The Money Behind Higher Education

Winnipeg Free Press, April 4, 2015 | Go to article overview

The Money Behind Higher Education


The 2012 student strike in Quebec did more than simply bring down the province's government. It also revealed deep cultural differences in ideas about university funding.

French-Canadian students, influenced by European thinking, were outraged their government had proposed raising tuition fees to $3,793 from $2,168 a year. The rest of Canada, used to much higher fees on the American model, was baffled by their fury.

In most European countries, the state pays between 80 per cent and 100 per cent of the cost of tuition. The main advantages of this model are equity and cost control. Where it works well, as in northern Europe, graduate education levels are uniformly high. Where it works badly, as in southern Europe, they are uniformly low.

America uses mixed funding, with individuals paying most of the costs of tuition and the government helping out with loans and grants. In some countries with similar models, such as Japan and South Korea, individuals and families pick up the tab. These systems tend to be better funded and more expensive than the European ones, because people fork out readily and costs are tougher to control.

The mixed-funding model is spreading. That's partly because rising demand has increased the burden higher education places on government budgets. So has "Baumol's disease," which increases the relative cost of labour-intensive industries, such as health and education, as technological change lifts the productivity of capital. Aging populations are pushing up health bills, so education, another huge chunk of government spending, loses out. Since the social benefits of primary and secondary education are clearer than those of tertiary education, universities tend to suffer the most.

One option is to allow quality to deteriorate. That has happened in many European countries. In Germany, students commonly pack lecture halls in their hundreds.

"We have more and more students," said Georg Krucken of Kassel University, "but the number of professors doesn't grow at the same pace."

Another option is to make individuals pay more. In America, retrenchment in state budgets has pushed up tuition fees. In California, for instance, they have tripled during the past 15 years, and a further 28 per cent hike has been proposed.

Outside America, the first big shift toward private funding happened in Australia, where tuition fees were jacked up in the late 1980s. A host of other countries followed, including Britain, Chile, New Zealand, South Africa, Thailand and some of the former Soviet republics. China used to impose no fees at all, but now it charges between $800 and $1,600 a year, not much for an urban family but a great deal for a rural one.

Countries with good universities increasingly rely on foreign students, who tend to pay more than domestic ones, as a source of revenue. In Britain, for instance, nearly a fifth of students are foreigners. International flows of students rose to 3.5 million in 2012 from 1.8 million in 2000.

Another source of private funds for universities is philanthropy. Endowments at some American universities dwarf income from fees. Institutions elsewhere are scouring the globe for wealthy alumni. Cambridge, which has done best among the British universities, had collected $7. …

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