Employment skills: Filling the gaps in tertiary education

Dave Heatley, Principal Advisor

A version of this article was originally published in the National Business Review.

Around the country, thousands of students are embarking on tertiary study, hoping their qualifications will lead to rewarding jobs that use their newly-acquired skills.

More New Zealanders than ever have some form of tertiary qualification and employers need skilled workers. So with some careful matchmaking, everyone should be happy.

Yet employers report hard-to-fill vacancies, most often because applicants lack the necessary skills or qualifications.

Why is this happening? That is one of many questions the Productivity Commission is investigating in its inquiry into “New Models of Tertiary Education.” Some reasons might be time lags, incomplete information and misaligned incentives.

Universities, polytechnics, wananga and private tertiary education providers make choices about what courses they offer. Prospective students know relatively little about what future employers will need, yet they make choices that will affect the kinds of jobs they can get, demanding courses and qualifications from tertiary providers that increase their future salary and other rewards.

It is this “induced” demand that faces providers, rather than the actual demand of employers. Reflecting low levels of employer-provider interaction, employers typically judge graduates to be a lot less “work ready” than providers do.

The government largely controls the quantity, minimum quality and price of tertiary education. Its choices reflect what it thinks employers will need in the future, recognising that skills help boost productivity.  But government thinking about future demand may not match employer thinking, and the government pursues other public policy goals through the tertiary education system (for example, social inclusion).

Employers know more than anyone else about their own future skills requirements, but by and large they do not share that information with providers, students and government – the people whose decisions determine future skills supply.

An obvious solution would be for employers to contribute that information to help shape student decisions, government policy and course content.

However, it seems that not many employers get involved. As a one-time owner and manager of a medium-sized business, some reasons come to mind:

  • Time lags – it takes some years for students to work their way through tertiary education, and employers are not that sure of their future skills requirements.
  • Bureaucracy – it takes much effort and time to change the contents of a course.
  • Free riding – involvement is costly, but a firm’s competitors will likely share any benefits. Employers may be afraid of wasting their time, energy and money.
  • Recruitment realities – new graduates, while important, are a smaller source of skilled recruits than immigrants and current workers.

These reasons all make sense. However, a skilled workforce is crucial to the prosperity of employers and indeed New Zealand, so increased employer involvement could offer large benefits.

The Productivity Commission, which has just released an issues paper examining these questions, wants to hear what would make the system more responsive to employer needs.

  • What changes to the system would make it more attractive for employers to be involved on an ongoing basis?
  • What are the trends that will determine future skills requirements?
  • What do they mean for the nature of the labour market?
  • What changes to the tertiary education system would maximise its contribution to New Zealand’s future prosperity?

The commission seeks submissions from, and meetings with, employers and employer groups.