A recent OECD report made headlines thanks to the links it made between oil prices, the Canadian dollar, and the decline in manufacturing employment. Lost in the discussion, however, were the recommendations found in the 128 page report on how Canada can increase access to higher education. These recommendations are particularly timely given the student protests in Quebec.
The report cites an earlier study by the Organization for Economic Co-operation and Development that the biggest determinant whether young people will attend university is whether or not their parents had attended university. When controlling for other factors, a young Canadian is 4.6 times more likely to attend university if her parents had attended as compared to one whose parents had not. Other factors such as occupation and parental income have much smaller effects on attendance rates.
The OECD report suggests that loans to low-income students may be of limited value, as students from disadvantaged backgrounds may underestimate the benefits of higher education and are often relatively risk-averse when taking on debt. Increasing the size of loan programs is of little use to low-income students if they are unwilling to take on those loans.
Tuition is seen as the financial barrier preventing low-income students from attending college or university, but it is only one of the financial costs faced by students. An earlier OECD study found that rural Canadians are equally as likely to attend college as urban ones, but are much less likely to attend university than their urban counterparts. This difference is likely due to the fact that there are more colleges located in and near rural areas than there are universities. Having to move away from home poses an additional financial burden on rural Canadians that is not borne by their urban counterparts.
Given the studies cited in the OECD report, reducing tuitions is an inefficient way of increasing access to higher education. Loans may not be pursued by low-income or disadvantaged groups, but an income-contingent loan repayment system, similar to that of the U.K. and Australia, could be more effective. The most effective way to increase access to higher education would be to simply give direct tuition grants to the three groups the least likely to attend university: lower-income households, rural and aboriginal Canadians and, most important, those who did not have a parent attend university.
Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business – Western University