Declining PhD student numbers are a warning sign for NZ’s future knowledge economy

The decline in the number of doctoral candidates at New Zealand universities is a worrying sign for the country’s effort to build a knowledge-based economy.

Aotearoa New Zealand’s economic trajectory has long been characterised by its reliance on primary commodities, such as unprocessed forestry exports, where high volume and relatively low value are common.

Successive governments have recognised the need to shift towards a more knowledge-intensive economy – one that fosters innovation, higher productivity and greater value.

This transition is not only about economic growth. It also carries an implicit social contract promising improved living standards, better public services and support for vital societal outcomes.

But over the past two decades, New Zealand has fallen short when it comes to diversifying its national income and cultivating a high-value, high-knowledge workforce.

This is particularly the case when it comes to funding higher research degrees and doctoral graduates – the very individuals we need to drive our future high-tech industries.

Funding squeeze

Studying at a postgraduate level in New Zealand has been financially draining for many students.

In 2013, eligibility for student allowances was removed for students studying above the honours level. Students had to be financially independent, borrow or receive a stipend (an annual scholarship from a university for a period of study) for masters and doctoral-level research.

And while universities spent NZ$82 million on scholarship stipends for doctoral students in 2022, government funding per student across all levels of study has declined by 16%. At the same time, university costs have typically increased by around 1.4 times the consumer price index.

University funding for doctoral stipends has been largely static (and crucially declining in real terms) over the past eight years. In 2021, the average doctoral stipend was less than the minimum wage.

Funding for the Centres of Research Excellence (CoRE) and the Performance Based Research Fund (PBRF) – sources of financial support for researchers – has also been largely static since 2016 and 2018 respectively, with a consequential decrease of 19% in real dollar terms for both since 2019.

Last year, all of New Zealand’s universities increased the value of doctoral stipends. But the higher stipends are being drawn from the same static funding sources, making it more difficult to increase the number of doctoral students.

In fact, the number of doctoral students has declined since 2019 due to funding pressure. This 6.6% decline between 2019 and 2023 contrasts with the slight 1.3% increase in Australia between 2019 and 2022.

The economic value of higher education

The decline in doctoral students is a bellwether for the health of New Zealand universities. But, more importantly, it is diminishing and delaying the prospect of the country growing a “higher knowledge and value” economy.

There’s a strong correlation between a country’s per-capita gross domestic product and the number of doctoral graduates residing within its borders. According to research from Universities New Zealand, a 10% increase in higher education research spending would eventually increase GDP by 1.75% to 1.84%.

New Zealand is not investing anywhere near enough in higher research degrees and doctoral graduates, especially if we want them to be the core of a future high-tech workforce.

Building back better

All is not lost, however. The current government has commissioned two parallel reviews of the science system and university sector. Review recommendations will be released in the coming months.

If the reviews call for more money, the government will need to weigh these up against other investments, such as in health and infrastructure.

However, New Zealand’s university sector must not fall again into the trap of benign neglect and unintended consequences.

To secure the economic future, the government must prioritise funding for higher research degrees, incentivise doctoral studies, and nurture the next generation of experts and innovators. Only then can New Zealand move toward a high-value, high-knowledge economy – one that fulfils the promise of improved living standards and robust public services.