Reality Check: Reducing the upfront student cost of higher education makes good sense

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Talking about tuition fees out of context makes little sense, according to a report on Learning and Earning by the Canadian Centre for Policy Alternatives (CCPA). Hugh Mackenzie writes that the role of the income tax system must be taken into account in any discussion of tuition fee policy. In most provinces, government funding is the largest single source of university revenues, so it only makes sense to consider how students and their families contribute not just through tuition but through the taxes they pay.
The benefits of university education are public, and not just private, individual “returns” on investment. And the relationship between education and earnings is variable and not consistent. Thinking in terms of the amount of time required to pay back the investment, Mackenzie estimates that eliminating tuition fees in Ontario would add less than two years to the time required for the province to recover its costs through the accrual of real public benefits, such as increased tax revenue from high paid knowledge-based jobs.
He also considers the cost of providing a free university education as a proportion of the lifetime taxation gains received by the province and finds that the impact of eliminating tuition fees in Ontario would only increase the cost proportion by 4.4 percentage points. This proportion would still be the second lowest in Canada. Of all provinces, Ontario also experiences the highest rate of return from its public investment. If all provinces were to eliminate tuition, Ontario and Quebec would share that distinction.
Some of Ontario’s advantage is because the province continues to underfund universities, but that should not obscure the fact that the tax system already embodies an effective means for people to contribute to the cost of their education in proportion to their private returns. And when tax paid is taken into account, it becomes clear that public subsidies for tuition fees do not amount to a transfer of income from low income to wealthy families, as is often argued. In fact, the opposite is the case.
Source: Hugh Mackenzie, Canadian Centre for Policy Alternatives, Learning and Earning, June 2013

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