Human Capital and the Inclusive Economy

This paper draws on recent empirical evidence to look at how human capital policies in New Zealand can achieve "Inclusive Economy" objectives. In particular it looks at evidence on policies that are best to promote growth, and to improve the distribution of well-being; whether they are the same, and the extent to which they involve trade-offs. Compared to other OECD countries, New Zealand appears to have relatively high rates of participation in tertiary education, and at least average performance on measures of achievement amongst school students. Nevertheless, in common with other English speaking countries, it tends to have a relatively wide dispersion of skills both amongst school students and in the working age population. There is some suggestion that New Zealand is not making as much progress as other countries (Australia in particular) in raising skills among the less able, in new generations of school leavers. Taken over all, the paper suggests a two-pronged strategy. Firstly, policies should aim to increase the incidence of world-class tertiary education and research relevant to industry. Given already high levels of public and private investment in tertiary education, this should involve redesign of institutional and funding arrangements, rather than large amounts of extra public resources. Secondly, policies should aim to raise the skills of the less able entering the workforce. Interventions in early childhood and primary schooling are likely to be most effective in the long term - though, given the current large stock of low skilled adults, a continuing search for effective working-age interventions to address this will also be worthwhile.