Yeah, I didn’t understand as much of that as I would have liked. What I do know is that tertiary education spending has increased a great deal over the last 20 years and I don’t see economic growth above long term averages that can be attributed to either the spending or the output of qualifications. Sooo, there might be an inverse relationship between tertiary education and economic growth.

Of course I can’t say what might have happened wihtout the spend/ increase in quals . . .

Thanks Matt – I am aware of the inputs issue, but if you read the last sentence of the Stats NZ quote, they do seem to address the relationships between inputs and outpiuts, and therefore productivity. And on p.11 of that release, labour composition makes a pretty small contribution to productivity growth. Happy to be corrected tho, as you know a bit more about it than me

Darel, tertiary education achievement certainly hasn’t led to high productivty increases but I’d be even more worried if it went the other way!

There might be a highly speculative argument for saying tertiary education has led to productivity decreases. It would have to about crowding out capital and technological investment. I don’t feel inclined to look at it but haven’t the NZ Institute done some recent work on this and I remember some Treasury Working papers that might certainly talked about this topic, but in the context of labour investment, not skilled labour investment.

The excellent DoL/ITF report of 2008: The Skills Productivity Nexus makes the point that productivity results from the aplication of a number of factors, skills and capital intensity being just two. The key point the report makes is that any one intervention on its own is likley to be ineffective in raising productivity.

Hi Dave,

“composition-adjusted productivity is growing slower than the other productivity measures”

This really just tells us that, when we measure the labour input properly labour productivity growth is weaker than the headline number suggests.

So in this case we know that average skills are rising, but this isn’t being taken account of fully by other measures. When we do include this in the “volume of the labour input” we have a greater labour input, and so the output per unit is lower.

It doesn’t tell us anything about relative industries, it is just a measure that gives a truer representation of what the labour input is.

In essence this measure is saying:

“skills are rising, skills create value, therefore if output is unchanged the output per skill unit is declining”.

A measure that doesn’t take this into account will overstate labour productivity – that is all this comparison is telling us. It is not telling us about the relative return to different skill sets.

Matt, I think we’re agreeing. Once we adjust labour inputs for skill levels, labour productivity is lower. I recognise that that doesn’t mean that tertiary education is a waste of money (for some of the reasons you and others have raised) but it’s worht looking at further.

Dave, even if labour input is adjusted for quality, it would seem reasonable to expect some higher outputs from higher skilled people.

OK Matt, I shall bow out – thanks for the clarification

“Are they really completely “apples and oranges”, Matt? Or is the difference between the labour-volume measure and the composition-adjusted measure the estimated contribution of increased skills to productivity?”

Apples and oranges are still types of fruit, they are just different

The difference between the two gives the minimum contribution to productivity of the increase in skills in NZ. It is the minimum, as some of the contribution is implicitly captured in other measures.

The main point is, these are just different ways of measuring a “labour unit”. We have to define what we want to know before we can decide which measure to use, as the “labour unit” in each case differs. That is what I meant by the apples and oranges thingy.

Ultimately, I would be cautious using productivity stats to account for anything to do with policy. Productivity statistics are notoriously random, so I would try to avoid reading much into them.

The labour quality adjustment uses qualifications as a broad proxy for skills. One of the things it doesn’t take account of is whether the increase in qualifications comes from domestic tertiary education or from skilled migration.

A lot of our recent growth in working-age people with degrees has come through migration. The research on migration is fairly clear that migrants take anything from 5 to 30 years to attain the same level of income and employment as native born residents – which you could also read ‘to be as productive as’.

So there is another question behind these statistics on the effect of relying on skilled migration to fill skill gaps, particularly on short-run productivity.

“Tongue-in-cheek” – ask the next taxi driver you see.

More seriously, perhaps a better way to phrase the question, Jim, is “why does it take so long for qualified migrants to adjust in New Zealand?”

The research indicates a range of factors including English-language ability, lack of recognition of overseas qualifications and employer discrimination all play a role See: http://www.educationcounts.govt.nz/publications/tertiary_education/55973/1
and:
http://www.educationcounts.govt.nz/publications/tertiary_education/70347/70350

While these factors are all well documented (with varying degrees of evidence), the question that remains as to how could NZ better utilise large number of skilled people who have arrived here in the last 10 years to raise productivity?

Sorry – I don’t have a ready answer to that one.