Should Post-Secondary Education be Free?

By Hugh Mackenzie & Kelly Foley

Hugh Mackenzie

The economist and research associate at the Canadian Centre for Policy Alternatives says yes.

Free tuition would redress a massive intergenerational inequity created over the past 30 years. In 1990–91, average university tuition in Canada was $1,464; adjusted for inflation, that would be $2,541 in 2019–20. Today the actual average undergraduate tuition is $6,463. A generation that gave itself tax cuts and paid for them in part by dramatically increasing tuition has imposed a substantial economic burden on the generation that came of age after 2000.

Free tuition would recognize the escalating expectations for education in our modern economy and labour market. Canada’s approach to public education funding has not kept up with those changes. The legislature of Upper Canada provided for public funding of elementary and secondary education in the 1850s. By the 1920s, the mandatory school leaving age was increased to 16. Other than a modest increase in the leaving age to 18 in most provinces—essentially, requiring high school completion—our approach to post-secondary education funding is stuck in the economy of a century ago.

Free tuition would break down class- and income-related barriers to Canadians’ pursuit of a full range of economic opportunities. The combination of income-tested grants and loans that today purport to address those barriers do nothing of the kind. For most middle-and lower-income families, the sticker price of a post-secondary education is prohibitive, stories of students accumulating massive debts are frightening, and the promise of relief against those debts, based on the experience of the past 30 years, is irrational.

Free tuition would address the disturbing phenomenon of young people delaying family formation and foregoing home ownership because of overhanging education debt.

Free tuition would provide significant economic benefit to Canada. Post-secondary graduates are more productive, earn higher incomes, pay more in taxes, use fewer healthcare services and are less likely to depend on social assistance. Higher post-secondary participation rates are associated with higher living standards, better health outcomes and enhanced social and community engagement. Every Canadian is better off.

Free tuition would address Canada’s crisis of low participation in professions. High tuition in programs such as medicine, dentistry, law and business administration make those professions increasingly available only to upper-middle-income and high-income students. At a time when our society seeks to diversify professions and other well-paid occupations, the barriers erected by high tuition work in the opposite direction.

Making post-secondary education free would be an investment in Canada’s future. It would increase participation and help improve education standards. And by reducing dramatically the burden of debt borne by graduating students, it would support exactly the kind of entrepreneurial risk-taking that is so important for the future of our economy.

 

Kelly Foley

The University of Saskatchewan associate professor of economics says no.

Youth in Canada who have grown in the highest-income families attend and complete university at much higher rates than youth in lower-income families. This fact has been well documented. To the extent that it reflects inequality of opportunity, the relationship between family income and university enrolment should be cause for concern. There are also good reasons to believe that this correlation represents an inefficient allocation of public resources.

In the interest of equity and efficiency, should university be free for everyone? I argue no. In the context of the current policy environment, eliminating upfront costs such as tuition for everyone will likely benefit high-income youth the most. It’s also a very expensive way to support and encourage low-income youth to enrol in university and is unlikely to substantially change the composition of university graduates.

Imagine a path leading to university enrolment. Steps along the way include getting good grades, finishing high school, applying and being admitted into university. At path’s end, just before entering university, lies a fence. Paying tuition and other direct costs opens the fence’s gate. Removing the metaphorical fence and making university free for everyone would benefit the students who were already willing and able to pay for university, among whom high-income youth are overrepresented.

The other beneficiaries of free university depend in part on who’s sitting on the “tuition fence.” To meaningfully change the relationship between family income and university enrolment, most people on this fence, or margin, would have to be from low-income backgrounds. Although changes in tuition have larger effects on enrolment among low-income students, the most important barriers these students face occur earlier along the path to university.

Research suggests that before students ever reach the barriers posed by the costs of applying for and enrolling in university, disadvantage and less “skills investment” in early childhood can represent a brick wall. Low-income families, lacking resources, tend to invest less in early skills development. Thus, the link between family income and university enrolment is largely, though not entirely, driven by factors that wouldn’t be ameliorated by making university free.

The development of skills and aspirations starts at birth. Skills investments made later in life are less effective, which suggests it could cost more to overcome the consequences of childhood disadvantage than to improve access to early childhood resources. Until youth are no longer trapped behind a “brick wall” that prevents them from even considering post-secondary education, untargeted free university will benefit those who need it least. Moreover, this policy would divert public funds away from the more effective strategy of supporting children from lower-income backgrounds at pre-school, primary and secondary school ages.

 

Hugh Mackenzie responds to Kelly Foley

Canada’s debate over rising college and university tuition has been ongoing for nearly 30 years. It’s not an accident that this period has coincided with wave after wave of tax cuts that have reduced the capacity of governments to pay for public services. In this context, it’s not surprising that arguments against tuition relief for students often amount to carefully disguised arguments in support of constrained fiscal policies. That is certainly true here.

To start with, the relationship between tuition and income is a red herring. It is a fact that participation in post-secondary education in Canada is positively related to family income. It is also widely accepted
that the cost of post-secondary education is not the only barrier faced by students from lower-income families and that those barriers begin long before the point of decision about whether or not to attend a college or university.

That doesn’t mean, however, that tuition isn’t a barrier to participation by lower-income students in post-secondary education. And the point might have more weight if we were actually taking seriously the obstacles facing lower-income students earlier in their academic careers. We are not. In fact, the programs and supports that might address these obstacles have been victims of the same downward pressures on public services spending that have driven up college and university tuition.

High tuition is a real barrier to both enrolment and program completion for low-income students. For a low-income family, the sticker price is a real shock. And for low-income families who have become all too accustomed to support programs that evaporate in fine print or disappear abruptly as rules change or are simply eliminated in the name of cost-cutting, programs that offer financial support don’t help overcome that barrier.

For lower- and moderate-income families, attending a post-secondary institution starts to look like a shift from education to social assistance.

As tuition keeps increasing, the line that defines the cost barrier keeps moving up the income scale, with the result that families that might have been able to manage tuition costs a generation ago now face barriers that they will struggle to overcome despite having incomes above the cut-off for financial support.

This squeeze is most apparent in professional programs (e.g., business, engineering, medicine, law) for which tuition has increased even more rapidly than for regular programs. The children of middle-income families are being priced out of the professions, with potentially profound implications for Canadian society.

None of this considers the financial impact on students and recent graduates. Students struggling financially to stay in their post-secondary programs end up working long hours in part-time jobs, undermining their chance of success, and are more likely to fail to complete their programs. Graduates often enter an uncertain job market with mortgage-like debts, delaying family formation and limiting
housing choices.

Those who support the status quo fail to acknowledge that the financial barrier presented by post-secondary tuition is a moving target, inviting the question of where, if anywhere, the upward march of tuition will, or should, stop. Was it right, in Alberta, when tuition made up 10 per cent of college and university revenue in 1989? Did Alberta have it right in 2018, when the tuition share reached 24 per cent? Or does Ontario have it right, at its 2018 level of 43 per cent?

Over the past 30 years there has been a massive intergenerational shift against young Canadians as their elders have chosen to pay themselves, in the form of tax cuts, at the expense of their children’s and grandchildren’s economic futures. This calls into question the claim that concludes the pro-tuition side of this argument: that relief from tuition “would divert public funds away from the more-effective strategy of supporting children from lower-income backgrounds at preschool, primary and secondary school ages.”

The fact that the question is posed as an either–or proposition amounts to a declaration that this intergenerational transfer is sacrosanct, and that in this context, when faced with a choice between providing tuition relief or supporting low-income students earlier in their lives, the choice will be to do neither.

And that brings us back to the fiscal policy issue that is the real driver of high-tuition in Canada. For 30 years, increases in post-secondary tuition have been the path of least resistance for governments looking to create fiscal room for tax cuts that have undermined our ability to pay for public services. The consequences for the future of young Canadians are profoundly negative. And in an economy in which our most important asset is the quality of our workforce, the consequences are profoundly negative for Canada as well.

 

Kelly Foley responds to Hugh Mackenzie

I share Hugh Mackenzie’s concerns about the many “class- and income-related barriers” in Canada that serve to perpetuate advantage and disadvantage across generations. I am less optimistic that eliminating tuition would make a difference. More importantly, I fear that free tuition could make matters worse.

Students from low- and middle-income families do face important financial barriers that public policy should address. However, eliminating tuition would not remove the need for a fair and effective student aid policy. Although, as Mackenzie points out, on average, tuition and fee increases have outpaced inflation in recent decades, and for most undergraduate programs living expenses are a large part of students’ annual budgets. For example, the University of British Columbia budgeting tool suggests that an out-of-province single student living in a shared residence room should expect more than $14,000 for living expenses per academic year.

For some groups, these non-tuition costs are even larger. Lone parents and those who live in remote areas are among the most underrepresented in Canadian universities, and have substantial costs that are not affected by tuition fees. Thus, whether or not we have free tuition, we need a financial aid policy that removes barriers for students who otherwise do not have access to funds to cover their direct costs.

Tuition paid by youth from high-income families, who are over-represented in university, leaves more funds to provide targeted grants that are large enough to cover tuition fees and living expenses for high-need underrepresented groups. Recently, in Ontario, the Conservative government enacted a reversal of that principle, by reducing tuition and eliminating grants that covered tuition on a sliding scale that depended on family income. This disproportionally benefits high-income families.

Mackenzie also argues that free tuition would make every Canadian better off because post-secondary education is associated with social benefits as well as better health and labour market outcomes among graduates. I agree that there are likely some spillovers such that people who do not attend university benefit from those who do, but it is not obvious those benefits are particularly large relative to the cost of free tuition.

With respect to labour market outcomes, it is only true on average that post-secondary graduates earn more than those with a high school diploma. The variance, or range, of earnings within education groups is larger than the difference in average earnings between different levels of educational attainment. In other words, the highest incomes among high school graduates can be larger than the lowest among post-secondary graduates.

University is not a golden ticket. It is a risky endeavour and is not the best choice for everyone. Indeed, the very fact that some people easily repay their loans, while others are crippled by the same level of debt, suggests that university does not pay off financially for everyone. The riskiest part of deciding to go to university, in terms of financial cost, is whether one’s future earnings will be large enough to compensate for the earnings and work experience that are forgone while in school. Every dollar that is used to eliminate tuition could be used instead to develop insurance against such earnings losses.

Truly addressing inequality of opportunity that transmits across generations requires more fundamental changes to our educational system. Eliminating tuition will not get the job done, and is not the best way to invest public funds in education if the goal is to reduce inequality. There are so many other ways in which public funds could be used to greater effect.

At the top of my list, I would put redressing the resource gap between First Nations on-reserve and provincially funded K–12 schools. This means not just equalizing ongoing funding levels but also making up for years of inadequate capital investment. More generally, the issue of inequality in high school resources does not get enough attention in Canada, leaving so many important questions unanswered. For example, in how many and in which high schools in Canada is calculus only offered via correspondence courses? Mitigating these and other inequalities that occur at the elementary and secondary level will be more cost-effective and the benefits will be more broadly distributed.

Why not do both? Why not simultaneously make equity-enhancing investments in elementary and secondary schools, and make university free? Although I do not believe that the benefits of eliminating tuition outweigh the costs, there is a far more important reason not to make tuition free in the current policy environment. The barriers that occur during elementary and secondary school—the brick wall—would prevent many disadvantaged youth from taking advantage of free tuition. As long as inequality of opportunity exists at educational stages that precede university in a child’s life, eliminating tuition will disproportionately benefit those who have also experienced more opportunity in elementary and secondary school.

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