Higher education in Quebec is staggeringly underpriced

The rector of Université de Montréal, Guy Breton, recently argued against cuts to public funding for universities (“Healthy universities are essential,” The Gazette, November 26). I share many of his concerns, but I see the problem not so much as a case of insufficient government funding, but rather as an instance of mispricing a valuable service.

My department — Concordia University’s economics department — has just rejigged its teaching schedule for next year. We will offer about 120 course sections, down from 170 a few years ago despite student numbers being higher. Our “small” introductory courses of 100 students will be amalgamated into 300-student sections — only because we do not have larger lecture theatres available.

Cuts in government grants to universities (about 15 per cent over three years), combined with a bargain-basement fee structure, do indeed challenge our ability to produce well-educated graduates and relevant research.

Admittedly, this is mitigated somewhat by new technologies that allow us to offer online interactive tutorials, use software to test our students, post our lecture notes online before class, and communicate with our students via blogs. We also produce low-cost ebooks and offer complete courses online for students with non-traditional schedules. Thanks to these information technologies, my university teaches almost twice the number of students it did three decades ago, but employs few additional professors.

Yet, all is not well. The economic model of a university is one where fixed costs are high and the marginal cost of additional students in certain faculties (social sciences, some sciences and arts) is low. Paradoxically, funding cuts thus encourage universities to generate additional revenue by inducing more students to enrol. How? By lowering entry barriers — a euphemism for admitting students with lower CEGEP scores, or being more lenient in readmitting students in failed standing. Such students are often less qualified.

Moreover, the low price of schooling serves as an inducement for students to accept the offer of a place, rather than consider alternatives. Consequently, despite our adjustment to modern technology, we should expect more failures, slower graduation rates and more frequent occurrences of “unsatisfactory” academic standing.

On the research side, our universities find it progressively more difficult to compete for top-flight academics in a global market. I anticipate that one of Canada’s and North America’s educational crown jewels, McGill, will slide precipitously down the international rankings in the near future as a consequence.

At the end of the day, the distorted market for higher education is not functioning well. Armies of bureaucrats are devoted to finding compensatory mechanisms designed to cover the cost of a service that is staggeringly underpriced. Student demonstrations in 2012 and the capitulation of successive governments in terms of fee policies have assured students and all Quebecers a pyrrhic victory.

Is there anybody in politics promoting the idea that providing virtually free education to professionals who may then ply their trade anywhere in the world is unfair to taxpayers? Or that on average, students might pay 30 per cent rather than 20 per cent of university costs? Even with this latter adjustment, Quebec fees would remain the lowest in Canada, and well below the average among Canadian provinces.

The problem universities are faced with today is one of misaligned incentives due to government distortions in the market for higher education. Artificially low prices are attracting many students who would otherwise pursue options better suited to their talents and interests, and starving universities of the funds they need to provide quality education and carry out cutting-edge research.

Allow prices to rise just moderately, with appropriate financial support for deserving students who need it, and the problem will recede accordingly.

Ian Irvine is a professor of economics at Concordia University and an associate researcher with the Montreal Economic Institute. The views reflected in this column are his own.

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