Peter Lyons: Why we need to reinstate night school

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The celebrations and street parades after the announcement of the Government's budget surplus a few weeks ago have died down ... and Labour has said it will reverse one of the forgotten casualties of this budgetary milestone if it gains power.

In 2009 the Government cut funding for adult community education classes. It was an easy target, as adult community education lacks the lobbying power of the tobacco, alcohol and gambling industries. As a result there was little organised public opposition.

The sad thing was that the costs involved were tiny compared to the economic and social benefits that these programmes generated.

At the time, 212 schools ran evening classes. This has now fallen to around 20 schools. The funding cut in 2009 was about $12 million a year - a tiny fraction of government spending on the 2011 Rugby World Cup or the various America's Cup campaigns.

It is easy to dismiss evening classes as a diversion for middle-aged folk escaping the tedium of endless reality cooking shows. But these classes were more than yoga for the aged, or creative writing for potential JK Rowlings. They provided a cost-effective retraining option for many people. This provided enormous benefits to our economy in upskilling people to increase their potential productivity.

A PricewaterhouseCoopers report said the benefit of adult education to the New Zealand economy was about $4.8 billion. The report concluded that every direct dollar spent produced a $16 gain to our economy. These cuts to funding for evening classes displayed a twisted sense of economic priorities.

To understand why there are such large economic benefits in funding evening classes it is necessary to appreciate an economic concept called externalities. These are spillover costs and benefits to a society of a particular activity. Evening classes provided large spillover benefits to our economy through the low-cost, easy access, retraining opportunities they provided.

In 1996, I was teaching in Warkworth. At the start of the year I was rung by the evening class co-ordinator at Orewa College. She desperately needed an accounting tutor for an evening class starting that week. I reluctantly agreed to take the class for the first term until a permanent replacement was found.

There were 10 students. They included several single mothers on the DPB eager to learn a new skill. There was a guy with cerebral palsy in a wheelchair. I ended up taking the class for the entire year.

By the end of the year the number had dwindled to seven students, which was not a bad attrition rate given my skills as an accounting teacher. All passed the final exam. For most of them it was their first success in an external exam.

It is not difficult to do the maths on the potential wider economic benefits of one of these students furthering their study in accounting. If one of those ladies on the DPB carried on to complete an accounting degree she would have an earning capacity of at least $70,000 per year. Over a 30-year working life, this would total an extra $2.1 million in GDP for the economy.

If the additional savings of not having to pay her the DPB or unemployment benefit are factored in, the net gain is even greater. Remember the saving to the Government of cutting evening classes was just $12 million a year.

A further factor overlooked in the demise of community education is the benefits to civic society. It gets people out of their houses and mixing with others. They are also acquiring skills and developing talents in the process. It adds to what is referred to as social capital.

Either someone in Treasury has failed to do some simple cost-benefit analysis or the Government's MPs don't mix with those who might attend evening classes.

These classes were not just for those wanting to increase their flexibility or make prettier cake toppings. They were an extremely cost-effective means of providing entry access to new careers. Cutting funding for them was bad economics and even worse social policy.

Peter Lyons teaches economics at St Peter's College in Epsom and has written several economics texts.