Students more than pay off tuition subsidies through future tax revenue

By Arshy Mann
[CUP Western Bureau Chief]

VANCOUVER (CUP) — A new study argues that students aren’t the freeloaders that some might believe them to be.

“Paid in Full: Who Pays for University Education in B.C.,” published by the Canadian Centre for Policy Alternatives (CCPA), has found that British Columbians with a post-secondary degree contribute more to the public coffers through future income taxes than it would cost taxpayers to entirely pay for their entire degrees now.

“There seems to be a conventional wisdom … that students are subsidized and they should stop complaining about high tuition fees because really taxpayers pay for their education,” said Iglika Ivanova, an economist with the CCPA and the author of the report.

“But because [post-secondary graduates] earn more money, they end up paying more taxes. The question is how much more do they pay in taxes and is that enough to cover the upfront costs of their degree.”

In the study, Ivanova compared how much it costs to fund a four-year degree to the expected lifetime income tax contributions of a university graduate. The higher earnings of degree-holders combined with lower rates of dependence on welfare or employment insurance meant that students more than end up end up paying their own way.

“A lot of people, when you talk about lowering tuition fees, think you’re saying you want to subsidize education,” said Ivanova. “But you’re not really subsidizing it. They pay.”

According to her findings, governments could cover the entire cost of tuition twice-over and would still be getting a bargain.

The CCPA study didn’t take into account the various other ways that degree-holders contribute to the economy, such as by paying higher consumption taxes, contributing to economic growth and through innovation.

Ivanova embarked on the project in order to update a previous CCPA study done by UBC economist Robert Allen in 1998, which came to a similar conclusion.
She was interested if Allen’s findings still held at a time that tuition rates increased substantially and British Columbians were paying less in taxes.

“Some people have speculated that we have so many graduates now [and] that university education isn’t what it used to be. Maybe it no longer has a payoff for students,” she said.

“But by and large we continue to find that almost every field of study including things that you would think have no practical value, like humanities, pay for themselves.”

There was only one discipline that didn’t cover its own cost — visual arts — and that’s because artists tend to earn considerably less than their peers in other professions.

Ivanova went on to argue that because many prospective students experience “sticker shock” when confronted with the high cost of a university degree, they may decide to pass on higher education and that governments are therefore missing out on the potential tax revenue.

“So why are we putting barriers to education for so many people by having high tuition fees instead of making sure that everyone who wants to can get an education and contribute to society?” she said.

Zach Crispin, the chairperson for the B.C. wing of the Canadian Federation of Students (CFS) argued that decision-makers should take heed of this study.

“I would definitely hope that [governments] would take a look at the data that’s been presented here by the CCPA and at least choose to freeze and work towards reducing tuition fees in the short term and really think fully about getting rid of financial barriers to post-secondary education,” he said.

He also pointed out that the study demonstrates that the net gains to the public treasury from higher education have actually been decreasing.

“The fact is that when we used to have a more progressive tax system, those numbers were higher,” he said. “As we move to reduce tuition fees and increase the tax base through a progressive tax system, students are going to be paying for their education more times over and we can actually increase the quality of it at the same time.”

Ivanova emphasized that regardless of how high tuition fees are, students end up paying for their degrees one way or another — it’s just a matter of when.

“It’s economically feasible and fairer to ask graduates to pay for their degrees through taxes after graduation rather than asking them to pay through high tuition fees up front.”