Mr. Chairman, I would like to begin by thanking you for inviting us to appear before the Committee today.
Canada is a wealthy, highly developed country with enormous promise. However, over the next decade, Canada faces important labour market competitiveness and demographic challenges. Ensuring the country's long-term economic growth and continued prosperity will depend heavily on the education and skill levels of Canadians and their success in creating and applying ideas and knowledge.
Challenge number one is that Canada must produce enough highly qualified graduates for the needs of the labour market. The talents, knowledge, and skills of master's and doctoral graduates are widely recognized as key drivers of the knowledge economy, as they transfer knowledge from universities to other sectors and inject innovation into the economy.
AUCC estimates that by 2016, an increase of at least 35% in the domestic production of master's and doctoral graduates will be required to meet the growing demand for these highly skilled people and to replace those who will retire.
The proportion of the Canadian population holding an undergraduate degree is at record levels, and the number of prospective graduate students in other countries intending to study abroad is increasing. Canada must attract more domestic students into graduate programs and attract more top international graduate students to fuel Canada's pipeline of highly qualified personnel and strengthen economic and diplomatic ties abroad.
AUCC recommends increased financial support for both Canadian and international graduate students in order to attract top students from abroad, keep talented students in Canada, provide opportunities to hone their research skills, and increase their contributions to the labour market through postgraduate internships and co-op placements.
Challenge number two is that the Canadian economy is increasingly dependent on international trade--a highly competitive, innovative, and knowledge-driven enterprise. Sustaining Canada's leadership in public R and D performance is key to meeting Canada's competitiveness challenge. In the university sector, public investments support the four foundational elements of research: new ideas, highly qualified research talent, cutting-edge research infrastructure, and institutional support for the research effort.
The least visible and least understood of these is the support for the institutional or indirect costs of research. These are real costs that universities must meet to create the conditions for research excellence. They include the costs of operating and maintaining research facilities, managing the research process from preparation of proposals to accountability and reporting, complying with regulatory and safety requirements, managing intellectual property, and promoting commercialization.
Numerous studies have demonstrated that for Canadian and American universities, these costs are at least 40% of their direct research costs. In the U.S., the median negotiated rate of reimbursement is 52%. In Canada, the overall rate of reimbursement in the federal indirect costs program is about 25%, placing Canadian universities at a significant disadvantage.
AUCC recommends renaming the current indirect costs program as the Canada research competitiveness fund, and supporting it at internationally competitive levels in order to maximize returns on public investments in university research and to derive full value for Canadians. AUCC remains committed to improving the visibility, accountability, and transparency of federal investments in this area.
The third challenge relates to the fact that over the next two years, more Canadians will depend on fewer workers. In order to tackle that demographic problem, Canada has to increase its labour force and enhance its productivity. That will mean increasing the educational attainment of the Canadian population as a whole and, in particular, guaranteeing university access to traditionally under-represented groups.
Canadians are increasingly concerned about the fact that the Canada Millennium Scholarship Foundation's mandate will be ending in 2008-2009, given that it now provides needs-based non-repayable student financial assistance of $350 million annually. The AUCC is recommending that the federal government continue to provide students with support that is at least comparable to what is now available, in the form of needs-based non-refundable financial assistance, with a particular focus on improved access to graduate studies for traditionally under-represented groups.
Mr. Chairman, AUCC is currently working on specific proposals to the government for investments in each of these three areas. I'll be pleased to share them with this committee once they're finalized.