if our ambitious plans for the expansion of graduate studies are to be realized. Increasing aid to graduate students alone will not do the job; we need resources to hire more faculty.
  • A significant increase in need-based support for students, including a substantially increased program of income-based repayment and debt relief after graduation. The recent report by Bob Rae for the Province of Ontario again made the case for income-based repayment and debt relief—while the federal government has made some steps in this direction, it is time to invest in a major program, which allows society to share the risk with students in the granting of loans for university study.

After decades of falling real government operating grants per student, the stars now seem aligned for a substantial increase in operating funds for Canadian universities, which would allow us to begin closing the funding gap with the US and to make our full contribution to Canada’s cultural, social, and economic development. All of us involved in this National Dialogue need to do all we can to keep those stars aligned in the turbulent political times that seem to lie ahead.

Paul Davenport, “Federal Funding of University Education,” in D.M. Nowlan and R. Bellaire, eds., Financing Canadian Universities: For Whom and By Whom (Toronto: OISE Press, 1981), pp. 5-36. The conference was jointly sponsored by the Institute for Policy Analysis of the University of Toronto and the Canadian Association of University Teachers.

As an aside, I note that my colleague from the OECD, Abrar Hassan, spoke at this conference yesterday. Mr. Hassan is the Head of the Education and Policy Division at the OECD, where I spent a three-month study leave in 1999.

Council of Ontario Universities, Advancing Ontario's Future Through Advanced Degrees - Report of the Task Force on Future Requirements for Graduate Education in Ontario (November, 2003), p. 23.