On August 24, US President Joe Biden announced a plan to forgive up to $20,000 of student debt for millions of Americans. I don’t really care to get into the folly of student loan forgiveness or the nakedly cynical political motivations behind the decision. Even CNN published an opinion piece from former US Congressman Charlie Dent thoroughly thrashing the Biden administration’s move.
Yet, even though it is an American news story with mostly American consequences and I’m writing for, I hope, a predominantly Canadian audience, it does present me with an opportunity to give voice to an idea that I’ve been bouncing off of family and friends for quite some time. One imagines they’ll be grateful that I’m unburdening this idea onto the page (and you, my poor reader), that they might, at last, get some rest for their weary ears.
I won’t keep you in suspense. The idea is quite simple: employers should pay for higher education. All of it.
Why Employers Should Foot the Bill
There are a few reasons why I believe that employers should foot the bill for higher education. For the most part, my reasoning has to do with economics but there are some social, structural and moral reasons as well. I see all of these reasons as being interconnected so I’ll do my darndest to untangle the mess of half-formed associations in my head—clarity wasn’t necessary when I was chewing my family’s ears off about this idea over a bottle of wine… or two. So bear with me.
“Why does anyone attend university or college?”
I’d like to start with what I consider to be the simplest reason for why I believe that employers should pay for higher education. This is partly an economic reason though one could just as easily, I believe, call it social or structural—economics is, after all, a social science (something of an oxymoron but don’t let me take too many tangents or I’ll simply write us both dizzy). The reason can be found in the answer to the question, “Why does anyone attend university or college?”
Admittedly, I don’t have any studies or statistics to refer to—only my own experience and what I perceive to be the prevailing socio-structural framework. As far as I can tell, the overwhelming majority of degree holders, if pressed, would say that they only attended university so that they could work in their desired profession or command higher wages in the labour market. Sure, many others would say that they were simply funneled (or, rather, crammed) into the educational pipeline by implicit social expectations, explicit parental pressure, strangely invested guidance counselors and freakishly friendly university recruiters. They would answer our topical question with tautological axioms that have the intellectual weight of a shrug. “I went to university because that’s what people do,” they might say. A still smaller minority that made it into the hallowed halls of academia, one imagines, are the type of preening whipper-snappers who are more familiar with library staff than they are with their own roommates and skip out early at frat parties because, I quote, “Midterms are coming.” I would know, I was one of them.
“Why does anyone attend university or college?”
If it is the case, however, that the majority of university and college degree holders only suffered through years of stale lectures and exam-anxiety induced alopecia so that they could qualify for higher paying jobs or enter into their desired profession, it raises yet another question: “Who is actually using these higher education degrees?”
Let me put the question another way. Would anyone—barring the preening whipper-snappers—actually attend a higher education institution if every well-paying job didn’t list at least a BA in this or that field of study as a qualification? Probably not.
Now, I want to be clear. I’m not suggesting that people are only motivated to attain higher learning because they want more money. I’m not suggesting that something as mundane as job qualifications has been at the heart of intellectual curiosity since the dawn of time. Certainly, Isaac Newton wasn’t motivated to postulate the theory of gravity to make himself more marketable to Space X. What I am saying, however, is that within the context of our current socio-structural framework, the only people actually making use of higher education degrees are—by their own admission as so clearly stated in their job postings—employers.
I can imagine a world in which people, having graduated high school, pursued their own intellectual interests at their own pace, in their own way, to their own desired depth and at their own expense and benefit. They wouldn’t have a piece of paper declaring their job market fitness to the world but they would have what actually matters, i.e. higher learning. I can’t, however, imagine that anyone would, of their own volition, spend tens of thousands of dollars and the last remaining years of their youth sitting in a classroom for four years and listening to what is supposed to be intellectually stimulating material but what is actually, for all intents and purposes, a prolonged and not particularly well-structured job training seminar at the end of which you are granted a piece of paper that is effectively a type of insurance for employers that you actually know what you say you do. Yet, that is exactly what they are doing and only, it would seem, because “desirable” employers demand it.
To drive my point home (and I’ll try to put my sarcasm aside for a moment), I’ll return to the hard economics of the matter. In economics, labour is, for employers, suppliers, producers, companies, etc. an input. Improvements to labour inputs that increase their productivity are, by definition, investments. If, then, employers view higher education as a labour productivity-increasing investment, why aren’t they making the investment themselves?
“Society benefits from positive externalities when people attend university or college!”
Now, I can already hear my fellow economists getting ready to rebuke my arguments, filled to the brim with haughty Keynesian righteousness. “Society benefits from positive externalities when people attend university or college!” they shout. “Labour receives a return on their investment through higher wages, so they should share in the cost!” they argue. I’ll tackle this nonsense about externalities first because it’s easiest to dispel and, after all of that technical drivel about productivity and investments and one particularly long run-on sentence, I’m itching to write something quippy and sarcastic so you don’t fall asleep.
Imagine if I, a green thumb with the landscaping zeal of a Bonsai artist, knocked on all my neighbours’ doors and informed them, chest puffed out and nose in the air, that my gardening had beautified the neighbourhood to their benefit. I would then proceed to unfurl a scroll with all my differential equations and, in a most nasal voice, proclaim, “My gardening has appreciated the market value of all homes on this street by 5%.” Rolls up scroll and crinkles nose. “You’re welcome. I accept payment in cash and banker’s cheque.” Click, click of the heels and I’m off to the next door.
If that sounded ridiculous—because I hate grubs too much to muck about in the dirt—then that’s because it is. Homeowners don’t pay a “Good Neighbour Tax” when they sell their property and distribute the funds to the more beautified homes on their street, do they? That would be white blackmail. Residential racketeering. Subdivision subversion. It is patently absurd on the very face of it and it doesn’t make any sense. So how is it any less ridiculous when we consider charging society for the positive externalities of a good university education—or anything else, for that matter?
Certainly, it is true that society benefits when individuals are educated. Presumably, if they’re in school, they aren’t out doing drugs and tagging underpasses. One hopes that they would go on to make higher wages and thus become more rapacious consumers who encourage invention and innovation. And, of course, the usual argument that stuffy Keynesians make; that as higher wage earners, degree holders pay more in taxes (I don’t think that’s necessarily a good thing but that’s a tangent with tangents of its own and I promised not to make you or I dizzy so I won’t pursue it). Even the most abstract theoretical physicists who blather on about 77 dimensions provide some benefit to society—even if only to serve as an example that too much reading is, in fact, not good for you.
Of course, these examples of positive externalities are all—as all examples of positive externalities are—nebulous, unquantifiable hypotheticals. In order to arrive at some sort of workable figure, one would have to make so many assumptions and state so many qualifications that they would actually need 77 dimensions to make the math work. It is nothing more than the arrogance of economists that they believe that the entire world and everything in it can be crammed into a T-cell, logged in a double-entry accounting system and represented on a graph. Hire all the actuaries you want, you’ll never convince me that you can accurately calculate the dollar value to my neighbours that I keep a weed-free lawn, far less try to estimate the benefit to all Canadians that I attended university.
Now, I believe that I’ve made my case on this point. However, for all my rancorous ranting about the foolish idea of passing on costs based on externalities, all I have managed to do, I believe, is to show that one group of people—namely, society as taxpayers—shouldn’t pay for higher education. Beyond my initial argument that it is employers who are demanding and using higher education degrees, I have not yet shown why I believe this means that employers should be the ones footing the bill.
“For the majority, tuition isn’t an investment in their future—it’s an entry fee to the labour market.”
This takes me to the next objection my fellow economists might raise. Recall their exclamation, “Labour receives a return on their investment through higher wages, so they should share in the cost!” To address this objection, you’ll have to excuse me while I dust off the old economics degree—wherever it is—and use some technical jargon that makes me sound smart and officious. I promise, however, nothing you’re about to read is as complicated as it sounds—I am, after all, writing this with the eloquence granted me from a glass of wine.
To make my point clearly, I’ll simply say this: the user of a product or service should be the one to pay for it because (apart from its being the morally correct thing) sharing the cost with anyone else creates disastrous market distortions. My fellow economists and public policy wonks, pedantic bunch that we are, would recognize by now that I have been relying on the user-pays or beneficiary-pays principle (the consumer or beneficiary of a good pays the full cost for said good). It’s not a particularly revolutionary idea but it is a particularly good one. That being said, however, there is a subtle and oft-ignored difference amongst economists between the user of a good and a beneficiary of a good. Much like my neighbour whose house appreciated because of my boxwoods and begonias, labour might be a beneficiary of higher education, but it is not (unless the labour employs itself) the user.
There is, in fact, a useful tangent here that I feel it is necessary to take—despite my promises not to—so that when we resume our original course, there will be less room for misunderstanding what I’m saying. To the extent that labour sets wages, I would have to say that I agree with the statement that labour should invest in itself—i.e. pay for its own higher education. Private contractors, entrepreneurs and freelancers can and do set their own wages according to what the market will allow. Often, they fare much better than they’re corporately-captured compatriots. But note that these individuals are not labour in the sense that we are talking about. They are, themselves, employers… of their own labour. For the most part, however, we do not live in a world populated by contractors, entrepreneurs and freelancers—i.e. we do not live in a world where labour sets its own wages based on its own costs and market value. We live in a world where most people receive a salary or an hourly wage for a job and employers fit labour into and out of these preset positions with predetermined wages. Given this and the apparent reasons why most people attend university or college (i.e. to get one of these preset positions), for the majority, tuition isn’t an investment in their future—it’s an entry fee to the labour market.
Now, onto those disastrous market distortions I stated as the justification for invoicing employers to pay for the cost of tenured professors’ salaries. If it is, as I have argued, that employers are the ones experiencing the labour-productivity boosting benefits of a higher education degree, then only employers would know how valuable (in dollar figures) it actually is—they need only look at their bottom line. If it was, then, that labour was supposed to invest in itself, how would it know how much to invest? Would a $100 tuition fee be too little? Would $1,000,000 be too much? Only the employer would know.
Of course, my fellow economists would say, affixing their glasses, “Labour only needs to know how much of a return would come to it, i.e. how much more money, in higher wages, a university or college graduate makes over the course of their professional career. On the margin you see.” Crosses legs and picks lint from corduroys. “If the amount is more than the cost of tuition (plus the interest on the loan and the opportunity cost, as measured in deferred earnings, of sitting in a classroom for four years) then it is a good investment. If not, then it is a bad investment.” Smiles warmly with self-satisfaction.
In the perfect world that my fellow economists imagine, where consumers are rational and information is perfect, I would say that they would have me beat and polish off the rest of this bottle of wine. That perfect world, however, only exists in textbooks and internally consistent, albeit wildly inaccurate, theories.
If it was the case that high school graduates were capable of performing this supposedly simple differential analysis (or even just Googling reliable statistics) telling them how much more money their degree would earn them, then how is it that they end up with tens or hundreds of thousands of dollars in student debt that requires a federal bailout? Usury interest rates? I think not. The reality is that, even if a 17-year old high school graduate bothered to do such a complex differential analysis for which they would likely need a university education to perform properly anyway, the best they could come up with would be one of those 77th dimensional calculations of something approximating a multiversal projection of their future. In other words: a shot in the dark.
This is because a high school graduate is in no position to know the future of the job market (or even what they want to do with the rest of their nascent life) and, subsequently, the value of their higher education to a potential employer. Granted, employers don’t possess a crystal ball of their own, but they are, firstly, in a better position to know their labour requirements in the short and long term, and, secondly, already assuming the risks and rewards inherent in conducting business. To harken back to my gardening example, there is a type of information asymmetry (I know something that you don’t know) and agent-principal problem (I want something that you don’t want) at play that makes it impossible for me to know whether my gardening efforts were worth the work. How could I possibly know whether the 5% increase to my neighbour’s property value from my gardening was worth the back-breaking effort if I don’t know what kind of house they keep? And if I put in the effort to find out—skulking about their windows, peering around an open front door and inviting myself over to Thanksgiving dinner so I can get the grand tour up to and including the walk-in closet—then at what point do I become an employer myself? A cottage contractor, as it were, hired to increase property values right before a sale by beautifying the neighbourhood?
I posit that the cost-sharing of tuition with taxpayers and students has led to precisely this kind of information asymmetry and agent-principal problem that have, in turn, created the issues we’re currently seeing in higher education, and, by extension, the labour force. By outsourcing the cost of the investment to ill-informed and otherwise-motivated beneficiaries of higher education—i.e. taxpayers (read: government… read: politicians) and high school graduates—we have allowed the cost of a degree to outstrip all reasonable expectations of financial return to the user. Similarly, a lack of information sharing and coordination between employer, university/college and labour has resulted in a glut of useless degrees—what in God’s name is Bombardier or TD Canada Trust supposed to do with a BA in Intersectional Gender Fluidity Studies?—and a dearth of practical degree holders.
How Employer-Funded Higher Education Might Work
The change I’m proposing might sound radical but it isn’t really, altogether, much of a change at all. In Canada, employers already pay taxes and, allegedly—though no one can actually verify—politicians use some of those tax dollars to pay for things like higher education. Why not simply cut out the middleman altogether—whose accounting of tax dollars leaves much to be desired anyhow—and have employers pay universities directly. In a sense, they already do this. Corporations routinely make massive donations to universities and colleges—in 2021, private organizations gave the equivalent of $1,700/full-time student to Canadian universities. All I’m proposing is that we stop calling these wealth transfers “donations” and start calling them “payment for services rendered” and have the money follow the students, much in the way that structured scholarships do.
I confess, beyond the broad strokes, I haven’t worked out the details or the mechanics of how this model might work exactly—I’m open to suggestions. One imagines it would require a great deal more coordination and communication between employers and institutions of higher learning so that Bombardier doesn’t end up with engineers who know more about Queer Intersectional Gendered Environmental Studies than they do about, say, gee, I don’t know… Newton’s Third Law of Motion.
In closing, I’ll say this. Student loan forgiveness will only make the crises in higher education—from affordability to intellectual rot—worse. “Free” or fully taxpayer funded higher education will, similarly, only worsen these same crises of the academy. Why not, then, try sending the bill, in full, to the Degree Dealers’ number one customers: employers.
