Education Sector Prejudice

Gareth MorganPolitics

Gareth Morgan, Director of Gareth Morgan Investments

The announcement last week by Lockwood Smith of tertiary sector funding constraints and the subsequent educationalist reactions of threatened fee rises, demonstrates the need for greater competition in the sector. The cost plus mentality of education providers and the gullibility of student organisations to accept it, should encourage policymakers to properly reform the sector rather than edge it towards efficiency via public funding pressure.

It’s clear the current organisation of public sector tertiary education is not conducive to the supply side responses necessary to maximise efficiency from the resources they capture. As this column discussed last week it seems an anachronism that in an economic environment that is demanding businesses attain international competitiveness that we have a tertiary education system that in most respects lags the standards of excellence attainable in the world’s best universities. That providers of tertiary education in NZ argue the sole route to that end is via greater funding, or at least that lesser funding will necessarily result in lower education standards, or again that unless fees are raised tertiary education will suffer – demonstrates an organisational structure of tertiary education adrift from that needed to maximise the quality of education per dollar.

It is curious that the government has proceeded with the funder/provider split in health, but pulled its punches with tertiary education. While there exists competition between NZ universities to capture students it’s assumed that this will be sufficient to ensure that NZ students are being equipped in the best way possible. This we cannot be certain of though unless the competitive environment the universities face is as fierce as we can make it. It’s here where the whole issue of funding tertiary education could be reformed.

To ensure that the cost plus mentality of education providers in NZ is smashed there needs to be an external source of competition. Only by opening the bids for the annual university vote to overseas providers can we be assured that the best value per dollar is being achieved. And as discussed here last week, it is by no means certain in this age of rapidly advancing international communications, that continuing to invest in the bricks and mortar of our seven universities and staffing institutions with local talent as opposed to providing students access to world class talent, is the best option.

US universities earn US$5 bn annually from overseas students. This suggests there is some demand for what they offer. Opening up the supply of tertiary education in NZ to those institutions would both help the current providers overcome their penchant for greater government funding as the primary means for growth, and provide NZ students with a deeper range of tertiary education options than currently available. To see our own universities offering more courses run by world leaders in their fields, would have to be an advance on the insular, protected supply of university product currently being dished up.

Education Sector Prejudice was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.