Fourth Report of the Tertiary Education Advisory Commission - full report 14/58

Shaping the Funding Framework
Fourth Report
of the Tertiary Education Advisory Commission

Chapter 4: Emerging Trends

The tertiary education system does not exist in isolation from the rest of
society, and is influenced by wider social and economic changes. The development
of a new funding framework for the tertiary education system must therefore take
into account the emerging trends that will affect both the system itself and
society as a whole. These trends can be broken down into four main areas:
demographics, knowledge, technology and internationalisation.

4.1 Demographic Changes

The most fundamental change that the tertiary education system must be able
to cope with is future shifts in population levels and characteristics.

Traditionally, the major cohort of learners entering the tertiary education
system has been the group in the 17 to 25 age range. The number of people in
this age group is currently declining. From 2003, however, the decline in
student enrolments is projected to reverse, as the current demographic 'bubble'
of learners now in late primary to early secondary education enter the 17 to 25
age range. The period of greatest forecast growth in enrolments is between 2007
and 2010.⁵⁰

Primarily as a result of this demographic 'bubble', tertiary participation is
expected to increase slowly over most of the period from 2000 to 2020: total
participation is expected to rise from around 225,000 learners in 2000 to around
254,000 in 2018. Participation growth over the next 10 years is projected to be
moderate at just over 2 percent per annum. Growth in the second 10-year period
(to 2020) will be much lower at 0.1 percent per annum - effectively a period of
no growth. Total average growth over the 20-year period is estimated at under 1
percent per annum, assuming that current participation patterns continue.

No data are available on specific projected increases in part-time enrolments
- but, if the current trend for learners, to enter tertiary education throughout
their lives continues, there is likely to be an increase in the number of mature
and part-time learners in the tertiary education system. To summarise, the
number of fulltime learners under 25 is projected to decrease after 2013, but
the increase in older learners (both part- and full-time) will ensure that
overall learner numbers will remain relatively static for approximately the next
five years.

These figures relate to overall demographic trends. Population change for
specific groups of learners, however, may vary from the norm. In particular,
Maori and Pacific peoples have higher-than-average rates of population growth.
(Specific demographic issues for these two groups are covered later in this
report, in Chapters 13 and 14.)

Furthermore, population growth is characterised by uneven geographic
distribution, and this has its own implications for the tertiary education
system. Auckland, for example, has the highest regional population growth rate
in New Zealand, especially for Maori, Asian, and Pacific peoples. This means
that (at least to some extent) the projected increase in tertiary participation
will be evident more strongly in this region. Conversely, some areas such as
Otago/Southland and Taranaki have lower than average growth rates, which raises
important issues about the sustainability of tertiary providers in these places.

It is likely that the geographic distribution of the population will have a
disproprortionate impact on some sectors of the tertiary education system.
Universities and, to a lesser extent, other TEIs attract significant numbers of
learners from outside their immediate geographic area. Also, an increasing
number of providers offer distance-learning courses or operate branches in
regions distant from their 'home' - the Open Polytechnic of New Zealand and
Massey University being two highly visible examples. It is reasonable to assume
that changes in the geographical distribution of the population will have a
greater impact on providers offering programmes located primarily at lower
levels of the National Qualifications Framework, where learners are probably
less willing to shift in order to seek out providers.

The projected increase in learner numbers has implications for public
investment in tertiary education. In particular, if the overall quantum of
public funding remains static (or even if it is adjusted to take inflation into
account), then the actual public subsidy per-learner will fall. While this may
encourage TEPs to seek out other forms of funding and therefore promote
increased links between providers and broader communities, it seems more likely
that providers will also increase fees to cover the funding decrease.

4.2 Changes in the Knowledge Society

The Commission's earlier reports have drawn attention to the context for the
development of a knowledge society. The August 2001 Catching the Knowledge Wave
conference at the University of Auckland has also focused attention on how New
Zealand needs to foster innovation in a knowledge society if it is to compete on
the world stage.

Knowledge creation is accelerating. This trend has powerful implications for
TEPs as the engines for human capital development. A fundamental shift is
occurring, away from the use of raw materials and labour costs as the basis of
competitive advantage, towards an emphasis on knowledge as the form of capital
that drives economic growth. Organisational success now depends upon the ability
to foster an innovative work environment delivering new services and products to
the marketplace.

Knowledge creation increasingly occurs in partnerships across disciplines and
organisational entities. Collaboration, teamwork, and the formation of clusters
across established boundaries are features of these changes in the nature of
knowledge production. These concepts challenge the traditional roles and
structures of TEPs, and in turn require them to change and adapt.

As new knowledge and new occupations create demand, new courses will spring
up - often at the interface between old disciplines. The ability of a team of
academics to use different areas of subject expertise to create new programmes
will become critical. While established disciplines will continue to have a
pivotal role, new specialisations will develop, and providers will require a
greater diversification of educational programmes. Joint ventures between TEPs
and commercial organisations will foster technology transfer and
crossdisciplinary activity. Partnerships with other educational providers, and
with industry, will attract learners with a wider variety of learning skills and
a more varied expectation of learning relationships. These pressures will mean
course delivery by industry experts and by academic staff from other educational
institutions, at locations other than the main campus. The learners' choices of
their course or programme to study, and where and how they choose to learn, will
drive the nature and delivery of tertiary education provision.

Attitudes to place and space may change, as the on-line community emerges as
an adjunct to classroom-based learning. Technological change is dealt with in
more detail in the next section, but the impact of technology upon the knowledge
society will be profound. The physical place of the tertiary education provider
will become less important, and the website more critical. Alternatively, the
physical place may acquire new significance as the place for face-to-face
encounters at key stages in the educational experience. It is likely that
buildings will be used differently, and that learners will engage in a more
fluid way with the physical place at which TEPs are sited. Resource-based
learning approaches, for instance, will require differently designed facilities
(such as libraries and workplaces), more flexible access to learning materials
and equipment that supports learning (such as computers), and different types of
interaction between staff and learners.

These trends have been affecting tertiary education provision in subtle and
not so subtle ways over the last decade, and their effects are likely to become
more pronounced over the next few years. As a result:

• There will be pressure on the traditional hierarchies of TEPs - in terms of
  how work is managed and focused, and in the assessment and rewarding of peoples'
  efforts. Academic and general staff will need to work more closely together,
  particularly as the development of the on-line environment becomes more
  essential to organisational success.

• Vocational education providers will need to establish strong links with
  workplaces to ensure that the skill sets being developed in graduates are
  relevant to rapidly changing work environments and that they reflect the
  knowledge of experts from corporations and industry.

• Smaller or more isolated TEPs may find it more difficult to support
  multi-disciplinary and trans-disciplinary approaches, as they lack the necessary
  critical mass.

These factors may contribute to the need for restructuring within TEPs to
take advantage of economies of scale, improved capability, and the benefits
afforded by a greater concentration of staff expertise. A proposed 'hub and
spoke' model for the polytechnic sector (outlined in more detail in Chapters 5
and 16) would be a logical and positive response to the emergence of some of
these trends.

Rapid technological changes, and the widely discussed desire for New Zealand
to develop as a knowledge economy and society, have implications for the nature
and mix of graduates from tertiary education that New Zealand requires. Evidence
from human capital and economic growth theory is equivocal regarding specific
strategies that should be pursued within the tertiary education system. The
Commission, however, identified in Shaping the Strategy that it perceives
two key priorities - to improve the quality at the top, and to improve the
bottom of the system. These are both consistent with developing New Zealand as a
knowledge society

4.3 Technological Changes

Developments in new technologies represent both a challenge and an
opportunity for the tertiary education system. The Commission recognises the
need to provide opportunities for learners to build their skills in relation to
developing computer literacy and information access. The key to this is
learners' access to computers and the internet, and providers need to ensure
such access is available. This is the case even in disciplines where it may not
be immediately apparent, such as design and music.

The effects of technological change also influence New Zealand's capacity for
maintaining international standards of research and innovation. It is vital that
researchers are able to access the latest information and use modern equipment.
While it may not be necessary for them to have access to cutting-edge
technology, they must have resources that enable them to undertake
investigations at a level comparable to most overseas researchers. These
requirements must be taken into account when considering the resourcing of the
tertiary education system.

The specific technological change with the greatest potential impact on the
tertiary education system is the increasing sophistication and use of internet
technology. The internet provides learners with new and easy access to
information and a greater control over their learning, in terms of both the
courses they can study and the way they learn. This 'e-learning' offers new
opportunities. For example:

• Learning and assessment centres - these have been introduced
  extensively in the United Kingdom where they provide a course-brokering service
  and a physical location where on-line products and services can be accessed.
  Centres may also provide some learning-support services to assist learners with
  specific needs.

• Assessment service providers - most of these provide assessment
  services to learners wishing to have their nonformal or on-job learning assessed
  and credentialled. At a more advanced level, providers are authorised to award
  credentials and to provide a variety of other services such as learning
  assessment, educational planning and learning records - although they do not
  provide teaching.

• Customised learning packages - these are widely used in the corporate
  market. Learning packages are customised to meet the requirements of a corporate
  client, and are then offered through the company's intranet for in-house
  training.

E-learning and the way it operates has enabled businesses not traditionally
associated with tertiary education to identify it as a new business opportunity.
With this growing interest in the business of education has come a real interest
in education as an export industry.⁵¹
Education as an export industry is discussed in more detail in the next section.

The Commission is aware that the potential impact of e-learning on tertiary
education is being addressed by the E-Learning Advisory Group established by the
government in 2001. The Commission therefore urges the TEC to consider the
recommendations of this Group when making decisions about the funding of the
tertiary education system.

4.4 Internationalisation

Internationalisation is a trend influencing all aspects of society, culture
and the economy. Tertiary education is no exception. While universities have
traditionally had an international orientation both in courses offered and in
their collaborative relationships, tertiary education as a whole is increasingly
becoming a global activity. Not only is there a demand for qualifications to
have international currency, but in many countries the demand for tertiary
education outstrips the ability of supply to meet demand. This has led to a
significant increase in the number of international students studying in New
Zealand and to the rapid growth of institutions operating trans-nationally,
either as part of an alliance with other education providers or (in some cases)
as part of a corporate entity.

Furthermore, internationalisation of the economy has been accompanied by an
increase in international agreements on trade in services. New Zealand is
currently a signatory to four multi-lateral or bi-lateral agreements involving
trade in services, under which the provision of education is generally classed.
These are:

• the General Agreement on Trade in Services (GATS);
• the Australia New Zealand Closer Economic Relations Trade Agreement (CER);
• Asia Pacific Economic Co-operation agreement to liberalise services; and
• the New Zealand Singapore Closer Economic Partnership (NZSCEP).

Negotiations are also currently underway for a bilateral agreement with Hong
Kong. The General Agreement on Trade in Services (GATS) is the most significant
of these in terms of tertiary education as it specifically includes trade in
educational services, intellectual property and investment, and is aimed at
liberalisation of such activity. In signing this agreement, New Zealand has
provided relatively free access for overseas private primary, secondary and
tertiary education services to the New Zealand education system.

Some of the implications of this liberalisation of international trade in
education and research services are that:

• Trans-national providers can operate in New Zealand with no restrictions
  (other than those related to all foreign investment) unless they seek
  registration,⁵² the listing of their
  qualifications on the New Zealand Register of Quality Assured
  Qualifications (the Register), or access to government funding. If they seek
  any of these, they will be subject to the same criteria and procedures as
  national providers.

• There are no requirements placed on these providers to meet New Zealand
  quality standards unless they enrol international students, seek public funding
  for their courses, or have their courses and programmes linked to the Register.
  If they do any of these, they will need to meet accreditation and approval
  requirements.

Negotiations to strengthen the influence of this agreement are currently
being undertaken, and these could have serious repercussions on future
government policy. As one submitter pointed out to the Commission:

Proposals include a requirement that Governments show that any new
measure is 'necessary' to achieve a legitimate goal, the least trade restrictive
way of achieving that goal and that foreign providers potentially affected by a
regulation have been consulted before its implementation. If adopted, this would
impose serious restrictions on the right of governments and agencies to choose
the policy instruments which they believe will best achieve their objectives,
and place the interests of foreign education suppliers ahead of domestic policy
objectives.⁵³

The impact of these linked matters of trans-national providers and the impact
of international agreements must be recognised by the TEC. While trans-national
providers seeking public funding for the programmes and activities would have to
negotiate charters and profiles with the TEC and pass both quality and
desirability tests, the tests and processes used would not be able to
discriminate between providers on the basis of country of origin.

This would create some challenges for the TEC, and it would need to ensure
effective processes are in place for working with trans-national providers in a
non-discriminatory way. It would also need to ensure that its processes are
compatible with existing and future treaties and arrangements entered into by
the government. In particular, the TEC must develop robust and effective
processes for dealing with those providers that do not have an actual physical
presence in New Zealand.⁵⁴

A further issue is that New Zealand learners and researchers are supported
when they seek to study and research off-shore. Questions to consider include:

• What constraints should be put around that support?
• How could the support be managed and monitored to ensure that it results in
  no adverse impact on the New Zealand tertiary education system?

An increased role for scholarships is likely to be important in this regard.
These ideas are further developed in the Ministry of Education publication
Export Education in New Zealand: A Strategic Approach to Developing the
Sector.

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Footnote(s):

50

Long-term demographic projections supplied by the Ministry of Education,
2001 Profile and Trends data.

51

In 1999, Merrill Lynch estimated global expenditure on education and
training at $US 2 trillion.

52

Trans-national providers would need to register as PTEs unless they formed
an alliance with an existing TEI. Either way they would be subject to all the
same requirements placed on a New Zealand provider including demonstrating net
benefit (through the desirability test) and quality (through the quality test)
to gain funding.

53

Kelsey (2001).

54

The Ministry of Education has published a Code of Practice for the
Recruitment, Welfare and Support of International Students (1996). This document
is a voluntary code of conduct for providers of education in New Zealand. The
Code lets them know the standards they are expected to maintain. The Code will
be replaced by a revised, mandatory Code of Practice in 2002.