Universities may soon have to ensure students not only perform well but also get a job after they graduate if the institutions want to secure funding.

Tertiary institutions are funded on how many students they enrol but that is changing over the next two years to a performance-based model.

Tertiary Education Minister Steven Joyce says part of the new model includes setting performance targets that focus on course and qualification completion.

Ultimately, he would like to take things a step further by linking employment outcomes to the performance-based model.

That means funding for a university or polytechnic would be in part based on how many of the previous year's students found work as a result of their qualification.

Mr Joyce said he was floating the concept because there were still a lot of challenges to work out, such as how the employment data would be collected and measured.

However, he believed it would help students decide what courses to take and to know what to expect after graduation.

"Ultimately, I want to see funding linked to employment outcomes, not just internal benchmarks.

"This will send a strong signal to students about which qualifications and which institutions offer the best career prospects - and that's what tertiary education has got to be all about."

The suggestion has had a mixed reaction, with most opposing it, saying institutions will be forced to shift their focus to qualifications with the best employment prospects.

Tertiary Education Union national president Tom Ryan said linking funding to employment rather than academic outcomes was a dangerous path.

"The risk of this approach is that institutions which can get students to take cheap, quick qualifications with good short-term employment prospects are likely to be much better rewarded," he said.

"Meanwhile, those which maintain higher academic standards but are teaching students about issues and subjects that may not have immediate application to students' employment prospects could suffer."

Dr Ryan said while providing job skills was important, it was only one aspect of a broader tertiary education. "It would be a shame to see institutions being encouraged by Government to water down their commitment to teaching and research programmes that explore social and cultural and other dimensions that can not show immediate economic or employment outcomes."

Union of Student Associations co-president David Do agreed, saying people studied for various reasons, not all of which were based around getting a job in that field.

New Zealand Vice-Chancellors chairman Derek McCormack said there was nothing wrong with reminding people that higher education needed to take into account graduate employment outcomes, but it would be a bad idea to link that to funding.

He said the suggestion implied universities were falling down in this regard and that wasn't the case.

"The evidence we have is that graduates from New Zealand do well in employment, whether that's in terms of income or in terms of their employability."

But the Industry Training Federation says employment outcomes are highly relevant for industry-related vocational education and training qualifications.

Federation executive director Jeremy Baker said more than half of all tertiary education and training qualifications could be clearly and directly linked to industry and occupational purposes.

Another quarter of all qualifications are vocationally oriented, but have application in a broad range of sectors and occupations.

"For all of these programmes, measuring the employment success of education and training is extremely important," he said.

Labour's tertiary education spokesman, Grant Robertson, said it was "potentially very dangerous to move to a focus that's exclusively about employment".

* 68.7 per cent of domestic students were working fulltime.
* 16.6 per cent were in part-time work.

Source: NZ UniGradStats 2008