Education Key to Economic Growth and Equity

The Treasury has been on the public record numerous times stating that education and in particular, raising the quality of teaching, is a priority for economic growth and living standards.

A skilled workforce is crucial to raising growth and productivity. The potential growth impact of lifting student achievement is significant. Our analysis suggests that if overall student achievement[1]was lifted to among the top in the OECD, GDP would be 3-15 per cent higher by 2070.

The OECD's latest economic survey of New Zealand supports the Treasury's view that education is a key area we need to focus on if we're to achieve a sustainable step-change in economic growth, equity, and higher living standards for all New Zealanders.

• OECD's latest economic survey of New Zealand

While some results show the NZ education system doing much that is right (for example, the proportion of adults who are tertiary educated; high average scores and percentage of high achieving students in the international PISA test), the report raises a number of concerns:

However, inequality in education outcomes is substantial…, and there is a long "tail" of underachievers. School drop-out rates are among the OECD's highest (Table 5). Furthermore, there is strong intergenerational persistence: tertiary students are more likely to have highly educated parents than in any other OECD country (OECD, 2012b), and PISA scores are very sensitive to socio economic background. While ethnicity does not explain the entire problem of excessive socio-economic gaps, ethnic disparities in education mirror those in the labour market. Among the population lacking school qualifications, Maori have nearly double the incidence of people lacking school qualifications as Pakeha/Europeans and quadruple those of Asians, and conversely they show much lower rates of tertiary attainment. Whereas Maori and Pacific Islander tertiary attainment rates have been rising, they are not catching up to those of other ethnicities (Chapter 2).

The report also calls out teacher quality, including it in the list of recommendations for improving education policy (Box 2.7), and explaining it in relation to the system:

A key objective must be to make the system work better for students at risk of dropping out. Indeed, the extremely high within-school PISA score dispersion indicates that even greater efforts are necessary to adapt education to the needs of highly diverse learners. This emphasises the value of high-quality teaching. A recent OECD report noted that teacher assessment is variable, linkages between teacher assessment and professional development are weak and there does not seem to be a clear career pathway for effective teachers (Nusche et al., 2012). These issues should be addressed, including by professional development of leaders and boards themselves. Teacher training geared to difficult learners should likewise be stepped up.

These OECD findings and recommendations add detail to the broad perspective Treasury takes - economic growth isn't our only concern. Economic growth matters because it contributes to higher living standards for New Zealanders. The Treasury's concept of living standards includes incomes but also education, health, social and environmental factors.

• Living standards framework

In his speech "Economic Leadership: When Business Isn't Usual" Secretary to the Treasury Gabriel Makhlouf, outlined the need to tackle the education issue to raise living standards and increase equity, and the crucial role that quality teaching plays in enabling people from all backgrounds to reach their potential and fully participate in society.

• Economic Leadership: When Business Isn't Usual

A paper released at the same time set out how Treasury approaches issues of equity and the crucial role education plays. Equity is also a strong theme in Treasury's advice on education during 2011/12, in particular the paper on the link between socioeconomic status and student achievement.

• Treasury's advice on education during 2011/12

Living Standards Background Note: 'Increasing Equity' - January 2013 - Higher Living Standards

In its work on education, the Treasury continues to see student achievement as being of critical importance. Treasury sees education as an investment in our future and a key element of any strategy to achieve sustainable economic growth and more equitable outcomes in society - goals which are at the heart of our advice.