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Fees-Free: Grades are out
Published in May 2018 newsletter

The tertiary education sector took a swift turn to the left in late 2017, as highlighted earlier this year with the implementation of the fees-free tertiary education policy. Half a year on, and what has the policy got to show for itself? A lot of money spent, not much change to student numbers, and a complete lack of targeting skills needs.

Infometrics has been following the developments of the fees-free tertiary education policy with interest since it was established late last year. We have written on it a couple of times previously, which you can find here and here. We thought it useful to assess the short-term impacts of the policy, noting that the true effects of the policy will not be known for several years.

We assess whether the government, through the fees-free policy, has been successful in improving tertiary education outcomes in New Zealand over the past 6 months. For ease of understanding we have chosen to grade the fees-free policy using the traditional university grading system. We look at the following areas: accessibility, student numbers, skills gaps, improving education quality, and the value for money of the policy.

Accessibility: B-

A main goal of the fees-free policy was to improve accessibility of tertiary education for everyone. The government contends that the policy pays for people who would have previously been unable to attend tertiary education due to cost. Unfortunately, inflation numbers released by Stats NZ have shown that it is the higher spending households who have benefited most from the fees-free policy. This indicates fees-free has benefited those who could afford tertiary education already, while failing to help the lower spending households.

Although the fees-free policy resulted in a decrease in the explicit cost of tertiary education, the implicit costs remain, which fails to effectively improve access. As mentioned in Infometrics’ previous article on the matter, there are more persistent barriers to access than course fees, such as the costs of living and the opportunity cost of missed work.

However, Education Minister Chris Hipkins has been quick to highlight that student loan applications have fallen, indicating his belief that accessibility is becoming less of an issue.

Student numbers: C+

Fees-free has failed to increase student numbers from last year. However, it is important to note that previous forecasts predicted a drop of student numbers this year. Thanks to the fees-free policy, student numbers have shown almost no change from last year. However, keeping student numbers constant is far from the benefits we were told to expect. Just because things could be worse, doesn’t mean the outcome is good.

Although student numbers may be static rather than falling as much as was forecast, the minimal change in student numbers tells us that in effect, the policy in 2018 almost wholly subsidised students who were already heading into further study, and not much else. This contradicts Chris Hipkins’ point of fees-free improving accessibility.

It is likely to take multiple years for the policy’s full effect to be felt. However, this makes for an expensive couple of years with no results.

Skills gaps: F

The growing skills gap in the labour market is a massive problem. This was identified by the Labour Party in their Future of Work Commission. However, the fees-free policy is likely to have been a step backwards, rather than forwards. As stated in our previous analysis, industry experts expect the fees-free policy to push students away from the trades and towards university.

To rub salt on the wound, in the latest budget announcement, the government did not budget for any further investment in on the job training and apprenticeships or vocational education and training. The Industry Training Federation outlined their disappointment in the budget here. Without the ability to target students and incentives them into skills area that need more workers, the gap between the skills of people looking for work and employers’ demands will only grow.

Improving quality: F

Many tertiary education providers are heavily underfunded and consequently struggling to provide a high standard of education. This lack of funding and increasing cost pressures, has seen the international rankings of some of our Tertiary Education Providers fall in recent years. A freezing of the tertiary budget, and failure to account for inflation, is likely to cost universities alone between $18m and $36m a year according to Universities NZ.

The money going into the fees-free policy could have been better used to fund those universities and institutes of technology and polytechnics who have been under-resourced. This would have likely been able to effectively improve the quality of education. In economics we always look at the opportunity cost – it doesn’t appear the government did!

Wasting taxpayer money: A+

The fees-free policy comes with a hefty price tag – at an expected $2.5b over the next five years. When a government policy is costing so much, it should be well thought out and able to deliver on its promises. Unfortunately, as we’ve pointed out above, fees-free falls short in that regard.

There are many other options the Government could have taken to improve the tertiary education sector. These other options would have also allowed more room for investment in this year’s budget. For that, we give the government an A+ in wasting taxpayer money.

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