Is the era of accessible, highly subsidised higher education coming to an end?


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In many western countries, governments have made increasing participation rates and widening access for socially-excluded groups a policy priority for higher education. At the same time, higher education has historically been seen as a ‘public good’, with tuition costs offset by subsidies either directly to the universities or to students in the form of grants or low-interest loans. In many Asian countries, where families are accustomed to sending their children overseas or to expensive private universities at home, the fact that many western students have easy access to local universities where they pay partial or no tuition fees seems alien. The growing costs of massification, coupled with the current fiscal stress suffered by many governments after the financial crisis, means that this liberal western model is beginning to unravel. This presentation examines the case of New Zealand, where higher education policy is struggling to adjust to the new financial realities.

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Is the era of accessible, highly subsidised higher education coming to an end?

  1. 1. Is the era of accessible, highly subsidised higher education coming to an end? Lessons from the New Zealand policy laboratory QS-APPLE 2010 ◊ November 18, 2010 Professor Nigel Healey Pro-Vice-Chancellor, University of Canterbury
  2. 2. New Zealand “policy laboratory”  Treaty of Waitangi 1840  Votes for women 1893 (1919 in UK)  Old age pensions 1889 (1911 in UK)  Social welfare system 1938 (1945-51 in UK)  Independent central bank – Reserve Bank Act 1989  Fiscal Responsibility Act 1994  Accessible, affordable higher education for all, from 1940s onwards
  3. 3. Overview  Why publicly subsidise higher education?  Why allow open enrolment to university?  A brief history of university entry in New Zealand  The performance of New Zealand universities  The financial challenges post-GFC  The future of open enrolment
  4. 4. While publicly subsidise highereducation?  Investment in (higher) education increases productivity and promotes economic growth – especially in a knowledge economy  Higher education transforms the life chances of those educated – promotes social harmony  The gains to society of an educated population exceed those to the educated individuals (through higher productivity and earnings) – there are positive „spillover effects‟
  5. 5. …and the orthodox policyprescriptions which follow  Countries should aim to increase overall participation rates in higher education  Policy should focus on raising the participation rates of socially disadvantaged or under-represented groups – „social inclusion‟, „widening access‟  Governments should provide (at below cost) or subsidise higher education to ensure optimal take-up  Such support may be targeted at subjects where the positive spillovers are highest (eg, teacher training)…  …or at lower income groups who are less able/willing to fund an investment in higher education
  6. 6. Why allow open-enrolment touniversity? (1) “Open enrolment” means the automatic right to enter by virtue of qualifications (UE) or age Competitive selection “rigs” entry in favour of higher socio- economic groups  “Rite of passage” for middle-class children; entrenches social inequalities  Regressive redistribution of income from poor to rich  “Open access is a cornerstone of our tertiary education system. Any moves away from this will threaten participation by most of the population into tertiary education” (David Do, NZUSA Co- President)
  7. 7. Why allow open-enrolment touniversity? (2)  High school performance is a poor predictor of university performance  Take level 3 NCEA scores and award  4 for Excellent  3 for Merit  2 for Achieved  Use only best 80 credits (max score 320)  Compare with Grade Point Average (GPA) at end of first year  A+ = 9, C- = 1, D = 0, E = -1
  8. 8. NCEA scores vs first year GPA (2009)(source: Sampson & Broght, 2010) Type II error Type I error
  9. 9. A history of university enrolment inNew Zealand (1) UC accepted “unmatriculated” students since it began in 1873 University of New Zealand: “the Entrance or Matriculation Examination has been a standard examination given by the University to make certain that its entrants are ready, in its opinion, to pass into the University“ (NZCER, 1935) Government required NZ universities to admit returning servicemen after WWI without entrance examination
  10. 10. A history of university enrolment inNew Zealand (2) Progressive education movement 1930s-1950s C E Beeby  “the architect of our modern education system”  Director of NZ Council for Education Research 1935-39  Director of Education , 1940-60 Peter Fraser  Minister of Education 1935-40  Prime Minister 1940-49  “every person, whatever his level of academic ability, whether he be rich or poor, whether he live in town or country, has a right, as a citizen, to a free education of the kind for which he is best fitted and to the fullest extent of his powers” (speech in 1939)
  11. 11. A history of university enrolment inNew Zealand (3) Unmatriculated students could be admitted at the University‟s discretion (“provisional admission” ) first at 30+, then 21+, finally 20+ 1989 Education Act  Paved the way for introduction of domestic tuition fees ($1,250 in 1991), previously nominal $300  Domestic tuition fees set at 25% of total cost of tuition  Increased by average 13% pa throughout 1990s  Made enrolment at 20+ a right (no university discretion) - “driver‟s test” principle”
  12. 12. 1989 Education Act Para. 224  2. a) a person is eligible to be enrolled as a student at any institution…if the person is a domestic student [and]  2. b) the person holds the minimum entry qualifications for the course determined by the council (as defined by the NZ Qualifications Authority (under para. 257)  3. Sub-para. 2. b) does not apply to a person…[who] has attained the age of 20 years  5. Where the council of an institution is satisfied that it is necessary to do so [it…] may determine the maximum number of students who may be enrolled in a particular course  9. No foreign student…shall be enrolled at an institution if the students enrolment at the institution would have the effect that a domestic student…would not be able to be enrolled
  13. 13. The story so far  The case for publicly subsidised higher education turns on the positive spillovers for society of having educated, productive and engaged citizens  The case for open enrolment is that it gives everyone, regardless of social background, a chance to succeed?  So:  How is New Zealand‟s university system performing?  And what is the problem with maintaining open enrolment?
  14. 14. Proportion of 25-64 year olds who have studied at tertiary level 45Source: OECD Education at a Glance 2010 40 35 30 25 New Zealand 20 OECD 15 10 5 - 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
  15. 15. New Zealand university participation rates by age group and ethnicity, 2009 45.0% 40.0%Source: Ministry of Education 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Pakeha 18-19 Pakeha 20-24 Maori 18-19 Maori 20-24 Pasifika 18-19 Pasifika 20-24 Asian 18-19 Asian 20-24
  16. 16. New Zealand university participation rates by ethnicity (% population 15 years+ enrolled) 9.0% 8.0% 7.0%Source: Ministry of Education 6.0% 5.0% Pakeha Maori 4.0% Pasifika Asian 3.0% 2.0% 1.0% 0.0% 2002 2003 2004 2005 2006 2007 2008 2009
  17. 17. So how is the university sectorperforming and what is the problem?  New Zealand has 4th highest tertiary participation rate in OECD (after Canada, Japan and US)  Although there are differences in participation rates between ethnic groups, rates are trending up  But growing participation and social inclusion increases the cost to the taxpayer of higher education  Giving everyone a “fair go” wastes resources  Post-GFC, the government‟s ability to fund higher education is significantly constrained
  18. 18. The cost of the NZ tertiary system ($m) 4,500 4,000 3,500Source: Ministry of Education 3,000 2,500 Student loans 2,000 Tuition subsidies 1,500 Student allowances 1,000 500 0
  19. 19. Direct government funding to universities $1,400,000 $1,200,000Source: Ministry of Education $1,000,000 $800,000 Total Government Funding $600,000 EFTS Vote $400,000 $200,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008
  20. 20. Increased funding has price andquantity dimensions Funded EFTS Government114,000 Funding/EFTS112,000 $12,000110,000 $10,000108,000 $8,000106,000 $6,000104,000 $4,000102,000 $2,000100,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Ministry of Education
  21. 21. Giving everyone a “fair go”necessarily wastes resources  Although it is hard to predict in advance how an individual student will perform, with open enrolment a significant proportion will fail  Open enrolment is a “fair go” to succeed or fail  Resources are genuinely wasted if:  Failing students do not learn anything  They could otherwise have been working or learning a vocational trade  Their self-esteem and confidence is damaged by failing  “Ghost students” – unintended product of open enrolment, liberal progression standards and student loans
  22. 22. Illustrative academic progressionpolicies The University of Auckland  Satisfactory progress: a student is required to attain a Grade Point Average of at least 0.8 in the last two semesters in which they were enrolled.  Victoria University of Wellington  Satisfactory progress: passing at least half the number of points attempted in the last two consecutive trimesters of study, or passing at least 36 points in the most recent trimester. !
  23. 23. Eight year qualification completion rates for domestic students 80% 70%Source: Ministry of Education 60% 50% 40% 2000-2007 2001-2008 30% 2002-2009 20% 10% 0% Bachelors Graduate Honours/PG Masters Doctorates Total cert./ dip. cert./dip.
  24. 24. Eight year qualification completion rates for all students (bachelors and above) 70% 60%Source: Ministry of Education 50% 40% Male Domestic Female Domestic 30% Total Domestic International 20% 10% 0% 2000-2007 2001-2008 2002-2009
  25. 25. Comparative bachelor’s degree completion rates (five years) 100Source: OECD Education at a Glance 2009 90 80 70 60 50 Completion Rates (at least 5A/5B 40 Programme) 30 Left Without Tertiary Qualification 20 10 0
  26. 26. Proportion of students who leave without atleast a first tertiary degree % 60 50 40 OECD average 30 20 10 0 Source: OECD Education at a Glance 2009
  27. 27. Constrained capacity to fund highereducation: government debtprojections post-GFC Source: The Treasurys Long-term Fiscal Statement
  28. 28. How can the Government spend lesson higher education?  Plan A: Investment Plans 2008  Set enrolment funding cap per institution  Drawbacks:  With open enrolment, universities can‟t prevent becoming over-enrolled  Public expenditure on student allowances and loans demand-driven and goes over-budget  Worst of all worlds – public spending still uncontrolled and universities underfunded
  29. 29. How else can the Government spendless on higher education? Plan B: have you cake and eat it (2010) Retain open enrolment to give everyone a fair go, but drive underperforming students out of the system more quickly by:  Penalising institutions for exceeding their enrolment caps  Penalising institutions for low course / qualification / progression rates  Denying underperforming students loans Keep open enrolment, have fewer all-years enrolments in universities and (in principle) graduate the same number of students
  30. 30. Challenges for universities  If open enrolment is to be retained, universities need to fundamentally reshape infrastructure and organisational culture to ensure:  Students understand the consequences of failing  Weak students are identified and monitored  Pro-active support is in place for those willing and able to succeed  Such changes are a challenge to the business model  Large, unsupported enrolment-level classes cross-subsidise small advanced classes and research  Staff may resist reallocation of resources towards level 100 and retention services
  31. 31. A final complication…  Although it appears to violate the 1989 Education Act, a simpler response by universities is to limit open enrolment by selecting on basis of high school results  Action by several universities to adopt selective enrolment creates strong prisoner‟s dilemma issues…  enrolment universities may find standard of entrants falling, forcing them into a vicious circle (lower entrants, higher retention costs) or (more likely) to adopt selection
  32. 32. Conclusions  Open enrolment has been a feature of New Zealand universities since the 1920s  It has contributed to amongst the highest participation rates in the world…  …coupled with relatively low completion rates  Faced with funding pressures, the Government is seeking to reduce “waste” in higher education, but strategy may be derailed by growing use of selectivity at entry level  Will New Zealand again be a world leader in the policy laboratory?