What's Driving the Rising Cost of Canadian University Education?

And guess who's paying for it

We’ve probably all seen reports describing out-of-control higher education costs in the US. An education that in the 1970’s could be paid for with some savings and a part time job at the local Burger King will now cost you the equivalent of a down payment on a multi-family investment property. I’m not exaggerating. Check it out for yourself.

Those increases are not just the result of regular inflation. When you track US college costs against consumer goods (as the economist Mark J. Perry did here), you’ll see that rising college-related expenses are unlike anything else (besides healthcare).

What changed? The word on the street is that those crazy tuition costs are mostly due to colleges hiring armies of non-teaching administrators.

That’s what’s going on below the 49th. But what about Canadian universities? Back in 2006-7, according to Statistics Canada, across all Canadian universities the average inflation-adjusted cost of one year’s undergraduate tuition was $17,363. Fast forward to 2023-2024 - just seventeen years on - and that same tuition-only cost has now doubled to $34,628.

Note how I referred to those numbers as “costs”. That’s because $34,628 is what you’ll pay if you’re an international student without scholarships. Thanks to government subsidies, Canadians get a big discount. In fact, domestic students currently pay only $6,434. But it’s taxpayers who cover the difference.

So tuition is rising far faster than inflation. But is there any way to estimate what it is that’s driving those increases? Yup.

The rise of the university administrator

As the chart shows, since 2001, teaching jobs have dropped from accounting for 17.38% of all university positions down to 14.52% in 2022. In other words, universities are, proportionally, hiring teaching staff at significantly lower rates than they used to.

However, those numbers don’t tell us who universities are hiring instead of teaching staff. Perhaps they’re building up their food services, security, and custodial crews. There is at least one identifiable subgroup that’s visibly ballooned: education support services. That North American Industry Classification System category (NAICS 6117) includes educational consultants, student exchange program coordinators, testing services, research and development, guidance counselors, and tutoring and exam preparation services.

Since 2001, the proportion of support services staff in relation to all hires has more than doubled, from 1.06% to 2.62%. Their absolute numbers across Canada rose from 3,829 to 15,292 - that’s a jump of 400%.

All of which suggests that the problems attracting so much attention in the US are very much part of the higher education ecosystem here in Canada. The big difference, though, is that Canadian taxpayers are expected to pay for a far greater proportion of the product.

That’s certainly an interesting trend. But an increase of just 1.5 percent isn’t enough to explain the tuition growth we’ve experienced. And I’m also not sure that the “education support services” category maps directly to the class of high-earning administrator they’re talking about in the US. It looks like we could use some more data.

Tracking Salary Changes in Ontario Universities

The year 1996 saw a welcome victory for government transparency when Ontario’s then-Progressive Conservative Premier Mike Harris mandated the annual disclosure of all public sector employees earning more than $100,000. Since that year, the Sunshine List, as it’s popularly known, has grown from just 4,500 names to more than 300,000. However, $100,000 won’t buy you what it once did – especially if you must live in Toronto.