The global pandemic brought about unprecedented disruption in the tertiary education sector as closed borders effectively shut down the international education market, and social distancing requirements led to a dramatic shift to online course delivery. New Zealand’s Universities have adapted to these challenges but are by no means out of the woods yet with cost-of-living pressures, competition from other providers, and the attractions of earning a wage or going overseas all weighing on enrolments.

Domestic student university enrolments are reportedly down 3,000 this year compared with last year. Victoria University have been hit particularly hard, with enrolments down 12%, around 2,600 students, which has contributed to 229 jobs and six courses being axed. Here, we examine why university enrolments might have fallen and whether they are likely to recover.

People aged 18 to 24 years made up 64% of the domestic student university population in 2022. Estimates from Stats NZ’s Household Labour Force Survey (HLFS) suggest that over the past two years there has been a shift of young people away from solely being in education to being in education and work, or just work. Chart 1 shows that between the June 2021 and June 2023 quarters, the number of people aged 15 to 19 years not in the labour force and in education fell by an estimated 24,600 as the number of young people in employment and education rose by an estimated 21,000, and the number of young people just in employment increased by an estimated 11,800. Among 20-to-24-year-olds, there has also been a decline in the number not in the labour force and in education, but the rise in the number of employed is less clear cut.

We don’t know what type of institution these young people in education are attending and we don’t have 2023 enrolment data for other parts of the tertiary education sector such as Te Pūkenga or Private Training Establishments. Although, there have been widespread reports that Te Pūkenga enrolments declined in 2022.

We can make an educated guess and say that people not in the labour force and in education are more likely to be attending a full-time, classroom-based course – the kind that tends to be offered by universities. People in education and work are more likely to be in workplace-based training (and perhaps attending a polytechnic part-time) This isn’t at odds with reports of falling Te Pūkenga enrolments. Our understanding is that the workplace-based course provision at the new mega-poly is flourishing but classroom-based provision isn’t.

It's generally accepted that tertiary education enrolments tend to fall when the labour market is creating plenty of job opportunities. In recent years, the New Zealand labour market has experienced strong employment growth and deep skill shortages. Wage growth has also picked up, both in response to skill shortages and to keep pace with cost-of-living pressures. Indeed, those cost-of-living pressures may have made full-time education an even less attractive option with universities and students’ associations warning living costs are hitting students especially hard this year.

So, for many young people, the attraction of earning a wage and gaining work experience and/or training outweighs the benefits of sitting in a classroom. For employers, schemes such as Apprenticeship Boost have made taking on an apprentice more financially viable.

School leavers are a key part of the university student pipeline. The number of school leavers doesn’t seem to be a factor in lower university enrolments. The number of school leavers depends mainly by the size of the school roll, but it can also be influenced in the short-term by the year in which young people choose to leave school.

We don’t yet have school leaver numbers for 2023, but 2022 saw continued recovery in their numbers, with almost 64,500 people leaving school, up from a recent low of just over 59,400 in 2020 (see chart 2). It looks like a number of young people in years 11 and 12 postponed leaving school in 2020 when measures to restrict the spread of COVID-19 were affecting workplaces and tertiary education institutions.

Looking ahead, the cohort of students that will reach year 13 in 2024, looks to be slightly smaller than this year’s year 13 cohort. There are currently just over 53,300 students in year 12 compared with just over 54,600 year 12 students last year.

A bigger concern for universities is that 2022 saw a drop in the proportion of school leavers attaining the University Entrance Award. With the exception of 2020, a steady 41% of school leavers have attained the University Entrance Award since 2015. However, in 2022 the proportion dropped to 38%.

This year we have also seen a resurgence in the number of young people going overseas. In the year to June 2023, 5,800 15-to-19-year-olds and 12,300 20-to-24-year-olds departed New Zealand as long-term migrants, which marks a return to the kinds of numbers we were seeing pre-COVID, particularly for 15-to-19-year-olds (see Chart 3). What remains to be seen is how long this resurgence will last and how high it will go. Some of the recent uptick is most likely pent-up demand from when people were prevented from going overseas by the closure of New Zealand’s borders. We are forecasting this pent-up demand to have largely run its course by the end of this year Following this surge, we expect a weaker labour market will see migration will settle back to something a little below pre-COVID levels.

Projected growth in the number of young people will be driven by net inward migration so won’t necessarily support university domestic enrolments in the future. However, population participation rates have been increasing.

Based on our population projections, we expect the number of 18-to-19-year-olds to increase 15% between 2023 and 2032 and the number of 20-to-24-year-olds to increase 17%. However, these rises are expected to be driven by net inward migration rather than natural increases in the domestic population, so they most likely won’t translate into increases in domestic student university enrolments.

Historical increases in university participation rates, if they continue, are a cause for optimism. In 2022, 22% of people aged 18 to 19 years were participating in study at a university. This proportion has been increasing steadily from 16% back in 2003. A similar trend can be observed among 20-to-24-year-olds. The proportion participating in study at a university has risen from 19% in 2006 to 22% in 2022.

So, demographic trends are not necessarily on the universities’ side. School leaver attainment is a concern, competition for students is fierce within the tertiary education sector, and all tertiary education providers are competing with the attractions of going overseas or entering employment. COVID-19 has highlighted the need for a more sustainable funding model for universities, whose financial reliance on international students was laid bare when New Zealand’s borders were closed.

Is it also time for universities to consider the attractiveness of their offerings? Are their courses relevant to changing skill needs in the job market? Should universities be increasing opportunities to combine classroom-based learning with work experience? Are their course delivery options flexible enough? And should they be offering more of their courses in smaller, bite sized modules such as micro-credentials? These are the questions that other parts of the tertiary education sector are grappling with. Universities should be no exception.