Underperforming in education harms national income

Dr Bryce Wilkinson
NZ Herald
16 November, 2023

The incoming Government needs to make improving education a major priority. Achieving that will take decisive action, and many years of effort.

Right now, New Zealanders are feeling the squeeze on their
 living standards. That squeeze is a result of poor productivity growth for the last 30 years, lost export income and major deficit spending by the outgoing Government.

The good news is that reversing New Zealand’s 25-year decline in educational achievement would also lift future living standards. Better-educated populations have higher national income per capita.

Low national income per capita is a problem for New Zealand. Poor government policies, including excessive government waste, are holding living standards back. Ridiculously high house prices relative to income are an obvious manifestation of this.

According to Statistics New Zealand, New Zealand’s labour productivity growth in the 2008-2022 growth cycle has averaged only 1.0% pa. In the 1997-2000 growth cycle, it averaged 2.8% pa.

Even before the onset of COVID-19 in 2020, the outgoing government’s big spending has seen the costs of financing the public debt treble as a percentage of tax revenues since 2020-2021.

The incoming government must either spend less or raise taxes. This is so even if it does not reduce projected deficit spending.

People are going to blame the new government for its “austerity”. That allows critics to feel self-righteous, but it ignores reality. Government budget constraints are real. The outgoing Labour government was facing the same problem.

What can be said about how improving educational outcomes for kids might lift future living standards?

Phillip Stevens is a director of economics and research at the New Zealand Productivity Commission. He and co-author Martin Weale wrote a chapter, Education and Economic Growth, for the International Handbook on The Economics of Education, published in 2004.

Their chapter was a comprehensive review of international research at that time on that topic.

A robust finding is that individuals with higher levels of educational achievement tend to have higher incomes. Notably, a host of international research finds that much the same holds at the country level. Countries whose populations have higher average levels of educational achievement tend to have larger national income per capita.

One overseas study they cited found that an increase in the average years of schooling by one year might increase national income by around 5%. That would represent five years of national productivity growth at the current rate of 1.0% per annum.

School attendance matters. In the third term of 2022, only 46% of students attended school regularly. Failing to fix the attendance problem lets kids down and holds the country back.

Even so, increasing years of schooling only helps if students are learning more. Improving pupils’ cognitive skills is what counts.

Data from the OECD’s Programme for International Student Assessment (PISA) show a continuous decline in New Zealand pupils’ average level of educational achievement since the programme began in 2000. In 2020, its statistics indicated that the average mathematical knowledge of a 15-year-old New Zealand student now equates to that of a student aged 13 and a half 20 years earlier.

The 2020 Progress in International Reading and Literacy Study placed our year 5 (that is, age 9 years) students last among all English-speaking countries and 24th out of all 26 participating OECD countries.

In addition, the drop in the achievement levels of year 9 students (13-year-olds) was the largest since the assessments began in 1994.

New Zealand’s particularly large gap between high and low educational achievers and low achievers is especially concerning.

Adults who lack literacy and numeracy skills live with a devastating socioeconomic handicap. Far too many in New Zealand suffer from this handicap. Far too many students are leaving school with very poor levels of literacy and numeracy.

Most of our prisoners are not functionally literate or numerate. Not enough is being done to teach literacy in prisons. The new government should change that.

On average, students with poor literacy and numeracy will have low lifetime incomes. It is harder for such people to cut their spending when living standards are under pressure.

The New Zealand Initiative has done more than most to draw attention to the failure of our schools to prioritise the most effective method of teaching kids to read and write.

(Educationalists call this method “structured learning”. Applied to literacy, this includes teaching children to learn to associate sounds they already know from learning to speak with written letters of the alphabet.)

On a happier note, the Ministry of Education is now moving to put more emphasis on teaching children to read using phonetic building blocks rather than a less intuitive ‘whole word’ approach.

Kids are our future. Government determination to lift school educational attainment is vital. This is about spending better rather than spending more.

To read the article on the NZ Herald website, click here.

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