How can tertiary education deliver better value to the economy?

Publication Details

This paper asks how tertiary education can deliver better value to the economy. It is based on a presentation given at the New Zealand conference of the Association of Tertiary Education Management in Auckland in July 2010.

Author(s): David Earle, Tertiary Sector Performance Analysis and Reporting Division [Ministry of Education]

Date Published: December 2010

Which matters more – qualifications or skills?

In general, literacy and numeracy skills and qualification attainment are related. However, some people have low or no qualifications and adequate literacy and numeracy, and conversely, some people have tertiary qualifications and low literacy and numeracy (Ministry of Education 2009, Smyth and Lane 2009).

The evidence from the ALL Survey suggests that both skills and qualifications matter. Figure 3 below looks at the relationship between document literacy and hourly wages given different levels of qualification. While literacy skills are only part of the skill sets required for jobs, they provide indicators of the difference in value put on skills versus qualifications. Hourly wages provide a rough proxy for the value of work undertaken.

Figure 3:  Relationship of document literacy to hourly wages by qualification level

Image of Figure 3:  Relationship of document literacy to hourly wages by qualification level.

Source: Earle (2010b).
Note: Results are from a log-liner model of hourly wages. The reference group is males, aged 30, with English as a first language. The lines show the distribution from the 10th to 90th percentile fore each qualification level.

The relationship for people with no qualifications through to tertiary certificates and diplomas is very similar. There were differences within this group by qualification level – but not enough to be statistically significant given the sample size.  So, on the whole for this group, wages increase steadily with skills, irrespective of qualifications.

However, having a bachelors degree relates to a step increase in wages, even for people with lower levels of document literacy.  So here, having the qualification has more effect on wages than higher skills. For postgraduate qualifications, there is a much greater return on higher skills. This is largely because people with these qualifications are at the top of the qualifications requirements for their job. In their case, the skills they bring to the job are reflected in their wages.

From this it can be seen that qualifications provide entry requirements for occupations and jobs, while skills differentiate people in terms of their performance.