Tuesday, February 20, 2007

The Banker at the Schoolhouse Door -- Part 2

Readers of this blog will note that I received my first comment last week. And operating on the principle of full disclosure, I must announce that "Anonymous" is really my son, who was posting his comment from Seoul, South Korea. He raises three very good points: 1) the dollar value of the fees mentioned in the piece are not equivalent; 2) the more university degrees granted the less value each has; and 3) not everyone needs to or should go to university.

Let me address each of these points. Consider the first, that tuition of $585 in 1965 is not equivalent to $5555 in 2006. Absolutely true. But, if one considers the growth of inflation during those years, the rising cost of a university education becomes clear. According to the Bank of Canada Inflation Calculator (www.bankofcanada.ca/en/rates/inflation calc.html) the average annual inflation rate from 1965 until 2006 was 4.65%. That means that, if tuition increased with inflation, a freshman entering Trent University in 2006 would have paid $3733.68. If that is our new base, it means that tuition has increased by an additional 48% beyond inflation. Remember this increase has occurred as the number of students has increased. According to Trent, its student population has gone from 4977 in 1999 to 8207 in 2005. (Incidentally, I am indebted -- pun intended -- to our other son, the U of T graduate, for directing me to the Bank of Canada's Inflation Calculator. This is turning into a conversation between the generations.)

Just as Trent's student population has increased, the general student population at all Ontario Universities is expected to grow. The Ontario Council of Universities claims that "The 18 to 21 year old population will grow by 53,000 from 2006 to 2014 according to the Ministry of Finance." The Council also claims that the demand for post graduate professional education will be even greater: "Ontario's 22-29 year old cohort -- the pool the community professional and graduate programs draw on -- is projected to increase in size by 200,000 by 2021."

And, when one compares inflation and the cost of professional education over the last thirty years, the cost of a graduate education between now and then is placed in stark contrast. The $780 which Dalton McGuinty paid to go to law school in 1976 would be equal to $2,828.86 today. At $8,500, the cost of a ticket to law school at the U of O has tripled, even when one takes into account the inflation of the ensuing years.

Why? Well, again referring to figures compiled by the Council of Ontario Universities, "On a provincial government funding per capita basis, Ontario has been 10th of 10 provinces for over 10 years. While the gap narrowed as a result of the Reaching Higher plan [the $6.2 million the McGuinty government injected into higher education two years ago] it is estimated that it would require a further $950 million to reach the 2004-05 funding level of the other nine provinces." The simple fact is that the provincial government has not been investing in higher education in a manner which matches its rhetoric. As the university population has gone up, grant based government funding has gone down; and students have been caught in the squeeze. Thus, tuitions have risen to meet the shortfall.

And, assuming that students have about twelve weeks to work between the spring and fall semesters, they will never make enough to handle tuition costs. If they manage to squeeze in sixteen weeks of work at, say, nine dollars an hour, they'll earn $5760 before taxes. That's not enough to cover tuition and books, let alone the cost of room and board, if they are living away from home. Is it any wonder that they own a mortgage when they graduate?

As for my son's second point, the consequences of flooding the market with degrees, there are two sides to that coin. Yes, a Bachelor's degree in some fields has become the equivalent of a high school diploma two generations ago. On the other hand, just as a high school diploma was the ticket of admission into the new industrial economy, the bachelor's degree has become that same ticket into the knowledge based economy. And, just as some high school diplomas were awarded in the face of little effort, sadly some Baccalaureates have been granted for surprisingly little work. C's and D's still pass.

Moreover, if the Bachelor's degree is now the new high school diploma, then one could argue that, just as full public funding was eventually extended to all high school students, the same should be true for university students. And, once upon a time, it was. Back in the 1960's, students in California's state university system paid no tuition. That policy changed when Ronald Reagan became governor.The likelihood of that policy's resurrection is, however -- well, I think you can intuit the answer.

Which brings us to my son's third and last point, whether or not everyone should go to university. The obvious answer is no. However, there are all kinds of knowledge. By the time a millwright or an electrician completes the class time and the training time to get his or her ticket, the time and money spent are equivalent to an undergraduate degree. But once again, the burden has shifted to the student. Gone are the days when organizations supported training programs where they would take in a predetermined number of apprentices every year to meet their present and future needs. These days, students have to shop around their skills to various organizations -- a policy that is pretty much hit or miss.

There was a time when education was seen as an investment -- an investment which benefited not only the student but society in general. If an economy was to grow, it needed trained people to support increased productivity. And productivity growth, in John F Kennedy's words, "raises all boats." In the last thirty-five years there has been a change in perspective. Education is now a cost; and, for a generation, governments of all stripes have been downloading costs to the people down the next rung on the ladder. Students are at the bottom of the ladder. These days the rising tide of productivity, in one wag's words, "raises all yachts." The small craft have been beached.

I now return to the task of insuring there will be enough money in the bank to pay for our third -- and last -- son's education.

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