Student Aid: A Relief Program That Can Drive Innovation, Too

The COVID-19 crisis had thrown into doubt summer job prospects for two million post-secondary students and cast a shadow over the next academic year. The Trudeau government has introduced a $9-billion relief program to ease some of that pressure on students, especially as they move into the summer months when many hope to earn enough for the year ahead. The Canada Emergency Student Benefit program will provide basic income support for students and also fund a significant increase in student aid for the coming academic year. But the assistance won’t be able to address some of the secular challenges that such a deep crisis will undoubtedly pose for students, who are among the most socially and economically vulnerable groups in our society.

In addition to the economic challenges, students completing their school year through online courses and exams already have a taste of what may lie ahead, in the form of disrupted classrooms and labs that are not ready for sudden change. The global pandemic is also likely to crimp demand for Canadian education among international students, who represent a growing part of the student body and a significant economic contributor to cash-strapped colleges and universities. Finally, for those now finishing diplomas and degrees, there’s a growing sense that they’re not out of the woods by any stretch. The massive spike in unemployment, which we expect to stay above 10% through the fall at least, may create a severe job shortage for new graduates without significant work experience. As we pointed out in our report, Recession Roadblock, the impact of an economic downturn can last for years when it comes to the employment prospects of an emerging generation. For educational institutions, the challenges are just as profound. How they adapt in the midst of crisis will have far-reaching consequences.

Term relief

The CESB is designed to provide comprehensive coverage for all students and new graduates, including those who graduated from December 2019 onward. Specifically, the CESB

• provides $1,250 per month for the next four months, with an additional $500 per month for those with disabilities or caring for someone;
• allows students to earn up to $1,000 a month if their hours are cut due to COVID-19.

In addition to direct support, the federal government is planning to:

• double the number of summer jobs, promising an additional 76,000 placements, subsidized by the Canada Summer Jobs program;
• double the funding for student grants for the 2020-21 academic year;
• spend $291 million to extend scholarships and graduate student funding;
• pay students between $1,000 to $5,000 for volunteer work through Canada Student Service grants;
• provide $75 million in direct funding to Inuit, First Nations and Metis students.

Summer backfill

This program will help offset some income shortfall for those who can’t rely on family assistance or scholarships to fund tuition and other expenses, and also help prevent a possible enrolment crisis in September. Post-secondary leaders have expressed concern that a deepening recession combined with unprecedented social isolation could lead many students to opt for a gap year, or stay home to pursue online courses. The threat may be even greater for first-year students who could opt to delay enrolment if campuses are not opening up in September. The consequences matter beyond campuses, too. As our population ages, a consistent flow of highly-educated and highly-trained youth has been widely seen as essential to our prosperity. Canada is relying on a younger skilled workforce to drive innovation and technological adoption.

Pandemic-proof placements

Outside of financial relief, the expansion of the Canada Summer Jobs program stands to provide experience for 146,000 students while others will benefit from the government’s support for volunteerism. Unfortunately, many students and new graduates will still go without valuable work experience, which is increasingly a critical part of post-secondary education, through internships, co-op placements and practicums. It’s understood that some of the funds, along with existing budget commitments, will be allocated to initiatives by the private sector and post-secondary institutions, including the Business Higher Education Roundtable, to create meaningful work-integrated learning (WIL) placements. An opportunity may emerge to develop “digital WIL” programs that allow students to engage with employers through virtual channels, as well as grand challenges that can employ teams of co-op students and interns to solve problems for businesses, non-profits and public sector organizations trying to navigate the crisis. “Student aid” may yet become a positive slogan for employers in search of ideas as well as helping hands.

Career setbacks

Canada’s 500,000 new graduates are likely to face a tough hiring climate over the next many months, although a sharp economic rebound in 2021 could produce labour shortages too, and with them demand for new talent. Eligibility requirements for previously announced income support programs will lessen the short-term financial impact for many displaced workers, but it won’t remove the potential long-term effects of graduating in a downturn. While it is difficult to know how the labour market will adjust to the COVID-19 risk, older workers may find themselves unwilling to work as much as they would normally. That would open up spots for younger workers, especially younger workers who are more vulnerable because they lack on-the-job experience. This challenge has been compounded by a rapidly unfolding recession: Canada lost one million jobs in March, and over the past few weeks seven million people have applied for income support. The Canada Emergency Wage Subsidy, which helps firms keep workers on the payroll, is likely to be used to protect some or all of existing workforces, but won’t expand employment for students entering the market this spring.

International experience

While international students who met the basic requirements for the Canada Emergency Relief Benefit are still eligible for that program, international students do not qualify for any relief from the CESB. Though restrictions on the number of hours they can work are largely lifted, it will be important to ensure that this large group of students, who might not be able to return home, is not left out. Universities and colleges face an additional dilemma when it comes to international students. At about 460,000 in number, they account for more than 20% of the post-secondary student population and bring in close to $6 billion in tuition each year. Even though international travel has fallen to nearly non-existent levels, and immigration systems are in limbo, international students can still technically enter the country with a valid study permit. But it would appear likely that enrollment of first-year international students will be severely reduced. Some surveys suggest as many as half of foreign students who have received acceptance offers already plan to defer enrollment. If such prospects are realized, many institutions will face a financial crisis that could impact the economic ecosystems built around post-secondary institutions. It may then be necessary for the federal and provincial governments to step in with more assistance – preferably tied to community and economic benefits, and not just to cover an institution’s fixed costs.

Old school, new school

There is a strong likelihood that post-secondary institutions will need to pivot even more to online education. Many already are there. For some programs, which are largely based in theory, such as in the humanities or mathematics, this transition may occur smoothly. For others, such as those that require laboratories, or hands-on trades and apprenticeship programs, not so much. The massive social disruption caused by the pandemic makes adjustments to both teaching and learning all the more challenging. Fortunately, Canada has many of the world’s leading education technology companies, such as Top Hat and D2L, and the crisis should be a time for institutions to partner more actively with such tech providers and even experiment with new approaches. The coming summer lull could create a moment in which furloughed educators and professionals are contracted to provide micro-credential programs through online channels. The springtime shutdown could even become a new season of learning, in which old schools become the new school of education. Colleges and universities should also reflect on their special place as social hubs that are proven places for the development of many of the skills – social and civic – that will be in demand by a society looking to rebuild from crisis. Post-secondary institutions must strive to rapidly adapt new technologies while ensuring the most fundamental elements of an education do not atrophy.

Post-graduate thinking

Governments have, by and large, allowed those who enter the labour market during downturns to languish. This time can be different. Ottawa has an opportunity to implement measures not taken during past recessions—directly helping new graduates find work in their field by encouraging, or directly subsidizing, firms to hire new graduates. One option is to provide funding through student grants and directly to universities to provide supplementary training for graduates so their skills do not depreciate after they leave school. Such policy advancements, at both the federal and provincial levels, may be needed to ensure the temporary relief measures announced this week do not lose their impact as soon as the money runs out. Education can provide perpetual dividends, but also requires continuous investments.

Andrew Agopsowicz is a Senior Economist working in both the Economics and Thought Leadership groups. He studies the labour market – largely focusing on the future of work, demographic change, diversity, and human capital. Before joining RBC, Andrew was a Senior Economist at the Bank of Canada.

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