A generous subsidy championed by the beneficiaries

Reading the Herald over lunch, I chanced upon a story under the headline $50m PhD subsidy pays off.   That is the $50 million per annum subsidy put in place more than a decade ago that allows foreign PhD students to study at domestic fees (apparently a saving for them for more than $30000 per annum each), allows full domestic work rights for them and their partner, and free access for their children to New Zealand public schools.

The story says it is based on a new report from Education New Zealand.  Education New Zealand, of course, is not exactly a disinterested party.  It is the government agency that champions the export education industry.  In their own words

ENZ is New Zealand’s government agency for building international education. We promote New Zealand as a study destination and support the delivery of education services offshore.

But I went looking anyway and found the new report.  They got a research firm to produce it for them, not (as far as I could see) involving any new research themselves.

There didn’t seem to be a great deal in the ENZ report on the PhD subsidy scheme, but there was this

Since the introduction of the PhD policy in 2005, the number of international PhD students has increased, and now makes up 45% of all PhD students. Berquist (2017) finds indicators that suggest this policy has been effective, such as an increase in New Zealand’s research output, with the rate of citation of New Zealand research rising from 0.96% of the world average before the strategy, to 1.26 times the world average for 2010-2014. The academic impact of research from New Zealand is also rising; and at a rate faster than Australia. In addition, all eight New Zealand universities are now in the top 450 of the QS world university rankings, compared to three in 2005.

That sounded quite good –  to be perfectly honest I didn’t have any strong priors on the merits of this programme –  but it did leave me wondering why, if it was such a good deal for the universities, they didn’t just price PhD products this way themselves, rather than turn to the taxpayer for more subsidies?

Here was what the Herald article reported the university lobby as saying

Universities NZ director Chris Whelan said the subsidy gave NZ universities an advantage over their overseas counterparts.

“We don’t know of any other jurisdiction that does it,” he said.

“Lifting rankings has a flow through to our ability to recruit students, and our ability to recruit world-class academics, and our ability to collaborate with researchers overseas.

“It’s this that is really strongly contributing to the rankings of a university like Auckland and feeding that virtuous cycle which works to attract more international students.”

The fact that no one else runs a programme like this should probably be a red flag –  the more so, as it is now 13 years since New Zealand introduced the subsidy.  Call it marketing spending, or whatever other label you like, but if the university lobby is right surely there is no reason for them not to fund it from within their own resources: their own argument is that it generates a virtuous circle for them?

But I was still curious about the evidence in support of the claims.  In that ENZ quote there was after all a reference to “Berquist (2017)”.  So I tracked that paper down.

It turned out not to be journal article or anything of that sort, but a paper that had been given at a conference in Australia a year or two ago.  Which might be fine, except that as I flicked to the end of the paper it showed the author

Brett  Berquist,   Director  International,   The  University  of  Auckland

In fact, his entire career seems to have spent in doing/promoting/facilitating international education.

I’m not here to criticise Mr Berquist. He has a job to do, and a business to promote, and may well do it very effectively.  He just wrote a conference paper; it was ENZ that chose to use it as the evidence for the effectiveness of this (really quite large) subsidy scheme.  All that said, Mr Berquist didn’t exactly bring a detached “academic” tone to his conference paper.

In  our  international  education  industry,  where  many  people  have  chosen  this  line  of  work  from  a   deep  personal  conviction  or  experience,  we  sometimes  seem  to  assume  that  the  general  public   shares  our  logical  views,  even  if  they’ve  not  had  our  personal  experiences  of  what  a  powerful   and  beneficial  force  international  education  can  be.

Subsidised industry =  logical views.  Anyone sceptical, presumably not so much.

I suspect there are plausible arguments to be made on both sides of this particular issue.  It is plausible that by means of this subsidy we end up attracting to stay some highly-skilled and innovative migrants who otherwise wouldn’t have considered New Zealand.  But even if so, we really need a proper cost-benefit analysis, because the upfront cost per person isn’t small and (according to the paper) the typical person finishing their PhD on this programme is already in their 30s.  On the other hand, there is the selection bias problem.  Really able people don’t pay fees to do PhDs at top overseas universities –  in fact, the top universities compete to get these people.  And since New Zealand universities aren’t top tier (even in many individual subjects), and we are offering a cheap programme, with attached work/residence points rights, it might be reasonable to wonder quite what quality the median foreign PhD student we are subsidising is.   I don’t know the answer.  And there might be some foreign students who really prefer Auckland or Victoria to Harvard, Chicago, NYU, Stanford (places young Reserve Bank economists have gone off to do PhDs at) or Oxford or Cambridge.     But, for now, we don’t seem to have the evidence.   It would benefit everyone –  well, perhaps not the universities –  for such in-depth research to be done by independent rsearchers.

I’m also a little puzzled about the reported cost of the programme.  The Herald article says

Numbers have leapt from less than 700 in 2005 to 4475.

The subsidy means doctor of philosophy (PhD) students at the University of Auckland pay only $6970 a year, the same as domestic students, compared with $39,529 for international doctoral students in education, fine arts, music and clinical psychology.

Nationally, the subsidy is budgeted to cost $50m in this financial year.

But if we now have 4475 foreign students doing PhDs, and are subsidising them each $32559 (on these Auckland numbers), that seems to multiply up to about $145 million per annum.  (And some of them would have been here anyway even without the subsidy –  arguably the better ones, for whom it was worth meeting the cost or who could earn the university’s own scholarships?)  And any domestic school fees, for those with kids, is on top of that.

Whatever the answer to that particular issue, for now one would have to say of the subsidy programme “case not proved”,  and take the Herald article with a considerable pinch of salt.  ENZ is probably always just going to produce as much propaganda as it can get away with, but I wonder if The Treasury has attempted a proper evaluation of the programme?


10 thoughts on “A generous subsidy championed by the beneficiaries

  1. Silly me. Last week having just rented my Huntly property for $410 a week and a couple of months ago my 45sqm Mt Eden property for $530 a week and feeling quite comfortable, I offered to cover my daughter’s Student loan thinking that it would be only $30k – $40k for the 5 years completion of a conjoint undergraduate double degree. Fell out of my chair when she told me that she had racked up $70k in student loans which I have now unwittingly promised to pay off.


  2. And meanwhile, NZers who want to do postgrad study later in life at home get pretty much no help at all unless they are amongst the lucky few to score a scholarship.


  3. I have met a couple, both with Masters from Portugal, who have been accepted for the PhD program in Auckland, where their department has a very good international standing. They told me horror stories about tertiary education and subsequent employment in Portugal. They will be working on research with children, and their project looked to have real benefits for us while they complete their PhDs. That may take some time, as they still have to pay the $7k a year fee and work to earn this and support themselves, They will be in their thirties when they finish, certainly. Apart from the cited benefits to research output and university rankings they might deliver, it seems to me more benefit might be gained if they and the thousands like them, stayed here, as they surely define a skill level. It would be good to know what the residency statistics are for subsidised PhD students under this program.


    • I’m sure there are many worthwhile people on the programme. I don’t know the numbers – eg how many are still here (say) 10 years after competion – but if suppose it was a third, we might have spent $300000 per long term migrants (3 years study each x $30000 subsidy per year x 3). Certainly would put the cost of the old assisted migration programmes in the shade……

      Perhaps the numbers are less bad than that. If so, it would be good to have a rigorous study to show it.


  4. We shouldn’t be encouraging PhD students to study in NZ for their sake. PhDs are not worth the financial investment for students. PhD students are generally exploited and there are little chances of an academic career.
    That is why research-based post-graduate degrees in Australia are practically free for locals but for course-based Masters degrees, locals in Australia pay the same fees as international students.


  5. PhD Subsidies

    Interpret this paragraph from the Herald Article
    “The subsidy means PhD students at the University of Auckland pay only $6970 a year, the same as domestic students, compared with $39,529 for international doctoral students in education, fine arts, music and clinical psychology”

    Does this mean
    (a) the subsidy scheme is only available at Auckland University?
    (b) students in education, fine arts, music and clinical psychology can’t get the subsidy? or
    (c) they can get it

    What would be most revealing is the distribution of International Students across the various faculties compared to how many are studying the earth sciences ie dairying and grass systems and land management and cattle health at say Massey and Lincoln where we should be world leaders

    Or is it simply a case of bums-on-seats

    What do we achieve by elevating fine arts and music and clinical psychology numbers

    Meanwhile we subsidise international PhD education students while we have a desperate teacher situation



    • The scheme operates at all universities. i’m not sure why Simon Collins used those particular disciplines in his piece, but the subsidy also seems to apply to all subjects.


  6. The political drive for research degrees is an assumption that it will improve economic growth (i.e., innovation led by formal research). But the increase in academic publications (a classic case of the indicator becoming the goal) is not matched by any significant growth. Post-doc funding was rather dismal and many could not find research jobs (this may have changed, I left NZ 2 years ago).

    As for the rankings farce, some institutions rise up the ranks by capturing more of what they were already doing (people are employed to manage all this). Lincoln leapt many places whilst disintegrating (losing staff and students). Many governments evidently direct their citizens (presumably by subsidizing them) towards institutions ranked in the top 300.

    As for PhDs leading to an academic career, this has been exposed as wildly optimistic with many more grads than jobs (and jobs in universities at the lower levels are very very demanding and not at all secure).

    And you are very polite Mr Reddell; the incestuous justification of the policy would be considered intellectually corrupt in any true/robust academic debate.


    • Thanks for those comments.

      I didn’t want to be automatically very negative on anything to do with NZ immigration, and vaguely recall that when the policy was first put in place back in 2005 it sounded reasonable to me. But the more I’ve reflected on the issue in the last 24 hours, probably the more negative I’ve become.

      Of course, gains from getting a PhD don’t just flow from getting jobs in academe, so some of these people could still end up making quite a big contribution (albeit at quite an upfront taxpayer cost). But I’m left wondering whether for some people enrolling for a PhD might just be a path towards residency, rather than the product (the degree) they really want. With full work rights for a partner, that person could pick up a job here – with no labour market tests – earning points to a residence visa. The $7000 a year PhD fee might be a relatively modest price to pay in some cases for getting a foot on the ladder.


  7. PhD science programmes emphasise innovation at its most complex – genomics, molecular biology, advanced materials, computing – and in this the research leaders (usually based in the richest countries) can pick and choose their people. Sure there’s some exciting stuff happening in NZ but it’s a market like any other, and NZ will struggle to compete. There is a ‘life style’ factor, and Auckland still looks like a pretty nice city compared to many main cities. But if that’s a factor it would tend to support the argument that this is as much about residency as focusing on a PhD. I don’t blame any individual for taking this route, as I’m sure you don’t. But like the wider migration policy, it seems to avoid any serious examination.

    Liked by 1 person

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