Managers are the Bottleneck

Gareth MorganPolitics

Gareth Morgan, Director of Gareth Morgan Investments

The Porter report on New Zealand identified lack of education as one of this economy’s major shortcomings. The government is aware of the issues and has held a conference on them. Human capital development is rapidly becoming a catch cry for those who are into single issue solutions to economic stagnation. This could be dangerous, however. Lack of thought and analysis of the problems and appropriate solutions may fetch any initiative the same fate as those unfortunate Chinese students intent on learning english at New Zealand language colleges. Big bucks spent with nothing to show for it.

Education is vitally important to the performance of the economy and our ability to drive down the rate of unemployment. If we are to invest in it, however, we must be very clear as to what we intend achieving, and measuring the returns from that investment.

A good place to start is to ask where are the bottlenecks caused by the lack of education? We apparently have a problem but as yet there has been very little specific identification of it/them. The current poor performance and high level of unemployment is unlikely to be solved by pouring money into early childhood education, despite possibly very attractive long term returns from such investment. Similarly, whatever problems exist in primary school education they are not significant in relation to the economic and employment issues we face.

Secondary and tertiary education may well harbour some of the problems that need to be addressed, but producing more lawyers, engineers, scientists and geographers does not seem an especially urgent requirement. There are, no doubt some businesses that are short of particular skills. But if the market is prepared to offer significantly more attractive prospects for a law graduate than an engineer, then clearly financially hard pressed young people are likely to lean towards law than engineering. This may suggest the problem lies in the relative charge out rates of the two professions rather than a failure in the education system.

The small proportion of the working population with some form of tertiary education is often sited as a reason for our poor economic performance. This may well be so, but the problem may better be defined as a lack of opportunity for tertiary trained people in a country with few sophisticated businesses and a culture that is disdainful of intellectuals. What percentage of freezing company executives and board members had tertiary qualifications in 1980, or indeed in 1990?

One of the major bottlenecks that should be targeted by any further investment in education and training is management. These are the people who make decisions about production, marketing, investing, and employing. The more often they can get these decisions right the sooner we will lift the rate of economic growth and reduce the size of the dole queues. The payback from investing in this area would be relatively fast and in some cases significant. As managers improve their skills they will be in a better position to educate future managers.

Managers are the Bottleneck 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.