Cash towers — varsities are big earners

The nation’s eight unis have combined expenditure of $3.5b and export earnings of $1b a year

New Zealand’s universities are economic engine rooms, making a significant contribution to our economy. That may come as a surprise to many who still think of universities as they were back in their day, or may dismiss them as irrelevant ivory towers.

So what do they look like today? Student numbers have increased significantly, reflecting population growth and increased demand for a university education. Between them, the country’s eight universities are educating 172,000 students, 30 per cent at postgraduate level.

Collectively, they employ 20,000 fulltime equivalent academic and other staff — nearly 1 per cent of New Zealand’s workforce. NZIER research estimates that universities generate an additional 3000-4000 jobs in the wider economy.

Last year the combined expenditure of all eight universities was $3.5 billion, which is roughly equivalent to that of the Auckland Council. Both directly and indirectly, universities contribute about 1.2 per cent annually to the economy.

So where does their money come from? About 42 per cent is from government tuition grants (using the “bums on seats” model), 28 per cent from student tuition fees, and 30 per cent from universities’ research, commercialisation and other revenue.

As the universities are spread across six regions, each also makes a significant local impact. For example, the University of Otago is the country’s second largest university and one of the largest employers in the South Island. Its latest economic impact report found the Dunedin campus injected an estimated $881m directly into the economy through spending by the university, its staff and its students.

In addition, its campuses in Christchurch and Wellington each contributed $51.9m and $50.5m to their respective economies.

Economic modelling estimated the trickle down or down-stream effects of direct spending and showed that the total impact of hosting a campus in Dunedin alone added a staggering $1.55b to the city’s economy, supporting directly and indirectly 13,902 jobs.

As well having a national and local footprint, universities are also a significant player in the “export” education industry. Many are surprised to hear this is New Zealand’s fifth largest export earner, generating $3.5b annually — more than double the value of the wine industry and the seafood industries respectively.

Universities are the largest contributor to this, generating over $1b annually and creating an estimated 3700 jobs for New Zealanders.

How do they do this? Each year about 26,000 international students are attracted by their strong international reputation. Few New Zealanders appreciate that we are probably the only country to have all its universities ranked in the top 3 per cent (500) of universities in the world.

Universities also play a critical role in research and development. They employ three-quarters of the country’s active researchers and have the second largest R&D spend after businesses, at over $800m a year. Much of this knowledge is shared freely and contributes to groundbreaking advances in many areas, including health, environment and the primary sector.

More and more universities are commercialising their research; today their commercialisation earns about $500m a year or 15 per cent of the total university income.

In 2014 alone, the University of Auckland generated $234m in research and contracts income. Its knowledge transfer company, UniServices, produces over $135m per annum, surpassing any similar operation in New Zealand and Australia.

To give an example, a team at the University of Auckland pioneered innovative wireless electric vehicle charging technology. They were the first in the world to make power jump efficiently and practically across air from one object to another by intersecting two magnetic fields. Inductive power transfer technology is now key to a licensing agreement between Qualcomm and Lear Corporation, to commercialise systems particularly for plug-in hybrids and electric vehicle manufacturers.

Their wider aim, to refine the technology to enable drivers to charge up while on the move, will revolutionise the viability of electric vehicles.

But finally, let’s not overlook the very real impact of 34,000 bright, energetic university graduates entering the workforce each year. New modelling from Australia shows that having more university graduates in the economy creates new jobs and lifts wages for workers who don’t have a degree.

The impact of new graduates joining Australia’s workforce lifted wages for workers without a university degree by A$12.60 ($13.27) a week or A$655 a year. Our own research shows that New Zealand graduates earn about $1.4m more over their working lives than a school leaver. Of these graduates, 97-98 per cent are employed, pay higher taxes, are healthier and less likely to commit crimes or use welfare. In short, they have a much lighter footprint on the public purse.

Graduates also play a very important role in our communities. They are more likely to vote, they’re active in their communities and their children do better in life. And amongst these young grads, are New Zealand’s future thinkers, leaders, and innovators.

So I suggest it’s more than time to drop the old “ivory tower” rhetoric. It’s time to think differently about our universities, and the difference they make to our country.