Profile & Trends 2006: New Zealand's Tertiary Education Sector

Publication Details

This is edition 9 in an annual series on the tertiary education sector. Profile & Trends has an associated set of tables available on the Tertiary Education Statistics page here on Education Counts.

The short articles in Profile & Trends 2006 include the following topics: The payoff from a tertiary education, New Zealand's expanding knowledge and skills resource, Passing courses, The variety of industry training programmes, Improving the relevance of tertiary education provision, Measuring the quality of research in New Zealand's tertiary education sector.

Author(s): Tertiary Sector Performance Analysis and Reporting, Ministry of Education

Date Published: November 2007

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Summary

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Overview

The Tertiary Education Strategy 2007-12 was released in December 2006. This second strategy continued the inclusive approach taken by the first strategy. It has a sharper focus on the expected contribution of the tertiary education system to government's national goals. The strategy describes how the tertiary education system is expected to contribute to lifelong learning; creating and applying knowledge to drive innovation; and connections between tertiary education organisations and the communities they serve.

The new strategy is complemented by a set of reforms of the funding, steering and quality systems that drive our system. 

New Zealand's Census of Population and Dwellings was held in 2006.  Its findings confirm not only that those with tertiary qualifications earn more than those without qualifications but that differences in earnings between men and women and among ethnic groups decrease as their qualification level increases. The census information also showed that those with higher-level tertiary qualifications earn more, on average.

Another census finding showed that younger adults – those under 35 years – held proportionately more higher-level qualifications than people in older age groups. One in seven New Zealanders now has a bachelors or higher qualification – our knowledge and skills base showed steady growth in recent years. 

After rising rapidly for many years, the number of students in provider-based education fell in 2006, while the number of learners in industry training continued to increase. Fewer domestic students completed formally recognised qualifications in 2006. On the other hand, a low unemployment rate attracted some young people into employment, lowering the first-year retention rate of students in 2006. Forty-two percent of domestic students studied at bachelors level. The number of people studying doctorates increased, principally because of the government's decision to treat international doctoral students as domestic for funding purposes – meaning lower fees for doctoral students from other countries. The proportion of Māori and Pasifika students with tertiary qualify-cations and higher-level tertiary qualifications showed the strongest growth between 2001 and 2006 among all the ethnic groups.

The 2007 Year

In 2007, tertiary education organisations and the government have worked on the implementation of the reforms to the systems that steer and fund New Zealand's tertiary education system. They have also spent time on developing the approach to quality assurance and monitoring.

The new system for tertiary education is built around 'investing in a plan'. Investment in most tertiary education organisations is to be on the basis of a plan from 2008 onwards with some private training establishments moving to the new system in 2009. The Tertiary Education Commission carried out discussions in 2007 with stakeholders and tertiary education organisations on the detail of their expected contribution to the new system. These negotiations were also based on the government's priority outcomes for tertiary education as set out in the strategy for the years 2008 to 2010. 

More information about the development of the new tertiary education system is outlined in the postscript to the report and in the forward-looking commentaries included in the report chapters.

Statistics and research

Profile & Trends 2006 has an associated set of statistical tables available on the Education Counts website. These statistics are used to inform the analysis contained in this report. These tables provide comprehensive coverage of the key trends in the sector's performance. The topics covered are: resourcing, financials, human resources, research, student support, targeted training programmes, the Secondary-Tertiary Alignment Resource, adult and community education, industry training, enrolments, equivalent full-time student units, participation rates, completion rates, retention rates, progression rates, and outcomes.

More information on tertiary education providers and students can be found elsewhere on the Education Counts website and on the websites of the Ministry of Education and the Tertiary Education Commission.

The statistics in Profile & Trends 2006 are for the year ended 31 December 2006 and have been sourced from the Ministry of Education, unless otherwise stated.

Enrolments in 2006

In 2006, there were 491,000 students enrolled in study programmes at tertiary education providers. Forty-three thousand of these were international students. In addition, over 176,000 trainees were engaged in industry-based training, including 9,470 modern apprentices. There were also 65,800 enrolments in short courses in 2006. Non-formal education such as adult and community education attracted an estimated 260,000 enrolments. It is estimated that approximately 19 percent of the population aged 15 years or over participated in some form of tertiary learning with a tertiary education provider during 2006, including 5 percent undertaking formal learning in the workplace.

After rising rapidly for many years, the number of formally enrolled students fell by 2.5 percent in 2006. There was a decline of 4.7 percent when the numbers enrolled at tertiary education providers are converted to equivalent full-time student terms. A major factor contributing to the strong growth in enrolments over the period from 2000 to 2004 was the increase in international students. This count trebled from 16,600 in 2000 to 50,500 in 2004. But in 2005 and 2006, the number of international students fell by 3,080 and 4,170, respectively. Domestic enrolments increased by 20,600 in 2005 while they fell by 7,770 in 2006. In contrast, the number of industry trainees increased by 8.1 percent in 2006.

In 2006, 274,000 domestic students, or 56 percent, enrolled in government-funded tertiary education organisations participated in certificate-level study. This compared to 58 percent of domestic enrolments at the certificate level in 2005. The number enrolled in diplomas was 72,600, or 15 percent of enrolments, while 149,000, or 30 percent, undertook bachelors-level study, and 35,600, or 7 percent, were enrolled for postgraduate study. However, when converted to equivalent full-time student units, then bachelors-level study had the highest proportion at 42 percent. 

In 2006, 110,000 domestic students completed 114,000 formally recognised qualifications. This represented a 7.6 percent decrease on the previous year in the number of completed qualifications. An estimated 44 percent of domestic students who had started a qualification in 2002 had completed it by the end of 2006. The first-year attrition rate of students in government-funded tertiary education organisations who started a qualification in 2004 was 34 percent, up from 29 percent in the previous year. The relatively low unemployment rate was a contributing factor to the lower retention rate of students.

Outcomes of tertiary education

The number of people in the New Zealand population with a tertiary qualification is rising. Data from the 2006 census shows that nearly four in ten New Zealanders was tertiary qualified, while the proportion without a qualification has fallen significantly. The proportion of people with a bachelors or higher qualification has increased in all ethnic groups, although in some groups the proportion has increased more than in others. The proportion of women who are tertiary qualified is increasing.

A strong economy, coupled with a tighter labour market, has significantly reduced unemployment at all qualification levels. Nevertheless, the tertiary qualified have a higher level of participation in the labour force. As more women become tertiary qualified, their participation in the labour market is likely to increase.

The earnings premium for those with a tertiary qualification decreased in 2006, compared with those with no qualification. This fall in the tertiary qualification premium reflects the strength of the labour market which currently is providing greater access to employment for those with no or lower-level qualifications. Despite the strong labour market, a significant earnings advantage continued to exist in 2006 for those with tertiary qualifications.

The findings of studies using the integrated dataset for Student Loan Scheme Borrowers suggest that participation in tertiary education can lead to a significant earnings advantage in the years following study. In particular, completion of a qualification increased earnings. Recent studies showed that the earnings advantage persists over time. A summary of these studies is included in chapter 4 of the report. 

Information from New Zealand's latest population census confirms that an increasing proportion of people hold a tertiary qualification. The higher knowledge and skill levels of the New Zealand population in 2006 – reflecting an increase in the human capital of the economy – was due to a higher participation rate in tertiary education over the last decade, coupled with higher levels of immigration by those who are tertiary qualified. The census data showed that younger adults – those under 35 years – hold more higher-level tertiary qualifications than people in older age groups.  One in every two people aged 25 to 34 years in 2006 held a tertiary qualification. Proportionately, there were also more women than men with a tertiary qualification in this age group in 2006. Also, proportionately more women than men held a higher-level tertiary qualification in this age group.

In all the ethnic groups, younger people were also more qualified than those in older age groups. The unemployment rate in the population with higher-level tertiary qualifications has fallen to below 3 percent. The 2006 census data showed that earnings disparities between ethnicities and between men and women decrease as their qualification levels increase. A summary of the 2006 census information is provided in chapter 4 of the report.

Workplace-based learning

The number of learners in industry training has continued to increase at a steady rate in recent years, even while the increase in the numbers in provider-based education has been slowing. One driver of the rise has been funding increases from both government and industry, reflecting a shared commitment to solve skills shortages in key New Zealand industries and improve workplace productivity.

The number of learners in industry training increased significantly between 2005 and 2006. This growth also surpassed the rate of increase in workers in the labour force, so that the proportion of workers involved in industry training was higher in 2006 than in 2005.

The significant growth in participation in the Modern Apprenticeships scheme, a part of industry training, can be attributed to government funding increases and to its popularity both with industry and with young people. Gateway, established in 2001 to broaden educational options for senior school students by offering them workplace-based learning, has also continued to expand. Over 6,700 secondary school students participated in Gateway in 2006. There are prospects for further growth in Gateway because the programme will be expanded to all decile 7 to 10 integrated and state secondary schools from 1 January 2008.

Industry training, Modern Apprenticeships and Gateway programmes are all linked to the National Qualifications Framework. This means that participants can earn credits towards national qualifications. In the case of Modern Apprenticeships and the majority of industry training programmes, participation is linked to the completion of national certificates and diplomas. Learners in industry training can gain credits through flexible, limited and supplementary credit programmes, or study towards qualifications such as national certificates, national diplomas and, less frequently these days, trade certificates.

All three programmes saw significant increases in credit achievement over 2006, while national certificate and other qualifications attainment also grew at a steady rate.

Level 1 to 3 provider-based qualifications

Enrolments in level 1 to 3 qualifications have peaked. After rising strongly in recent years, enrolments in levels 1 to 3 decreased significantly in 2006. The number of students in foundation education has been decreasing since 2004. Student numbers in level 1 to 3 vocational education qualifications have started to decrease. The numbers in short courses also decreased in 2006. Youth training numbers have continued to decline. However, training opportunity numbers have increased for the first time in several years.

The improved labour market is one of the reasons for the decrease in student numbers. Most students coming into study at these levels were employed in the previous year. Students are less likely now to complete or continue in study after a year and, of those who do complete their study, fewer are going on to higher-level studies. These trends are likely to be influenced by the improved employment opportunities that make employment a more attractive option than study. The stronger labour market also tends to reduce the need to complete a qualification once a student has attained the skills or knowledge sought from study.</p> <p>The Tertiary Education Commission conducted several reviews of provision in 2005 which resulted in reductions and/or reallocations of provision in 2006. The largest in terms of the amount of provision affected was the review of A1 and J1 classified courses. This review resulted in a reduction in the number of students in A1 and J1 courses and an increase in the numbers enrolled in courses in other classifications. A third of private training provider provision was also reviewed, with the aim of strengthening quality provision within this subsector. Dive-related courses were also reviewed. An article on <i>Improving the relevance of tertiary education provision </i>is included in chapter 7 of the report.</p> <p>Provision at levels 1 to 3 was also affected by policy changes to restrict funding available for short awards. This resulted in a significant drop in the number of students taking courses of one week or less.</p> <p>The large number of students who participated at this level over the last five years provides an opportunity to look in more depth at their pathways and progression to further education. Students enter study from a range of different backgrounds, including school, other tertiary study, employment and unemployment. Most just study towards one certificate. About a third of these go on to further study and most of them end up studying at a higher level. Different subjects lead to different levels of study, with trade-related subjects feeding into level 4 certificates and more professionally oriented subjects leading to diplomas and degrees. A study of the pathways and progression to further education of students in level 1 to 3 certificates is included in chapter 7 of the report.

Non-degree level 4 to 7 provider-based qualifications

After five years of significant growth in the number of students enrolled in level 4 to 7 non-degree study, there was a decrease in 2006 of students enrolled in both level 4 certificates and level 5 to 7 certificates and diplomas. While international student numbers have been declining since 2003, the number of domestic students decreased in 2006 for the first time in recent years.

There were decreases in the number of domestic students enrolled in level 4 to 7 non-degree study across all types of providers in 2006, except private training establishments. Despite a decrease in domestic students enrolled in polytechnics in 2006, a significant increase in numbers between 2003 and 2005 has resulted in polytechnics providing more than half of all level 4 to 7 non-degree study. The number of domestic students aged 25 years and over declined in 2006; however this age group continued to dominate this level of study with two-thirds of all domestic students at these levels aged 25 years and over.

The number of domestic students completing a level 4 certificate decreased significantly in 2006. While the number of domestic students completing a level 5 to 7 certificate or diploma also decreased, the rate of decrease was less than that for level 4 certificates. The five-year completion rates increased, with almost two in five domestic students who had started a level 4 to 7 non-degree qualification in 2002 completing that qualification by 2006.

Bachelors and postgraduate qualifications

For the first time in recent years, there was a decline in students enrolled in bachelors-level and higher study in 2006. While numbers in bachelors and masters-level study decreased, there was a significant increase in doctorate students. The main contributor to the overall decline in numbers was a decrease in international students, particularly from Asia, for the first time since 1998. In contrast, domestic student numbers remained relatively unchanged in 2006.

Universities continued to dominate bachelors-level and higher provision in 2006, with four in every five students studying at a university. Universities and private training establishments were the only types of providers to experience an increase in students in 2006. There was a continued decline in domestic students aged 25 years and over enrolled in bachelors-level and higher study in 2006. In comparison, the number of domestic students aged under 25 years continued to rise.

The number of students completing a bachelors-level or higher qualification increased slightly in 2006. This was due in part to an increase in the five-year completion rate for those domestic students who started study in 2002. Level 8 qualifications1 experienced the largest increase in domestic students completing qualifications. The five-year completion rates were highest for European and Asian domestic students in 2006.

The University of Auckland economist Dr Sholeh Maani recently explored the relationship between parental income during adolescent years and the tertiary education choices of New Zealand youth at age 18 years. The study by Maani showed that while parental income did not have a statistically significant influence on participation in tertiary education overall, it did significantly influence participation at university. Academic performance at school and peer influence were the most important influences on participation in tertiary education. A summary of Dr Maani's study is provided in chapter 9 of the report.

Student support

In 2006, student allowances uptake increased, after several years of decline. Between 2001 and 2005, the number of recipients fell each year – largely because, for most students, eligibility for allowances depends on their parents' incomes. As incomes have risen, the number of students whose parents' income fell below the thresholds was declining. From the beginning of 2005, the government began a series of increases in the parental income thresholds. These thresholds are now indexed – they move each year with inflation. In addition, in 2006, there was an increase in the personal income limit – the amount a student can earn from part-time work while still retaining eligibility for an allowance. These policy changes led to a 4.6 percent increase in the number of allowances recipients in 2006. The total paid out on allowances also rose in 2006 – by 8 percent – again, the first rise after several years of reductions.

The uptake of student loans increased in 2006 – the first full year of the interest-free student loans policy. The number of borrowers rose by 8.4 percent on 2005. Around 5.2 percent of the New Zealand population aged 15 and over borrowed from the loan scheme in 2006. The uptake rate – the proportion of eligible students who choose to use the loan scheme was 56 percent, up from 49 percent in 2005.

Another consequence of interest-free student loans is a change in repayment patterns. Loan repayments for the year to 30 June 2007 were no higher than in the previous year, despite there being a larger number of borrowers. The amount repaid – $487 million – was about 5 percent below the amount collected in the year to 30 June 2005. While it will take some time for new repayment trends to emerge, the expectation is that repayments will start to increase from 2008 and that they will rise steadily from then.

Research contribution

The research performance of the tertiary sector improved in several areas in 2006. In the area of research training, enrolments in doctoral degrees increased substantially. This was driven by a significant rise in international enrolments which occurred in response to a change in government funding policy that funds international doctoral students on the same basis as domestic students. The number of people completing a doctoral degree decreased slightly in 2006, with men and international students especially showing a noticeable decline.

In the area of research output, the universities showed improvement in a number of areas. The external research contract income earned by the universities per academic staff member rose in real terms between 2004 and 2005. Total research output increased at four out of the six universities that reported research outputs in 2006. The academic impact of research by the New Zealand universities, relative to the world average, increased between 2000-2004 and 2001-2005 in four out of ten broad subject areas monitored. Two of the ten subject areas, 'health' and 'medicine and public health', had an academic impact above the world average in 2001-2005.

Sector capability

The collective financial performance of the public tertiary education institutions has declined since 2004 as the operating environment has changed. The aggregate operating surplus fell to 1.9 percent of revenue – below the benchmark of 3 percent. While the indicators of liquidity and cash flow remained above the benchmark set for prudent operation of a tertiary education institution, both worsened in 2006, for the second year in a row.

In large part, this decline in financial performance reflected factors such as the continued reduction in international student enrolments, increases in the costs faced by institutions and the slowdown in the growth of enrolments in the wānanga. These were all factors that made the operating environment more difficult.

There was considerable variation among the tertiary education institutions, with some recording strong performance, while 12 of the 33 institutions had an operating deficit in 2006, compared to nine in 2005, six in 2004 and none in 2003.

Overall, the universities performed more strongly than the other sub-sectors. They experienced a relatively smaller decline in international students and their income was more diversified than that of the other sub-sectors. The universities' collective surplus – 3.3 percent of revenue – was above the benchmark.

By contrast, the polytechnics experienced a fall in income as international enrolments dropped, as they experienced the effects of changes made to community education funding in 2005 and 2006 and as they moved to reposition their provision. While income fell, the polytechnics' costs continued to rise, with cost per student increasing by 14 percent as they shifted out of shorter courses and as they experienced the effects of the reduction in international students. Their combined operating surplus in 2006 was less than 1 percent of revenue, compared to 1.6 percent in 2005, 4.4 percent in 2004 and 7.7 percent in 2003. Seven of the 20 polytechnics recorded an operating deficit.

Capital expenditure in the tertiary education institutions exceeded the operating cash surplus generated from operations for the second year running, leading to a reduction of cash reserves.

The number of staff employed by tertiary education institutions fell in 2006 after having risen for several years. In private training establishments, staff numbers also decreased.

The decrease in the number of academic staff was greater than that for the non-academic staff in the public tertiary education institutions. In private training establishments, this situation was reversed with the fall in number of non-academic staff significantly exceeding the fall in the number of teaching staff.

The latest fall in student numbers exceeded the fall in the number of teaching staff, lowering the 2006 student to academic staff ratio in the polytechnics and wānanga. However, the number of students per academic staff member remained higher in 2006 in these sub-sectors than five years earlier. The universities' student to academic staff ratio has remained at a very similar level over the past five years.

The number of university staff eligible for research funding from the Performance-Based Research Fund increased from 2003 to 2006 and the average age of the eligible researchers also increased in 2006.

Total expenditure on personnel in public tertiary education institutions rose in 2006 and personnel costs also increased as a percentage of total expenditure.

Information from the 2006 Population and Dwellings Census confirmed some of the trends facing the tertiary education workforce identified in 2005 by the Strategic Review of the Tertiary Education Workforce. For example, the number of people with postgraduate qualifications in the academic workforce has increased more rapidly than that in New Zealand's other industries. And, as expected, there were proportionally twice as many postgraduate qualified people in the technical and higher education academic workforce in 2006 than in all other industries. An important finding confirmed by the census data is that New Zealand's academic workforce is ageing. The 2006 census data also shows that the income levels for New Zealand's academic staff have risen when compared with other industries over the last five years.  An in-depth analysis of the 2006 census information on the tertiary education workforce is included in chapter 15 of the report.

Investing in knowledge and skills

Government spending on tertiary education increased by 8.5 percent in the year ended June 2007. Total government spending on tertiary education, including operational costs and capital expenditure, was $4.2 billion in 2007, compared to $4.1 billion in 2006. As a percentage of gross domestic product, total expenditure increased slightly while operating expenditure remained unchanged in 2007. Total tertiary education expenditure accounted for 2.7 percent of gross domestic product while operating expenditure accounted for 1.9 percent. The main difference between the operating and total expenditure was the amount of Student Loan Scheme lending that was treated as a capital expense.

The number of equivalent full-time student places funded by the government continued to decrease in 2006. Despite the decrease in student numbers, government spending on tuition subsidies continued to increase in 2006, due to an increase in the base funding rates.

In 2006, the average domestic fee per full-time equivalent student at the public tertiary education institutions increased by 10 percent. This increase largely reflects a continued move away from enrolments in low-cost courses or zero fee courses. In the universities, where there has not been widespread fee discounting, average fees rose by 4.6 percent. The number of international students continued to fall in 2006 and as a result total international fees revenue also continued to fall in 2006.

This category covers bachelors degrees with honours, postgraduate certificates and postgraduate diplomas.

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