The Treasury

Global Navigation

Personal tools

Skill levels and employment

The skill levels of those in the workforce, and human resource practices of businesses, contribute to a firm’s productivity by supporting efficiency gains, the adoption of new technologies, innovation, and the take-up of market opportunities. Getting people into work, and raising their skill levels can also support the achievement of wider social outcomes.

Raising skills is a cumulative process over a person’s lifetime. Foundation skills are important as the gateway to future learning and productivity enhancement. The tertiary system can support extension and deepening of skills. Workplace training can also support ongoing learning and skill development.

Responsibility for skills development is shared among individuals, families, firms, education providers and the government.

Skills and skill formation

The skill level of New Zealand’s population is good relative to similar countries, but there is still room to lift this, particularly for some groups of people. At the last census, for example, 19% of those aged between 20 and 64 had no qualifications. Raising the skill levels of the population will require a range of policy responses, which should be implemented in ways that maximise value for money.

Early childhood education

Early childhood education can provide a strong foundation for learning. It is particularly beneficial for children from disadvantaged backgrounds if services are of high quality and if children participate regularly. Recently there has been significant government spending in this sector. We consider that value for money in this sector could be increased by targeting funding to children from disadvantaged backgrounds.


Compared with students in other OECD countries, 15-year-olds in New Zealand perform well, on average, although we have a relatively wide distribution of achievement. There is some evidence of increased retention of senior students and attainment of qualifications in recent years.

Figure 10: Fewer students are leaving school with little or no attainment of skills
Figure 10: Fewer students are leaving school with little or no attainment of skills.
Source: Ministry of Education

Note: the introduction of the NCEA has allowed for greater recognition of part qualifications; recent years may not be comparable

Policies are largely in place to build on this improvement, and there has been significantly increased expenditure for schooling in recent years. However, most of the recent additional funding has been directed at increasing the number of teachers, and their pay, and we do not as yet know the effect of this spending on student outcomes. The following policy areas should continue to be priorities:

  • Improving teacher practice. Teachers are a key influence on the educational attainment of students. There are a number of initiatives in place to improve teachers’ skills, and in particular the ability to teach to a wide range of student needs. Initiatives should include a clear articulation of teaching standards, so that these standards are integral to the selection, training, accountability and professional development of the teaching workforce.
  • Student achievement information. High-quality assessment tools are now available to schools but need to be more widely used to assess learning and benchmark student achievement. The information generated by these tools needs to be better communicated, particularly in primary schools, to inform teaching practice and to inform decision-making by schools, families, communities and the government.

Tertiary education

New Zealand’s tertiary education sector is crucial because it provides key skills for industry and firms; thereby supporting economic growth. Policy settings in the tertiary sector need to provide for participation of New Zealanders in quality courses that meet the needs of individuals and firms. As the benefits of tertiary education accrue largely to the individual, ensuring value for money in the system and an equitable balance in who pays are issues that will continue to require focus.

Participation in high-quality courses

There has been a significant increase in the numbers of New Zealanders accessing tertiary education over the last five years. The tertiary system has to be flexible enough to meet the needs of a range of population groups.

The working-age population who use the tertiary sector to retrain throughout their working life. This group of mature students is highly represented in the New Zealand system. The group of particular concern is adults with low skills. We need to ensure provision is effective and that students can progress to meaningful qualifications.

The 18 to 24 school leaver cohort. Participation rates of the 18- to 24-year-old school leaver cohort have not been growing. This pattern may partly reflect the buoyant economy, but more needs to be done to enable this age group to enter tertiary education, as the greatest economic benefits in the long term are generated by entering at this stage in the life cycle.

Figure 11: Mature students have increased their participation but not school leavers
Figure 11: Mature students have increased their participation but not school leavers.
Source: Ministry of Education

Increased participation rates alone are not sufficient to promote economic growth. Those participating in tertiary education also need to be able to access quality courses that support improved labour market or education opportunities for students, and which are relevant to the needs of individuals and firms.

Policies to improve the quality and relevance of courses, and to limit participation in courses of questionable value or quality, have been put in place for sub-degree education. We recommend that these policies be further strengthened by addressing subsidy levels for some courses, improving governance and management in tertiary education institutions (touched on in the public sector management chapter), and by providing better information about the quality and value of courses at sub-degree level and the cost of such courses. Ultimately, however, a system based on students, institutions and industries deciding relevance is essential for a flexible system that responds to the conditions in the labour market for skills.

Increased participation rates have led to increased costs for government. Further, subsidy rates for some courses have been too high. Addressing value for money questions, along with getting a better balance in who pays, should contribute to demands for better performance and higher-quality courses from tertiary institutions.

Getting a better balance in who pays

Total government funds committed to tertiary education have risen by 60% over the past five years. This increase has been directed to funding additional places in sub-degree education and reducing the cost to all students. These policies have, however, had little impact on participation or access for disadvantaged groups.

Improving value for money in the tertiary sector will require better allocation of resources – focusing less on reducing the costs for all students and more on improving access for disadvantaged groups and on improving quality for all. This will not be easy.

Recently there has been a particular public focus on the Student Loan Scheme. We consider that the underlying principles of the Student Loan Scheme are robust. The scheme reduces barriers to participation, repayment is income-contingent and the scheme is open to almost all students. Evidence suggests that, on average, individuals are not facing overwhelming levels of debt (more than 64% owe less than $15,000), repayment periods are manageable (the median loan repayment time is estimated to be just under seven years), and those with higher debt levels tend to have quicker repayment times than those with lower debt levels. Nevertheless, if Ministers wish to modify the scheme there are a number of trade-offs that will need to be taken into consideration.

Managing public concern about the costs of tertiary education is a key challenge for governments the world over. The international evidence suggests that the benefit from tertiary education accrues mostly to the individual. Better public understanding of the benefits of study for graduates, the performance and fairness of the loan scheme, and how the costs can be fairly shared between graduates and wider taxpayers is needed. This is a significant economic issue for New Zealand given the size of the investment needed to finance tertiary education and the increasing burden on taxpayers.


  • Fund courses that lift the skills of those participating in them and provide high-quality qualifications
  • Improve the efficient allocation of government spending in tertiary education by:
    • achieving a better balance between taxpayers and students
    • targeting resources to the most disadvantaged
    • freeing up resources for improving the quality of provision
Page top