(Vancouver) A new study by the Canadian Centre for Policy Alternatives challenges the conventional wisdom that the public heavily subsidizes post-secondary education. Paid in Full: Who Pays for University Education in BC calculates the full financial contribution that students make towards their post-secondary degrees in British Columbia, taking into account two ways in which students...
For many grade 12 students spring is university application season. But in Western Canada, youth living in families with an annual income over $100,000 are still more than twice as likely to attend university than youth with family income under $25,000.
This is hardly surprising, given average tuition fees run over $4,800 a year these days, but it’s fundamentally inequitable. It undermines social cohesion and there are real economic costs to all of us when we don’t fully utilize the skills and capabilities of all our citizens.
Reducing upfront costs for students will improve access to higher education and ensure that BC can reap the benefits of a well-educated workforce. And it’s more affordable than you think.
Conventional wisdom has it that higher education in BC is heavily subsidized because tuition fees don’t cover the full cost of education. But this common misconception ignores a second way in which students pay for their education: through higher taxes after graduation. When these tax payments are added up over the course of graduates’ careers, it turns out that university students fully repay the cost of their degrees and then some.
Despite the pervasive stereotype of Arts majors serving lattés at Starbucks, the reality is that higher education remains a great investment in today’s economy. University graduates experience shorter periods of unemployment, are more likely to work full-time and earn higher salaries than their peers with high school diplomas. Census data shows that BC women in their 30s working full-time earned $56,000 if they had a bachelor’s degree, $40,000 with a college degree and only $33,000 with a high school diploma. For men, the corresponding figures are $74,000 for a bachelor’s degree, $58,000 for a college diploma and $50,000 for high school.
With higher earnings come higher income taxes and less need for government cash transfers like welfare and employment insurance. A new study I’ve authored for the Canadian Centre for Policy Alternatives calculates the value of the extra income taxes (net of transfers) paid by female university graduates over their careers at $98,400, and $155,400 for men. This is more than twice the actual cost of a four-year undergraduate degree in one of BC’s public universities, $50,630, and tuition fees already cover 40% of that.
In fact, graduates in virtually all programs, including humanities and social sciences, contribute considerably more to government coffers over their working lives than their education costs.
This reality should urge us to rethink how we fund our colleges, institutes and universities. Higher education in BC has always been funded through a mix of government spending and student tuition fees, but over the last decade we’ve seen an increasing reliance on student fees. Fees have more than doubled since 2000 and now make up 40% of university operating revenues. This has put tremendous pressure on BC students and families, and has led to a growing number of students graduating with heavy debt loads of over $25,000.
It’s economically feasible and much more fair to ask graduates to pay for their degrees once they start reaping the payoffs of their investment, than to charge them high tuition fees up front.
While those with post-secondary degrees earn more on average, some individuals with higher education will earn less than the average high school graduate. A progressive income tax system is sensitive to these individual differences. And it also guarantees the public treasury will recoup its investment because the risk is pooled among graduates.
In addition, low tuition fees allow graduates to make career decisions freely. Those who opt to pursue careers with high social value, but low remuneration like the fine arts or the non-profit sector, would not have their choices distorted by the threat of unmanageable debt loads hanging over their heads. And we’d all have richer lives for it.
There’s no better time than now to make higher education more accessible in BC. In this decade alone, more than three quarters of new jobs will require some form of post-secondary education. We currently don’t graduate anywhere near the numbers of people we’ll need to ensure that these jobs can be filled. Expanding our investment in post-secondary education now will pay dividends in higher tax revenues, lower unemployment and better social mobility for decades to come.
Does this mean that those who can afford it or the children of the wealthy shouldn’t have to pay for their university education? Not at all. They should pay, like everybody else, but they should do so through progressive taxation tied to their income.
Iglika Ivanova is an economist and author of Paid in Full: Who Pays for University Education in BC?