January 17, 2016

The dumbness of Liberals' post-secondary strategy



Speaking recently to the student newspaper at the University of Toronto's Mississauga campus, newly-elected Liberal MP Iqra Khalid outlined a key component of the federal government's post-secondary education plan:
When asked about her thoughts on postsecondary tuition, Khalid says that “as the national household debt rises, it’s becoming very hard for postsecondary students to complete their education”.

According to Khalid, the government has put forward a “very comprehensive plan” that will help students “not only achieve their postsecondary education but also then to transition into the workforce”.

“The first would be to [address] student loan accessibility,” she says. “To not have the loan fee repayable the minute you graduate, but to have that loan become payable once you are earning more than $25,000 a year. So it’s [a] multi-faceted [plan].”
Days before the election, I published on this blog the case for rejecting the Liberal plan for lower tuition fees.

In short, it would cost taxpayers a fortune. Also, research shows that lower tuition fees result in lower expectations, lower standards, and less motivation among students.

From a purely economic perspective, since university students tend not to come from poor families, there's no reason to subsidize university education for redistribution purposes. And, subsidies for university education far exceed the level that could be justified for efficiency purposes (many people argue that university education creates a positive externality, meaning that it generates some benefit to society beyond the benefit to the students who enroll).

In other words, excessive tuition subsidies is not only a massive strain on the taxpayers' wallets, but they also create an undesirable distortion in the labour market by causing far too many students to enroll in university than is socially optimal.

But besides just increasing government spending on post-secondary education, as noted by MP Iqra Khalid, the Liberals will not make student loans repayable until the student is earning more than $25,000 per year. In other words, taxpayers will be on the hook for interest payments until university graduates are earning at least $25,000 annually.

Not only does this policy create a distortion by encouraging excessive university enrollment, it also distorts students' decision-making away from behaviour that would make them more likely to get a good job after graduating. By giving students a financial incentive to not get a good job after graduating, this policy encourages students to enroll in less useful programs and to spend less effort looking for good jobs.

What will be the results of the Liberal post-secondary plan? More youth unemployment, higher taxes, and more government debt.

3 comments:

  1. Not to sound pessimistic, but I must admit that, after all I have seen and all I have witnessed happening to the greatest country on the face of the earth, I am forced to say that I am fortunate in that nature will keep me from insanity because I will not live long enough for it to take hold -- and I make these remarks with the greatest of humility simply because I have never wavered in my loyalty to Canada, nor would I. But what I view today will, in my view, bring about a Canada I could in good conscience not be proud of and I fear for the children that will have to deal with our political and social mistakes.

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    Replies
    1. Well said sir, I have to agree, I am glad I am on the back side of life but I fear for my children and their children.

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  2. I am like you Bill. We have to try and educate the children before they get completely influenced by the Socialism they are being taught in school for a start.

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