Canada’s universities will face some big challenges over the next 10 years. They will see a projected 30 percent increase in enrolment, or 200,000 more students, by 2011. They also will need to hire as many as 40,000 new faculty members to respond to enrolment growth and to replace retiring professors. At the same time, universities will be expected to perform significantly more research if Canada is to reach the federal government’s objective of being one of the top five countries in the world in terms of research and development. And all of this comes at a price: an estimated $6.2 billion more annually in operating revenues and $6.4 billion more in research funds will be needed by 2011 to meet these challenges. But there is also a price to pay if we ignore these challenges, including lower productivity and reduced economic growth in the long term.
The Association of Universities and Colleges of Canada (AUCC) builds a detailed case for these projections in a report entitled Trends in Higher Education, released in the fall of 2002. However, in the months since the report’s publica- tion, we have found that our estimates are perhaps overly conservative and the upper limits of our projections will quite likely be surpassed. For example, full- time enrolment in the 2002-03 school year increased by 40,000 students, or more than 6 percent, from the previous year. This was the biggest annual enrol- ment increase ever experienced by Canadian universities and is above what we expected. As well, the impact of Ontario’s double cohort, entering university this month, appears to be greater than what we anticipated just six months ago. These developments, in turn, will affect our faculty pro- jections. What’s more, Canada’s desire to be one of the top five countries in terms of research and development is proving to be a rising target as other countries significantly boost projected R&D expenditures. This means Canadian governments, industry and universities will have to do more to meet the top-five goal.
With those caveats in mind, the following analysis uses data from the AUCC’s report to examine what the next decade has in store for Canadian universities in four key areas: enrol- ment, faculty, research and finances.
In 2001-02, there were about 646,000 full-time students at Canadian univer- sities and university-degree level colleges: approximately 558,000 undergraduate and 88,000 graduate students. An addi- tional 275,000 students were enroled part-time, equivalent to about 80,000 full-time students. The two factors likely to have the greatest impact on future enrolment are population demographics and university participation rates. We expect the triggers that influence partici- pation rates will play a much larger role in driving enrolment increases than shifts in population.
Between 1974 and 1991, there was a surge in the number of children born. These are the children of the baby- boom generation, often referred to as the ”œecho.” These children are now reaching the age when they are begin- ning to enter universities, and their numbers will continue to grow over the coming decade. Population in the key enrolment-driving cohort of 18- to 21- year-olds is projected to rise by 8.5 per- cent during this time. With no increase in participation rates, this population trend alone will likely push up full-time undergraduate enrolment demand by about 35,000 students over the decade. To put this in perspective, this is equiv- alent to the full-time undergraduate enrolment of Canada’s largest universi- ty, the University of Toronto.
Meanwhile, university participa- tion rates are influenced by myriad factors that range from parental influ- ence and socioeconomic status to responsiveness to labour market demands. In Canada, children whose parents have completed post-second- ary education are more than twice as likely to complete post-secondary edu- cation than children whose parents did not complete secondary school. Data from the 1996 census indicate that many more adults in recent years have completed degrees than in the preceding generation. For example, in 1996, 17 percent of adults aged 45 to 54 held a university degree compared to just 6 percent 20 years earlier. Since many of the boomers’ children will soon complete secondary school, it stands to reason that this group of more highly educated parents will cause significant upward pressure on participation rates.
Moreover, a recent Statistics Canada study suggests that more youths are com- pleting high school and pursuing a post- secondary education. It indicates that the high school dropout rate has declined from 18 percent in 1991 to 12 percent in 1999 and that 70 percent of graduates pursued some type of post-secondary education. It also suggests that two-thirds of high school graduates want to obtain a university degree. This is a strong signal that young people are more convinced than ever about the value and impor- tance of staying in school.
Another demographic factor that has a significant impact on participation rates is socioeco- nomic status. Data from Statistics Canada demonstrate that chil- dren from high income families are far more likely to attend uni- versity than their lower income counterparts. We anticipate that during the next decade students from lower income backgrounds will increasingly seek the eco- nomic and social advantages that a university education affords and will demand that universities expand their capacity to accommodate more students. This also will put pres- sure on governments to finance the growth in capacity.
University participation rates also will continue to be influenced significantly by the growth of the knowledge economy and its emphasis on highly qualified professionals. Canadians have recognized and are increasingly responsive to these labour market signals. Similarly, participation rates are affected by Canadians’ assess- ment of the value of a university edu- cation. While there is clearly concern about the growing costs of university, polls confirm that the public continues to believe in the value of the experi- ence. And that belief is not misplaced: a Statistics Canada survey indicates that over the course of a career, univer- sity graduates earn on average $1 million more than those who have not had any post-secondary education. Nevertheless, high student debt and the possibility that some young people are avoiding university for fear of incurring large debts ”” what we call debt aversion ”” remain real concerns whose impact on accessibility must be continuously reassessed.
Finally, a discussion of enrolment growth cannot take place without men- tioning university capacity. While pop- ulation demographics and participation rates suggest how enrolment demand is likely to grow or change, capacity speaks directly to universities’ ability to meet that demand. Universities’ capaci- ty to supply and finance the human and physical resources required to meet enrolment demand will be a determin- ing factor of enrolment growth. In the last few years, both the federal and provincial governments have provided some additional funding to enable more students to attend university. This funding is crucial, as in Canada govern- ments provide almost 60 percent of operating support and more than 80 percent of the resources for the expan- sion and improvement of buildings and other major university infrastructure. Public policy and public finances will therefore continue to play a large role in determining universities’ ability to meet the capacity challenge.
We predict the increases in participa- tion rates combined with growth in the population from the echo boom genera- tion will result in an additional 200,000 students seeking access to a university education. This represents a dramatic increase for a Canadian university system in which many segments are already run- ning beyond capacity. Moreover, it is worth noting that by 2011 this growth would still not bring Canada to the level of university participation rates (around 25 percent of young adults) that current- ly exist among leading OECD nations. Given that these nations’ education poli- cies continue to encourage further growth in university participation over the coming decade, Canada requires this strong enrolment growth to avoid falling even further behind.
There are currently about 34,500 full-time faculty in Canadian uni- versities. The first and most pressing factor that will have an impact on future faculty hiring requirements is the need to replace faculty who are retiring in unprecedented numbers. The other three factors are growth in university enrolment, the desire to enhance the quality of teaching and the increasing demand for university-based research.
Canadian universities are facing an unprecedented wave in retirements due to aging faculty. In 1998, the proportion of faculty over the age of 54 surpassed 30 percent. This figure was only 20 per- cent a decade earlier. We expect the majority of these older professors to retire within this decade. We should note, as well, that over the last two decades, faculty numbers have not kept pace with student enrolment. As a result, the ratio of full-time students to full-time faculty is now 36 to 1. Twenty years ago, it was 24 to 1. These ratios will continue to grow unless more facul- ty are hired to respond to the 30 percent projected growth in enrolment by 2011.
Notwithstanding the challenge to keep pace with enrolment growth, the pressure to maximize quality has never been higher. Tuition fees have increased significantly and students are demand- ing more for their investment. The demand for personalized education, and by extension for more faculty to provide active and collaborative learn- ing experiences, will likely only grow in coming years. Moreover, faculty don’t just teach, but are engaged in research activities, which play an increasingly important role on many university campuses. The national push in Canada to increase research and development, together with the heightened emphasis on knowledge transfer and commercial- izing research results, will place more demands on faculty in the years ahead.
Combining the growing number of retirements with normal faculty attri- tion, we estimate that more than 20,000 faculty members will leave Canadian universities in the next 10 years. Consequently, universities will need to replace more than 60 percent of today’s faculty complement of 34,500. It is somewhat more difficult to establish how many more faculty will be required to meet enrolment growth as well as increased R&D and quality demands. Some observers feel the current system is running at or beyond maximum capacity. Therefore, they argue that faculty should grow at least in line with enrolment growth.
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Taking these factors into consider- ation, we suggest that universities will need to hire close to 40,000 faculty if enrolment grows by 30 percent and if universities have the resources avail- able to create the kinds of student-fac- ulty ratios (32:1) that existed in the mid-1990s. If this hiring takes place, universities would have about 54,000 faculty by 2011 rather than the 34,500 they had in 2001-02.
Canadian universities perform much of the country’s basic research and one-third of all national R&D. University research in Canada represents direct investments estimated at $6.8 billion annually. Of that amount, $3.6 billion ”” more than half ”” represents the univer- sities’ allocation of faculty time to research, provision of physical infra- structure, and other expenses related to research. The remaining sum, $3.2 bil- lion, is sponsored research funded by government, the private sector and other sources. These external invest- ments in university research have grown significantly in the last five years, with an estimated 35 percent increase in real terms since 1997.
There are at least three drivers of change that are likely to have a signifi- cant impact on the nature and the level of support for university-based research in the decade ahead. The first is a grow- ing recognition of the role of research and innovation in spurring economic growth and prosperity. In the Canadian context, this recognition leads to a sec- ond driver: the need to close the R&D funding gaps that threaten Canada’s  international competitiveness. A third driver is the increasing complexity of the research enterprise, a costly but inevitable reality that includes a height- ened emphasis on public safety, ethics and public accountability.
Over the past 20 years, a consensus has emerged among economists and scholars about the many benefits of pub- licly funded research, particularly univer- sity research, and the high rates of return that one can expect of such investments. These expectations will likely generate strong demand for more research, more researchers and greater research produc- tivity in the coming decade. In Canada, as in many OECD countries, investment in university research is increasingly driv- en by the recognition that, without such support, the economic and social well- being of the nation will be compromised.
However, Canada has reason to be concerned about its R&D competitive- ness, even with the sustained growth in investments over the past few years. As of 2000, Canada ranked 14th among OECD countries in terms of gross national expenditures on R&D (GERD) as a percentage of the gross domestic product (GDP), a standard measure for international comparisons. Sweden led all countries with 3.8 percent of its GDP devoted to R&D, followed by Finland, Japan, Switzerland and the US. Canada, at 1.8 percent, is well below the OECD average of 2.2 percent.
The gap in internationally competi- tive research funding is especially trou- bling given the increasing sophistication of the research enterprise and the rising costs of being in the ”œresearch game.” As projects become more ambitious and leading-edge, their funding needs increase, requiring access to sophisticated and costly research infrastructure and additional technical support. University researchers are also more frequently expected to transfer knowledge and, where relevant, to commercialize their research results.
There are signs that governments at all levels in Canada have recognized the importance of research and innova- tion. In early 2001, the federal govern- ment set an ambitious R&D target that would place Canada in the top five OECD nations by the end of the decade. This target has been widely interpreted to mean that Canada’s research intensi- ty, as measured by the GERD/GDP ratio, must rank among the top five by 2010. To reach this goal, we estimate Canada’s GERD/GDP ratio must approach 3 per- cent, which would entail tripling total R&D investments by the end of the decade. Given the key role that universi- ties play in contributing to Canada’s overall R&D output, if Canada is to reach this target, we estimate that universities will need to perform an additional $6.4 billion annually in basic and applied research by the end of the decade.
In 2001-02, Canadian universities attracted almost $16 billion in rev- enues. Approximately $9.7 billion of these revenues were operating funds used to finance the teaching, commu- nity service and nonsponsored research and scholarship activities of the uni- versities. Provincial government grants and tuition fees are the primary sources of operating revenues. The key drivers of change in the level of university financing required in the decade ahead are the growing demands for universi- ties to provide more and better quality educational opportunities to a wider array and growing number of students. They are also expected to assist faculty members to conduct more, and more complex, research and engage in more community service.
Given the combined pressure to improve both the quantity and quality of services offered, we assume that universities’ operating costs will grow at least in line with the expected growth in student and faculty num- bers. If operating costs were to rise in line with the current average costs in per-student or per-faculty terms, then a 30 percent enrolment increase would require a $3.2 billion increase in oper- ating support. These calculations assume that faculty/student ratios and the levels of operating support per faculty remain constant through 2011.
An additional increase in operating support would be required to redress some of the erosion that has occurred as a result of cuts to faculty and staff num- bers, which have been reduced in absolute terms since the mid-1990s and in relative terms since the late 1970s. In our growth scenario, the restoration of faculty and staff numbers to 1996 levels would require an additional $3 billion in operating funding by 2011. This additional funding would enable uni- versities to hire 8,500 more faculty, thereby restoring student-faculty ratios ”” with all the accompanying benefits for students and staff ”” to those at the beginning of the 1990s. Such a signifi- cant investment in quality improve- ment would also provide universities with the resources required to better staff and maintain libraries, expand computing services ”” including the use of technology to enhance learning ”” provide a wider array of student and research services and provide new aca- demic and research facilities for a growing number of students.
In seeking to maximize opportunities to respond to both teaching and research objectives, universities will need to continue to give careful consideration to capital cost expenditures in the decade ahead. The capital costs that will be incurred over the coming decade will be driven by the need to renew existing facilities and to respond to enrolment, faculty and research growth. In 2000-01, the Canadian Association of University Business Officers (CAUBO) estimated that the accumulated deferred mainte- nance incurred nationally by universities amounted to approximately $3.6 billion. This problem developed primarily as a result of the deep cutbacks in govern- ment support in the mid-1990s. Improving the state of current university infrastructure across Canada to a more acceptable standard would likely require a minimum of $360 million more per year over the coming decade.
The amount of new space required to accommodate a 30 percent increase in students and faculty can be estimated based on information provided in the CAUBO study. Assuming that 200,000 more students will need to be accom- modated nationally, with a concurrent growth in faculty to teach them, the total capital costs for this space will like- ly approach $9 billion. If funding for construction and renovation is provided on a steady and ongoing basis over the next eight years to ensure that universi- ties are ready to accommodate the influx of students, faculty and staff, then the capital costs over the next eight years will be $1.2 billion annually.
These are big numbers, and public dialogue will be as required to who will pay. Investing in post-secondary educa- tion will provide governments with tax revenues to sustain public spending and improve the quality of life of Canadians. For instance, university graduates comprise only 15 percent of the population over 18 but contribute one-third of all income taxes. As well, education and innovation are key fac- tors in improving our national produc- tivity which, in turn, will lead to a higher standard of living and more wealth for the country. Governments have played, and must continue to play, a key leadership role in providing financial support to enable universities to respond to growing demand for their services. Universities will also need to enhance the level of support they attract from other stakeholders. Moreover, given the scale of change required, universities ”” individually and collectively ”” will need to contin- ue to plan strategically and manage effectively to ensure the best possible use of all their human, physical and financial resources.
