New research shows economic impact of New Zealand’s universities: NZIER Report

New research confirms the major contribution New Zealand’s eight universities make to the nation’s economy, through productivity gains from research, innovation and teaching as well as through international education.

Chris Whelan, Executive Director of Universities New Zealand says, “This report from NZIER shows how critical universities have become in supporting economic activity in a world where everything is increasingly dependent upon a smart capable workforce and a source of ideas that improve effectiveness, efficiency and competitiveness across all parts of society and the economy.”

“Today the university sector is big business with 172,000 students enrolled nationally.  The collective expenditure of the eight universities is $3.4 billion annually, which is about 1% of New Zealand’s GDP.  They employ about 20,000 academic and other (full-time equivalent) staff, nearly 1% of the workforce.

“And with eight universities located across six provinces, they also have a significant regional impact.  The report estimates that universities generate another 3000-4000 jobs in the wider economy.”

The report found that universities contribute to New Zealand’s economy through the long term contribution of university education and research, improvement in productivity attributable to university research, the improved productivity of university graduates and through international education earnings.

Chris Whelan says, “Our message to government is that universities represent an excellent investment in New Zealand’s future.  They help drive economic growth and innovation – both nationally and regionally, create jobs and higher wages for New Zealanders.”

The report shows that universities contribute to productivity:

• New Zealand’s GDP is 3 to 6% higher because of the impact that a university education has had on the productivity of the workforce with university qualifications (28% of the workforce in 2014);
• In addition to being more productive themselves, graduates lift the productivity of other employees in their workplaces. This accounts for around 0.8% of GDP;
• The wages of workers without a degree are 1.6 to 1.9% higher as a consequence of working with graduates.
• The impact of research and the transfer of knowledge is measured:
• The stock of all knowledge generated by universities and adopted over time across the wider economy accounts for around 8.2 to 9.7% of GDP;
• Expenditure from university research over just the last six years (2010 to 2015) accounts for 0.3 to 0.4% percent of GDP;
• A 10% increase in higher education research spending will eventually increase GDP by 1.75 to 1.84%.

The importance of international university students to the economy is confirmed:

• They generate at least $1,040 million per year for New Zealand;
• International students pay $340 million a year in fees to study at university in New Zealand; they spend an additional $300 million a year in New Zealand on accommodation and other living expenses; visits by the friends and relatives of international students potentially generates another $30 million a year; the flow-on effects of international students equate to another $370 million a year;
• This equates to an average contribution of approximately $56,000 per year per student or approximately $198,000 per student completing a three year programme of study;
• New Zealand universities’ earnings from export education represent 1.7% of all New Zealand’s exports;
• For every $1 million spent in New Zealand by international students, GDP is increased by $1.6 million.

The report confirms a degree is a good investment.

• Graduates with bachelors level qualifications earn about 60% more than people with a secondary school education only. This premium rises to 85% for an honours level qualification, 95% for a masters level degree and 150% for a doctorate;
• Income premia for people with a tertiary education begin to emerge at age 25 to 29, peak at age 40 to 49 and are sustained until 60 to 65.
• The report finds that graduates appear to accrue a range of other health, standard of living, wellbeing and intergenerational benefits. While this was not assessed in this study, international research suggests the benefits to graduates are typically worth about double the graduate’s actual annual earnings.

A copy of the report can be found here.

Background:

• University income is made up of: 42% government tuition grants and performance based funding; 28% is from student tuition fees and the remainder comes from research, commercialisation and other revenue.
• The report was carried out by the New Zealand Institute of Economic Research using growth accounting and computable general equilibrium (CGE) modelling.
• Universities New Zealand is the peak sector body representing New Zealand’s eight universities, nationally and internationally.

For further information contact Hazel.Dobbie@universitiesnz.ac.nz