Publication: C.D. Howe Institute Commentary
Publication Date: 28-FEB-07
Delivery: Immediate Online Access
Author: Finnie, Ross ; Usher, Alex

Article Excerpt
The Study in Brief

The demands of the new knowledge economy require nations to have increasing numbers of highly skilled workers, including those with graduate degrees. Expanding graduate education will inevitably be an expensive proposition, but how would this money be spent best?

On the demand side, modifications have to be made to the student financial aid system and other bursary/scholarship programs in order to help students pay for their studies and otherwise make graduate education an attractive proposition, especially for the most qualified candidates and those in the disciplines that need to draw more students. Changes should include:

* expanding (graduate) student loan eligibility and generally raising loan limits;

* increasing grants, scholarships, and bursaries to help make graduate education affordable and appealing as a career investment;

* varying awards by discipline, depending not only on schooling costs, but also outside employment opportunities and the social (and economic) value of the schooling.

Such measures should look after increasing the demand for graduate school education among qualified candidates. Policy initiatives on the supply side would, however, also be necessary so that the system can provide the places required for these extra students.

Traditional measures such as increasing government-to-government or government-to-institution transfers could be a part of the solution, as would increasing the money available for research. But such approaches offer few guarantees that the money will be spent in the manner most likely to expand the system where its quality is greatest. Nor do they ensure that we have the best graduate education system possible for the money spent.

Alternative approaches include attaching funding to students directly, and varying the amounts awarded according to the standing of the student (based on grades, exams and other criteria). Such a voucher-type system could create incentives for institutions to improve the quality of their programs as they compete for top students, while also giving them the financial means to expand.

The economic advantage enjoyed by developed nations is largely rooted in their stocks of human capital, and if Canada is to be competitive at the international level it must have highly skilled people who are able to lead its R&D efforts, pass on its advanced knowledge and skill to the next generation of students seeking higher education, and otherwise spearhead the country's economic dynamism.

It is, however, no longer enough just to expand access to postsecondary education generally or to increase the number of persons with undergraduate degrees. With the worldwide growth of higher education in the past two decades, (1) these levels of education no longer give Canada--or indeed any other country-a sufficient human-capital advantage. Maintaining a competitive position in the knowledge economy now requires that large numbers of students acquire advanced degrees.

In its last major policy statement on innovation and competitiveness, Achieving Excellence, the federal government discussed the importance of higher education and committed itself to increasing the number of graduate students (2) (in both master's and PhD programs) in this country by 5 percent a year through 2010 (Canada 2002b, 60). Other reports, including the recent Rae Review in Ontario, have sounded similar clarions and have proposed similar goals. Clearly, Canadian governments are getting the message about the growing importance of advanced degrees. But the expansion of graduate education poses a number of challenges that governments--and to a certain extent universities themselves--have yet to solve or perhaps even fully appreciate.

This paper has four goals. The first is to sketch the very real financial challenges involved in expanding graduate education. The second is to present a framework for thinking about the supply of and demand for graduate education that provides a basis for the ensuing discussions. The third is to discuss the broad policy levers as well as specific policy initiatives that might allow us to increase the number of graduate students as effectively and efficiently as possible. The fourth and final goal is to outline some of the related policy implications of expanding graduate education, particularly as they pertain to teaching and learning at both the graduate and undergraduate levels.

At the heart of the paper is a simple demand-supply analytical framework that provides a useful basis for considering the factors that determine the number and quality of graduate students. One of the implications of this framework is that policies will be needed on both sides of the graduate student equation: measures to expand the capacity of the system as well as greater incentives for more (and perhaps different) people to enrol. The importance of the supply-side factors means, in particular, that offering more graduate scholarships and bursaries, as the federal government did in its 2003 budget, is unlikely to get the job done on its own. The more difficult and central task, in fact, is to increase capacity.

One possible means of achieving the expansion proposed here is essentially to attach graduate school funding to meritorious qualified students, who will then take that funding with them to their institutions and programs of choice and thus provide the means for expanding the system where it will best serve students -and society.

While such an approach would imply various design challenges, it is also quite practical and could be put into place fairly quickly and efficiently by using existing structures that award scholarships on the basis of students' merit. In this way, the proposed system would incorporate the much-vaunted benefits of the "single-payer" approach that generates such efficiencies for our public health system, and yet at the same time open up the "market" for graduate education and thus serve the goals of more and better schooling with improved efficiency. In short, such an approach should allow the system to create the best possible graduate programs of the desired size for the money invested.

The Cost of Expanding Graduate Education

Before we turn to discussions of policy mechanisms for increasing the number of students pursuing advanced degrees, it is worth stopping to consider the size of the sector we are discussing and the likely financial cost of expanding it.

The most recent statistics show that there are 148,000 graduate students in Canada, of whom 71 percent are full-time and 29 percent are part-time. Men are slightly more numerous among doctoral students and full-time students; women predominate among master's level and part-time students (Statistics Canada 2006). Roughly 74 percent of graduate students are studying at the master's level; the rest are studying at the doctoral level (CAGS 2005). Quebec has 30 percent of all Canadian graduate students, which is a disproportionately high number since it has only about one-quarter of the country's university students at all levels.

Although graduate students at the master's and doctoral levels are frequently lumped together, it is instructive to note the very large differences in concentrations of enrolments by field of study at the two levels. At the master's level, the largest fields of study are business and administration (25 percent of all enrolment), engineering (15 percent), social sciences (13 percent), and education (12 percent). At the doctoral level, the largest fields of study are physical and life sciences (22 percent of all enrolment), social sciences (20 percent), engineering (16 percent), and the humanities (12 percent) (CAGS 2005).

The cost of this education is highly variable; there is no single set cost of educating a student at any particular level or in any particular place. The cost depends on such things as instructors' salaries, teacher-student ratios, and the intensity of capital inputs, such as building construction and maintenance, IT infrastructure, and library acquisitions. Significant differences between institutions or jurisdictions--or changes (over time)--in these inputs will alter per-student costs. Of course fundamental to variations in cost are differences in quality, but efficiency also counts, and cost is not necessarily a direct indicator of quality.

At the global level, there are countries (in much of Asia and East Africa) where the cost of educating an undergraduate student is about $1,000 a year, whereas in the OECD countries the average is over $10,000, and in elite private colleges and universities in the United States it is $30,000 or even higher (Usher 2005). In Canada, the amount of per-student funding varies significantly from province to province. A recent publication by the Canadian Policy Research Networks calculates that per-student funding from all sources ranges from $14,300 in New Brunswick to over $35,000 in British Columbia (Snowdon 2006). The average per-student funding is calculated to be about $23,000.

All observers agree that it costs more to educate graduate students than undergraduate students because more advanced students require greater contact with their professors and greater access to equipment, laboratories, and other resources. How much more depends on the institution, the field of study, and the level of study, with doctoral students generally needing more resources than master's students. Although there are no Canadian studies on costs per student, certain rules of thumb are embodied in provincial funding formulas. Ontario, for instance (which has one of the more explicit and sophisticated funding models) funds master's students at anywhere between 1.5 and 3 times the level of undergraduate students, depending once again on the field of study, and PhD students at between 3 and 6 times the level of undergraduate students (Ontario 2003). Assuming that these kinds of funding ratios bear some relationship to actual costs, an increase in the number of graduate students will create a much greater burden for universities than would a similar increase in the number of undergraduate students.

Imagine for a moment that graduate enrolment were to increase by 7 percent a year. This may seem large (and indeed, it is more than some government targets), but even that rate of increase, sustained for a decade, would still leave Canada trailing the United States in the proportion of graduate students. Such a rate of growth does not even seem particularly large when compared to recent trends: over the period 1999/2000 to 2004/05, graduate enrolment rose by 28 percent, or a simple average of about 5.6 percent a year--which was far ahead of the average increase for undergraduate students of just under 4 percent a year, itself a total that is significantly inflated by the distorting effects of Ontario's double cohort (Statistics Canada 2006).

Such an increase would lead to a doubling of graduate students in 10 years, to just under 300,000. Assuming, on the basis of the Ontario funding numbers, that on average one graduate student costs 2.5 times as much as an undergraduate, then the cost of doubling graduate numbers would be roughly equal to the cost of adding 375,000 undergraduates to the country's colleges and universities. To put it another way, it would be almost like adding the equivalent of another Ontario to the national system of postsecondary education. To put this in perspective, the collective operating budgets of Ontario universities now total about $5 billion a year (Council of Ontario Universities 2006).

This is, of course, a large sum of money and not one that will be easily borne by the public purse (even if it pales somewhat in comparison to recent increases in health care costs). The costs could be reduced somewhat by changes in instruction methods and could to at least some extent be defrayed by higher tuition fees. Neither of these two alternatives is problem-free, however, and we will turn to the secondary policy challenges posed by each one later in this paper.

For now, having established the financial context of the policies being...



NOTE: All illustrations and photos have been removed from this article.



More articles from C.D. Howe Institute Commentary
Insuring Canada's exports: the case for reform at export development Canada, 01-DEC-07
Falling poverty rates, rising employment among poor, reflect social policy success: C. D. Howe Institute., 01-OCT-07
Reducing poverty: what has worked, and what should come next, 01-OCT-07

Looking for additional articles?
Click here to search our database of over 3 million articles.

Looking for more in-depth information on this industry?
Click here to search our complete database of Industry & Market reports by text, subject, publication name or publication date.

About Goliath
Whether you're looking for sales prospects, competitive information, company analysis or best practices in managing your organization, Goliath can help you meet your business needs.

Our extensive business information databases empower business professionals with both the breadth and depth of credible, authoritative information they need to support their business goals. Whether it be strategic planning, sales prospecting, company research or defining management best practices - Goliath is your leading source for accurate information.