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Reducing tuition fees will do very little to close the gap between university participation rates in people from the higher and lower ends of the income distribution.

The Canadian Federation of Students (CFS) is holding a National Day of Action on Wednesday in the name of increased access to a university education. Unfortunately, their message is greatly obscured by its predilection for policies that will do little to increase access. Its preferred policy change -- a reduction in tuition fees -- is the least effective and most expensive mechanism available for increasing access.



There is a well-documented correlation between family income and university participation rates: people from the top quarter of the income distribution are roughly twice as likely to go to university as those from the bottom quarter. An implication of this imbalance is that the population of people who are attending university is far from being representative of the population as a whole: university students from the top quartile outnumber those from the bottom by a factor of 2 to 1. This imbalance is both the problem and the reason why the problem is so hard to solve.



Reducing tuition fees will do very little to close the gap between university participation rates in people from the higher and lower ends of the income distribution. The direct costs of university -- tuition and books -- account for only a quarter of the total costs ( source), and financial considerations explain roughly 12 per cent of the gap between PSE participation rates of youths from upper- and lower-income households.

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The effects of a tuition decrease on university participation rates are small, but they are not zero. According to estimates in a study prepared for the government of Quebec by Université de Sherbrooke professor Valérie Vierstraete ( 121-page pdf, in French, discussed at length in the other official language here), eliminating tuition fees in Quebec would increase university enrolment by 7.8 per cent. While this is a welcome outcome in itself, some 90 per cent of that extra public money would go to students who were already attending university. Tuition reductions don't affect the decisions of existing students; their effect is the equivalent of an increase in their incomes. And the people who are already going to university are disproportionately drawn from high-income families.



A far cheaper, more equitable and more effective way of increasing access to universities is to concentrate public funds on providing support to students in financial need (this group also includes those who have debt problems). But these measures would benefit only a minority of students who are already going to university, while tuition cuts would benefit all students.



Student lobby groups such as the CFS have a mandate to represent the interests of all current students, and this group does not include those who might have gone to university if more financial support were available. They have little interest in targeted programs -- see, for example, the CFS' reaction to the Ontario government's tuition rebate for students from families earning less than $160,000/year.



The CFS has been remarkably successful in its campaigns over the years: the share of university spending on need-based programs has been steadily decreasing in favour of programs that benefit all students. But if we want governments to adopt policies that make it easier for those from low-income families to attend university, this trend will have to be reversed.



For more of Stephen Gordon's recent posts, click here.



Economy Lab, winner of the 2011 Eppy Award for best business blog. Follow Economy Lab on twitter

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