Productivity Commission report fails NZ

The Productivity Commission has again failed to understand the real challenges facing New Zealand’s universities and is trying to fix what’s not broken while ignoring things that are.

Professor Stuart McCutcheon, Chair of Universities New Zealand, says, “The fundamental issue is that funding and regulations are so locked down they are now the main constraint on the ability of our universities to create the truly great universities that New Zealand needs and deserves.

“At no point in its 500-page report does the Productivity Commission acknowledge that New Zealand has what is probably the world’s most efficient and effective university system.

“Despite having the lowest funding levels per student in the developed world, all of the New Zealand universities are ranked in the top 3% of universities internationally.  Our teaching is regarded as world-class and our qualifications are internationally recognised and highly regarded around the world. 

“Compared to every country for which we can locate statistics, our graduates have the best qualification completion rates (84%), highest graduate employment rates (98%) and lowest under-employment rates (12%). 

“Our research is also outstanding – with international citation rates at 1.4 times the average.  We have struck a good balance between research intensity and teaching quality.”

The universities create huge value for New Zealand, even though our average expenditure per student is US$15,400, which is 5% below the OECD average. In comparison, in Australia it’s US$19,916, in the United Kingdom it’s US$25,700, and in the United States $27,900.

Per student, the sector spends just 77% that of Australian universities, and 61% that of Canadian universities.

Chris Whelan, the Executive Director of Universities New Zealand, says the Commission has lost sight of the real issues hindering the continued development of the sector.

“They are arguing that deregulation and opening the market up to more international competition is the key to producing a better system for students and employers. 

“The reality is that our funding levels are too low to attract high quality international providers or to produce the innovative new forms of teaching that are appearing in other parts of the world.  All of the universities identified previously by the Productivity Commission as demonstrating international best practice, are funded at rates at least three times that of New Zealand providers.  We are not in principle opposed to competition, but we cannot be expected to compete with international providers while government continues to tie our hands with low funding levels.

“Similarly, our funding system hasn’t really changed since it was introduced in the early 1990s.  Today universities are still being funded as though they were delivering in the old classroom-based model. The funding system hasn’t evolved to reflect the opportunities and challenges of today’s mix of internet-based delivery, workplace-delivered teaching, or work-integrated learning. 

Chris Whelan says universities are concerned that instead of addressing these issues, the Commission has recommended an odd mixture of deregulation, heavier regulation, experimentation and pilot programmes.

“They are also proposing changes like getting rid of University Entrance and the quality system that is applied to all university qualifications.

“It’s not sensible,” says Chris Whelan.  “The reason we have so few young people failing at university is because University Entrance sends a good signal that they are academically ready for university-level study.  And the reason all our universities are so highly ranked internationally, and why we have such good graduate employment rates, is that we have an effective, world-class quality assurance system involving collaboration between the eight universities.

“We accept that there are always opportunities to tweak settings around things like University Entrance, or quality assurance, but getting rid of them and opening the market to international providers isn’t going to deliver better quality for students.  The international evidence shows that where this has been done elsewhere you get for-profit providers setting up shop offering low quality degree programmes that usually leave students with large debts and with qualifications that employers don’t value.”

On the plus side, Universities New Zealand is pleased the Commission has taken up their recommendation for a more joined-up careers information system, enabling secondary students and their families to make better informed choices.

Universities New Zealand has also welcomed the Commission’s recognition that current funding arrangements and levels are a problem and that changes are needed if our universities are to continue delivering world-class teaching and learning to New Zealanders.

In addition, the universities are pleased that the Commission has recognised the need for a more differentiated tertiary education strategy, to reflect the different roles and objectives of the wide range of tertiary education providers.

Chris Whelan says universities look forward to contributing to further conversations about what is really constraining New Zealand’s universities from doing more to help this country and its people.

Background: Universities New Zealand’s submissions to the Productivity Commission are available here.

Key Facts and Stats about the New Zealand University Sector

March 2017

Note: Student, staff and financial data relate to 2015 unless otherwise specified.

Students

• 172,000 students: 146,000 domestic students and 26,000 international students.
• 131,770 full-time equivalent students (EFTS).
• Half of university bachelor’s degree students are now studying science, technology, engineering, health or the environment.
• 8 years after starting a university bachelor’s degree, only 16% of full-time students have not completed compared with 28% in ITPs and 43% in Wānanga. This completion rate also compares internationally, with non-completion rates in comparator countries ranging from 18% - 40%, or more.

Graduates

• Approximately 43,000 graduates each year (90% at bachelor’s degree level and above). 30% of New Zealanders aged 25-64 years have a bachelor’s degree or higher – around the same as the UK and Australia.
• Three years after graduating, 97–98% of university graduates are in employment. 
• For graduates aged 29–38 at the time of the 2013 Census, 88% were in jobs that either needed a specific degree (doctor, teacher, etc) or for which a degree was highly useful (general manager, consultant, policy advisor, etc).  This compares with just 53% in degree-level jobs in the UK, and 56% in the United States.
• Students only pay 35% of the cost of their tuition.  They can cover all costs with interest-free student loans and can service these through, on average, earnings that are 1.65 times that of people with only a high school qualification.
• A typical bachelor’s degree graduate earns $1.38m more over their working life than a non-graduate.
• On average, by age 33 a degree has paid off for graduates. i.e. when the net additional earnings from a degree exceed the cost of getting a degree and income foregone while studying.
• New Zealand’s GDP is 3%-6% higher because of the impact that a university education has had on the productivity of the workforce with a university qualification (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.

 Funding, fees and expenditure

• The New Zealand government spends 0.9% of GDP on tertiary education institutions (excluding subsidies to households/individuals like student loans and allowances). This is below the OECD average of 1.1% of GDP.
• New Zealand’s universities have a combined expenditure annually of $3.5 billion.
• The universities receive 57% of Student Achievement Component (SAC) funding and 97% of Performance-Based Research Funding (PBRF).  They are collectively the single largest part of the tertiary education system.
• New Zealand universities produce graduates for 77% of what it costs in Australia and 61% of what it costs in Canada. 
• Between 2006 and 2015 Government per-capita student funding increased by 40%, domestic student fees increased by 37% and university costs by 47%.
• Universities employ 21,441 FTE staff (0.8% of the labour force) and account for another 3,000-4,000 jobs in the wider economy (around 25,000 staff in total).
• Actual salaries rose by an average of 2% a year between 2006 and 2015 (20% increase on a per capita basis). Half this country’s academic staff are recruited from overseas (including New Zealanders being recruited back home).
• Expenditure on personnel rose 57% between 2006 and 2015, but a large proportion was additional staff to address the increase in student numbers over that period. 
• The increase in operating costs has not been enough to maintain overall quality.  For example; The average staff:student ratio dropped from 17.8:1 to 18.4:1 between 2006 and 2014.

Research

• University research plays a part across New Zealand’s economy, society and culture.  Universities spend around $800m a year in research – representing around a third of this country’s total spend on Research and Development.  Over 60% of this research is on physical and information sciences, health, infrastructure and the economy. 
• International research (for example KPMG Econotech, Economic Modelling of Improved Funding & Reform Arrangements for Universities – 2009) estimates the return from university research as being at least 20% annually (allowing around five years on average to realise the economic and/or social effects).
• The stock of all knowledge generated by universities and adopted over time across the wider economy accounts for around 8.2 percent to 9.7 percent of GDP.
• Expenditure from university research over just the last six years (2010 to 2015) accounts for 0.3 percent to 0.4 percent of GDP.
• NZIER has estimated that investment of $40m a year in universities over five years would lift GDP by 0.12% within fifteen years – an additional tax take of $370m annually.
• A 10 percent increase in higher education research spending (+$80m) can be expected over 10-20 years to increase GDP by 1.75 percent to 1.84 percent (around $4.5bn).

The value of universities

• The economic impact of the eight universities was approximately 1.2% of total GDP.
• Universities make a significant contribution to the regions that house them representing an average of 4.1% of regional GDP counting just direct and indirect expenditure.  This rises to 10.6% on average when further induced activity is included. universities are now also 25 places lower in QS rankings than they were in 2009.

International education

• International education is New Zealand’s fourth largest export market and universities generate $1.04bn – or just over a third of the total. 
• A third of international student revenue is spent within universities on fees and study costs.  The rest is out in the wider local community on accommodation, food, entertainment and travel.
• For every $1m spent by international students, GDP is increased by $1.6m – supporting more than 30,000 jobs.
• 39% of university international students are studying for postgraduate qualifications.  Half of all international PhD students plan to work in New Zealand after graduate – most in education and training, healthcare, and science and technology.
• 93% of international university students choose to study in New Zealand because of the strong reputation of our universities. The 2015 International Barometer Survey of international university students found satisfaction with physical and virtual facilities and resources in New Zealand universities to be above global levels.

Māori and Pasifika

• 16,200 Māori students and 11,400 Pasifika students.
• Māori bachelor’s degree EFTS have increased by 25% in the universities since 2088.
• Pasifika bachelor’s degree EFTS have increased by 47% in the universities since 2008.
• Māori doctorate students have increased by 21% since 2008, and it’s paying off. Māori doctoral graduates earn more than non-Māori graduates 5 years after study.
• 48% of recent Māori university graduates were the first in their families to attend university. One-third were parents and 70% female.

Quality assurance

• 100% of requests put through the Committee on University Academic Programmes (CUAP) under urgency were completed in significantly truncated timeframes.
• 22% of proposals put to CUAP in the past three years were amended with nearly all the amendments being the submitters providing additional information or clarifying programme regulations, graduate profiles, course titles, course descriptors or course schedules.
• No programmes were amended (or opposed) because they were innovative, or because they needed to be brought in line with other existing teaching models. Some proposals were opposed or amended because their names were too similar to other dissimilar qualifications and there was potential for confusion among students and employers.
• A significant number of new teaching models and qualifications have been implemented over the past three years – including 180 point masters, ICT Graduate Schools, and new models of delivering initial teacher education. All proceeded successfully through CUAP.
• 99.7% of proposals put to CUAP in the past three years were approved.

University rankings

• All New Zealand universities are ranked in the top 3% of the world.
• NZ universities dropped an average of 25 places in the Times Higher Education rankings in the six years from 2009-2015.  NZ universities had dropped by 50 places in QS rankings until a one-off technical adjustment was made to ranking methodology in 2015