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

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

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

nigel.healey@canterbury.ac.nz

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


While publicly subsidise higher
education?

 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‟


…and the orthodox policy
prescriptions 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


Why allow open-enrolment to
university? (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)


Why allow open-enrolment to
university? (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


NCEA scores vs first year GPA (2009)
(source: Sampson & Broght, 2010)

Type II error

Type I error


A history of university enrolment in
New 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

New 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)


New 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”


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 student's
enrolment at the institution would have the effect that a domestic
student…would not be able to be enrolled


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?


Proportion of 25-64 year olds who
have studied at tertiary level

45
Source: 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


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


New Zealand university participation
rates by ethnicity (% population 15
years+ enrolled)

9.0%

8.0%

7.0%

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


So how is the university sector
performing 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


The cost of the NZ tertiary system
($m)

4,500

4,000

3,500

3,000

2,500

Student loans
2,000
Tuition subsidies

1,500 Student allowances

1,000

500

0


Direct government funding to
universities

$1,400,000

$1,200,000

$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


Increased funding has price and
quantity dimensions

Funded EFTS Government
114,000 Funding/EFTS
112,000 $12,000
110,000 $10,000
108,000 $8,000
106,000 $6,000
104,000 $4,000
102,000 $2,000
100,000 $0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2000 2001 2002 2003 2004 2005 2006 2007 2008



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


Illustrative academic progression
policies

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.
 http://www.calendar.auckland.ac.nz/regulations/academic/enrolment-and-programme.html

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.
 http://policy.vuw.ac.nz/Amphora!~~policy.vuw.ac.nz~POLICY~000000000900.pdf


Eight year qualification completion
rates for domestic students

80%

70%

60%

50%

40% 2000-2007
2001-2008
30% 2002-2009

20%

10%

0%
Bachelors Graduate Honours/PG Masters Doctorates Total
cert./ dip. cert./dip.


Eight year qualification completion
rates for all students (bachelors and
above)

70%

60%

50%

40% Male Domestic
Female Domestic
30% Total Domestic
International

20%

10%

0%
2000-2007 2001-2008 2002-2009


Comparative bachelor’s degree
completion rates (five years)

100

90

80

70

60

50
Completion Rates (at least 5A/5B
40 Programme)
30 Left Without Tertiary Qualification

20

10

0


Proportion of students who leave without at
least a first tertiary degree

%
60

50

40 OECD average

30

20

10

0



Constrained capacity to fund higher
education: government debt
projections post-GFC

Source: The Treasury's Long-term Fiscal Statement


How can the Government spend less
on 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


How else can the Government spend
less 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


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

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…
 ...open 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


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?


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

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