For most of the past 30 or so years, big Canadian universities have all been working off more or less the same business model: find areas where you can make big profits and use those profits to make yourself more research-intensive.
That’s it. That’s the whole model.
International students? Big profit centres. Professional programs? You better believe those are money-makers. Undergraduate studies – well, they might not make that much money in toto but holy moly first-year students are taken advantage of quite hideously to subsidize other activities, most notably research-intensity.
Just to be clear, when I talk about “research-intensity”, I am not really talking about laboratories or physical infrastructure. I am talking about the entire financial superstructure that allows profs to teach 2 courses per semester and to be paid at rates which are comparable to those at (generally better-funded) large public research universities in the US. It’s about compensation, staffing complements, the whole shebang – everything that allows our institutions to compete internationally for research talent. Governments don’t pay enough, directly, for institutions to do that. So, universities have found ways to offer new products, or re-arrange the products they offer, in such a way as to support these goals of competitive hiring.
Small universities do not have quite the same imperatives with respect to research, but this business model affects them nonetheless. To the extent that they wish to compete for staff with the research-intensive institutions, they have to pay higher salaries as well. Maybe the most extreme outcome of that arms race occurred at Laurentian, whose financial collapse was at least in part due to the university implicitly trying to align itself to U15 universities’ pay scales rather than, say, the pay scale at Lakehead (unions, which like to write ambitious pay “comparables” into institutional collective agreements, are obviously also a factor here).
Anyways, the issue is that for one reason or another, governments have been chipping away at these various sources of profit that have been used to cross-subsidize research-intensity. The situation with international students is an obvious one, but this is happening in other ways too. Professional master’s degrees are not generating the returns they used to as private universities, both foreign and domestic, begin to compete, particularly in the business sector. (A non-trivial part of the reason that Queen’s found itself in financial difficulty last year was because its business school didn’t turn a profit for the first time in years. I don’t know the ins and outs of this, but I would be surprised if Northeastern’s aggressive push into Toronto wasn’t eating some of its executive education business).
Provincial governments – some of them, anyway – are also setting up colleges to compete with universities in a number of areas for undergraduate students. In Ontario, that has been going on for 20-25 years, but in other places like Nova Scotia it is just beginning. Some on the university side complain about these programs, primarily in polytechnics, being preferred by government because they are “cheap”, but they rarely get into specifics about quality. One reason college programs are often better on a per-dollar measure? The colleges aren’t building in a surplus to pay for research-intensity – this is precisely what allows them to do revolutionary things like not stuffing 300 first-year students in a single classroom.
In brief then: the feds have taken away a huge source of cross-subsidy. Provinces, to varying degrees (most prominently in Ontario), have been introducing competition to chip-away at other sources of surplus that allowed universities to cross-subsidize research intensity. Together, these two processes are putting the long-standing business model of big Canadian universities at risk.
The whole issue of cross-subsidization raises two policy questions which are not often discussed in polite company – in Canada, at least. The first has to do with cross-subsidization and whether it is the correct policy or not. I suspect there is a strong majority among higher education’s interested public that think it probably is a good policy; we just don’t know for sure because the policy emerged, as so many Canadian policies do, through a process of extreme passive-aggressiveness. Institutions were mad at governments for not directly funding what they wanted to do, so they went off and did their own thing. Governments, grateful not to be harassed for money, said nothing, which institutions took for approval whereas in fact it was just (temporary) non-disapproval.
(I should add here – precisely because of all the passive-aggressiveness – it is not 100% clear to me the extent to which provincial governments understand the implications of introducing competition. When they allow new private or college degree programs, they likely think “we are improving options for students” not “I wonder how this might degrade the ability of institutions to conduct research”. And, of course, the reason they don’t think that is precisely because Canadians achieve everything through passive-aggression rather than open policy debates which might illuminate choices and trade-offs. Yay, us.)
The second policy question – which we really never ever raise – is whether or not research-intensity, as it is practiced in Canadian universities, is worth subsidizing in the first place. I know, you’re all reading that in shock and horror because what is a university if it is not about research? Well, that’s a pretty partial view, and historically, a pretty recent one. Even among the U15, there are several institutions whose commitment to being big research enterprises is less than 40 years old. And, of course, we already have plenty of universities (e.g. the Maple League) where research simply isn’t a focus – what’s to say the current balance of research-intensive to non-research-intensive universities is the correct one?
Now add the following thought: if the country clearly doesn’t think that university research matters because the knowledge economy doesn’t matter and we should all be out there hewing wood and drawing water, and if the federal government not only chops the budget 2024 promises on research but then also cuts deeply into existing budgets, what compelling policy reason is there to keep arranging our universities the way we do? Why not get off the cross-subsidization treadmill and think of ways of spending money on actually improving undergraduate education (which the sector always claims to be doing, but isn’t much, really).
I am not, of course, advocating this as a course of policy. But given the way both the politics of research universities and the economics of their business models are heading, we might need to start discussing this stuff. Maybe even openly, for a change.
