![New Zealand's Long-Term Fiscal Position [June 2006]](/mastheads/government/longterm/longterm06.gif){kind=small}
Sensitivity tests
This section looks at three scenarios.
Rising enrolment
The first scenario tests the sensitivity of the modelling to student numbers by assuming higher enrolment in each sector. Recent European Commission modelling of long-term education spending is used as the basis of the calculations.[45]
The schools enrolment rate is assumed to rise gradually so that, by 2050, it is 6 percentage points higher and tertiary, 9 points higher, than in 2011.[46] With no guidance from EC modelling, the early childhood education enrolment rate is rather arbitrarily assumed to rise 10 percentage points by 2050.
These changes lift the spending-to-GDP ratio by 0.3 percentage points by 2030 and double that by 2050. The effect is that while spending still falls, the reduction is much smaller than in the base case.
Rising enrolment and older attendance in tertiary
Over the period from 1999 to 2003, the areas of greatest growth in tertiary attendance have been in those 40 and older (from a low base and more as part-time students). This scenario therefore applies the rising tertiary enrolment assumptions in the first scenario to people aged 18 to 64. This change lifts the spending-to-GDP ratio by 0.2 percentage points above the previous case in 2050 and 0.8 points above the base case.[47]
Lower student/teacher ratios in schools
The second scenario looks at the effect of changing student/teacher ratios on spending.
This could be thought of a modelling an increase in the quality of the public education system (even though the evidence on the link between educational outcomes and student/teacher ratios is far from clear).47
The scenario lowers the student-teacher ratio gradually in primary and secondary schools so that by 2050 it is 20% lower than it is now. This reduction is somewhat arbitrary and is equivalent to decreasing the average class size by four students by 2050.
The result is a similar increase in spending to that in the enrolment scenario.
| Scenarios (% of GDP) | 2005 | 2010 | 2020 | 2030 | 2040 | 2050 |
|---|---|---|---|---|---|---|
| Base case | 5.14 | 5.79 | 5.23 | 4.99 | 4.88 | 4.78 |
| Difference from base (pp of GDP) | ||||||
|
1. Rising enrolment, larger tertiary pool
|
0.00 | 0.00 | 0.20 | 0.42 | 0.65 | 0.80 |
| 2. Rising enrolment | 0.00 | 0.00 | 0.17 | 0.33 | 0.46 | 0.62 |
| 3. Falling student-teacher ratios | 0.00 | 0.00 | 0.13 | 0.25 | 0.40 | 0.54 |
Source: The Treasury
Conclusion
The base case shows that demographic change could produce a reduction in the GDP share spent on education over the next half century. However, the scenarios in this chapter show that even small changes in some of the parameters can reduce potential savings.
With a decreasing proportion of the population in the work force and an increasing dependent population (especially those over 65), there is an open question about whether education will be primarily driven by demography.
Notes
- [45]Montanino, Przywara and Young (2004), p 17.
- [46]The enrolment increase in schools is lower because compulsory education means that enrolment rates are high already. The increase here is in the post-compulsory school enrolments.
- [47]See, for example, Michael A. Boozer and Tim Maloney, “The Effects of Class Size on the Long-Run Growth in Reading Abilities and Early Adult Outcomes in the Christchurch Health and Development Study,” Treasury Working Paper, 01/14.
