Free Tertiary Education – Helping the Poor or Middle Class Welfare?

Free Tertiary Education – Helping the Poor or Middle Class Welfare?

Geoff SimmonsTax and Welfare

Over the weekend Labour committed to free education in the 21st Century – including 3 years of free post-school education over a person’s lifetime. This is estimated to cost $1.2b by 2025 – but is that the right way to spend that kind of cash? Depending on what they are trying to achieve, Labour’s promise looks more like middle-class welfare than a hand up to those that really need it.

Later this year the Morgan Foundation will be releasing a report on education in New Zealand where we will explore some of these issues in more detail.

Who will benefit from free tertiary education?

One of the benefits of the new policy is that it will help more poor people afford tertiary education, including University. Certainly lowering the cost will help more people take up tertiary education, and that will no doubt persuade more poor people to go. This should in turn make it easier for Pacific and Maori students to get a tertiary education, and should reduce the longer student loan repayments faced by women. All good stuff.

However, this would come at a huge cost – and the reason that bill is so high is because they would also be giving free tertiary education to everyone who already goes. Given that most people who go to University are from middle and upper-class backgrounds (and they receive large personal benefits from that education), this policy looks like middle-class welfare.

If our aim is to help the poor further themselves, the first question should be whether the cost of tertiary education actually is the main barrier. Given that we have a fairly generous system for loans, it may not be. Meanwhile, our compulsory education system does a bad job reducing the differences between rich and poor kids. Perhaps a greater investment in primary schools, or even pre-school education would actually help more poor people get to University?

Isn’t universality good?

Of course, anyone who knows the Morgan Foundation will be surprised that we aren’t immediately supportive of a policy that promotes a universal system. But this proposal has some administrative fishhooks.

One of the advantages of universality is that it keeps things simple, and reduces administration costs. However, Labour’s free education proposal only applies for three years across a lifetime. That means we need to create a new administration to keep track of how many ‘free years’ each person has used up, and pay the different institutions for their education services. This is not a simple solution.

The other issue this creates is what will this do to people’s choice of post-compulsory education. University education is more expensive than polytech or apprenticeship schemes, but this policy would make the first 3 years free for each of them. Will this cause more people to choose University education over these other alternatives? Is that the right outcome given our workforce?

Is this the ‘Future of Work’?

Huge changes are afoot in the economy – which Little referred to as ‘the age of disruption’ – and on that count he is right. This is the basis of the ‘Future of Work’ programme led by Grant Robertson. But how does this new policy sit with the future of work?

The tertiary education sector is already struggling to stay relevant given these changes – graduates are increasingly finding that a degree or other training is no longer a guarantee of a job. Increasingly post-graduate education is required, but this funding would run out after 3 years. Would that put people off doing post-graduate education, particularly if they are poor?

This also raises the much larger question of whether our tertiary education sector is fit for purpose in the 21st century. Is four or five years of study really necessary or can degrees be trimmed a bit? Is it time to integrate the tertiary sector better with the working world?

Labour’s policy leaves all these big questions unanswered. The Morgan Foundation will be looking at them in more detail in coming months.


Free Tertiary Education – Helping the Poor or Middle Class Welfare? was last modified: January 31st, 2016 by Geoff Simmons
About the Author

Geoff Simmons

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Geoff Simmons is an economist working for the Morgan Foundation. Geoff has an Honours degree from Auckland University and over ten years experience working for NZ Treasury and as a manager in the UK civil service. Geoff has co-authored three books alongside Gareth.