For someone with a hammer, everything looks like a nail, they say. For politicians, large-scale restructuring and reorganisations are sometimes that hammer. No matter the nature or cause of a problem, the hammer will fix it.
Or maybe not. Not every problem is a nail. In some cases, tools more sophisticated than a hammer are needed. New Zealand’s vocational education sector is one such case.
It is laudable that the government has put reforming New Zealand’s underachieving vocational sector on the political agenda. Experience from abroad shows how dual education, where students split their time between working and classroom, can help put young people to work. It also provides an option for those who do not want to be stuck in lecture halls for years before entering the labour force and prefer to stand on their own feet early in life.
One of the reasons for a lack of trust in industry-based training is its failing structure. When Education Minister Chris Hipkins presented his reform proposals on August 1, he identified several problems in this regard, and most were sound.
Today, the roles of school-based and industry-based education pathways are unclear and at times overlap. As a result, gains from specialisation are lost, and students and employers alike end up confused about what to expect from courses.
The minister heard industry concerns about poor skills matching for both industry and school-based pathways. Labour market statistics for the youth show this clearly. Of all OECD-countries, only the UK has a higher ratio of youth to middle-aged unemployment; New Zealand’s high youth minimum wage also does not help.
Further, the minister was right to say the structural deficits of some publicly owned institutions would no longer be acceptable. With an extra $100 million already injected into these institutions, the government needs to think of a better business case or a shut-down procedure for them.
Unfortunately, some of the core reform proposals are standing on shaky ground, and some of the main difficulties that the government identified were not addressed.
Take, for example, the creation of a monolithic New Zealand Institute of Technology planned for 2020. Merging the 16 existing institutes of technology and polytechnics into one is meant to deliver substantial economies of scale. Running one back office instead of several is expected to be cheaper and reduce duplication. Overall, efficiency gains from the merger are estimated at $224m to $386m.
But the government’s Regulatory Impact Statement warns those efficiency gains have only a low probability of materialising. The minister has been advised by a review panel that the numbers are indicative at best. And the attempt to calculate possible gains over a 30-year period does not make it more trustworthy.
Any gains from the merger might quickly be nullified by costly side effects. Policymakers and their advisers should know about managerial diseconomies of scale, too.
After all, management tasks in a big institution can grow disproportionately, controls and accounting procedures become more difficult and decision-making gets more complicated. Sound strategies become difficult to work out, let alone implement.
Hipkins also proposed that the head office of the newly formed institution need not be based in one place. Economies of scale become even harder to imagine like this.
Also, factors that made for the success of vocational training abroad do not seem to have been appropriately considered in the reform proposal. In Austria, Germany and Switzerland, most young students choose some vocational pathway. They do so not for lack of alternatives but because they see it as the best of different options to kickstart their professional career.
One reason for the popularity of vocational pathways abroad is the broader range of jobs available, including white-collar jobs.
Another is that different pathways have to constantly prove they can satisfy all stakeholders. Companies, for example, work hard to set up a curriculum that enables their apprentices to progress in their career, encourage further studies after the apprenticeship and offer promotion opportunities later. Only then are they able to convince the best students to work with them.
The current proposals in New Zealand ignore the purpose of competition between different types of vocational education. By unifying all New Zealand’s various types of vocational education institutions under one umbrella organisation, this country is moving further away from a dynamic system that matches the needs of students and the industry alike.
Before the minister starts restructuring the system, he needs to figure out how to make it more attractive for young people and increase contact between the educational sector on industrial needs and learners. In the meantime, it may be wise to put the hammer to the side.
Upcoming research from The New Zealand Initiative may help redraw the construction plan and choose gears more appropriate for the job.
If not, the reform proposals may very well be a colossal waste of time and money – and drive the final nail into the coffin of New Zealand’s struggling vocational education system.
Natanael Rother is a research fellow with The New Zealand Initiative.