review of the skills base in - ipart · all submissions should be sent to: review of skills base in...

Review of the Skills Base in NSW and the Future Challenges for Vocational Education and Training

Issues Paper ______________________ S9-19 ISBN 1 920987 54 1

December 2005

This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism and review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgement of the source is included.

ii

Request for submissions Submissions are invited from interested parties. Unless confidentiality is sought, the submissions are generally available for public inspection at the Tribunal's offices and will be available on-line in PDF format from the time of processing of the submission until 3-4 weeks after the release of the final report of an inquiry. The Tribunal may exercise its discretion not to exhibit any submissions based on their length or content (containing material that is defamatory, offensive, or in breach of any law). Submissions should have regard to the specific issues that have been raised. There is no standard format for preparation of submissions but reference should be made to relevant issues papers and interim reports. Submissions should be made in writing and, if they exceed 15 pages in length, should also be provided on computer disk in word processor, PDF or spreadsheet format. Submissions from stakeholders must be received by 28 February 2006. All submissions should be sent to: Review of Skills base in NSW and the Future Challenges for

Vocational Education and Training Independent Pricing and Regulatory Tribunal PO Box Q290 QVB Post Office NSW 1230

Confidentiality If you want your submission, or any part of it, to be treated as confidential, please indicate this clearly. The Tribunal may include in its publications a list of submissions received during the course of a particular review or inquiry. It may also refer to submissions in the text of its publications. If you do not want your submission or any part of it to be used in any one of these ways, please indicate this clearly. A request for access to a confidential submission will be determined in accordance with the Freedom of Information Act and section 22A of the Independent Pricing and Regulatory Tribunal Act.

Privacy All submissions will be treated in accordance with the Privacy and Personal Information Act 1998. Any personal information you give us will not be reused for another purpose.

The Tribunal members for this review are:

Dr Michael Keating AC, Chairman Mr James Cox, Full Time Member

Ms Cristina Cifuentes, Part Time Member

Inquiries regarding this review should be directed to:

Fiona Towers 02 9290 8420

Stephanie Biesaga 02 9290 8456 Aaron Murray 02 9290 8440

Independent Pricing and Regulatory Tribunal of New South Wales Level 2, 44 Market Street, Sydney NSW 2000

(02) 9290 8400 Fax (02) 9290 2061 www.ipart.nsw.gov.au

All correspondence to: PO Box Q290, QVB Post Office NSW 1230

http://www.ipart.nsw.gov.au/

TABLE OF CONTENTS

1 INTRODUCTION 1 1.1 Purpose of the review 1 1.2 Process for review 3 1.3 Structure of issues paper 4

2 FUTURE CHALLENGES FOR VET 5 2.1 Changes in the structure of the labour market 5

2.1.1 Changes in labour force participation rates 5 2.1.2 Dramatic increase in part time work 6 2.1.3 Decline in full-time employment for males aged between 35 and 54 7 2.1.4 Decline in blue collar work and increase in employment of managers, professionals and services sector workers 8 2.1.5 Link between skills, education and employment 9 2.1.6 Link between education and productivity 10 2.1.7 Number of people who could work more 11

2.2 The ageing population and its impact 12 2.2.1 Impact on dependency ratio 13 2.2.2 Impact on government fiscal positions 14 2.2.3 Impact on labour market 14

3 OVERVIEW OF THE VOCATIONAL EDUCATION AND TRAINING SYSTEM IN NSW 17 3.1 Role of TAFE and other training institutions 17 3.2 Characteristics of the VET system 18

3.2.1 Completion rates and outcomes for VET students 23 3.3 Governance arrangements 25

3.3.1 The National Training Framework (NTF) 25 3.3.2 The Australian Qualifications Framework 26

3.4 Sources of funding 27 3.4.1 Introduction of competition 31

3.5 Recent reform of VET 31 3.5.1 Move away from time-based to competency-based training 31 3.5.2 New Apprenticeships and User Choice 33 3.5.3 User choice 37

4 KEY ISSUES FOR STAKEHOLDERS 39 4.1 Forecast supply and demand for skills in NSW over the next 20 years 39 4.2 Demand for VET if participation rates were to be increased 41 4.3 Managing the cost of VET and increasing its effectiveness 41 4.4 Factors affecting the take-up of VET 43 4.5 Capacity of training system to provide training required over the next 20 years 46

iv

Introduction

1 INTRODUCTION

Vocational and Education Training (VET) is the post-compulsory education and practical training that equips people with skills that enhance their job prospects and assist them in entering or re-entering the workforce, or in re-training or upgrading their existing skills. It does not cover the degree and higher level professional programs which are delivered by universities and other higher education institutions. The Independent Pricing and Regulatory Tribunal (Tribunal) has been requested to undertake a review of the skill base in NSW and the future challenges for the VET system. The terms of reference for the review are as follows. The Tribunal is to consider and report on: • The future demand for skills in NSW over the next 20 years.

• The probable future sources of supply of skilled labour for NSW, including the possible supply from retrained ‘mature’ labour.

• The consequent demands for the further education and training system in NSW and the implications for TAFE in particular.

• The economic and social implications of meeting this increased demand for further education and training in NSW.

• The capacity of the further education and training system to accommodate these demands for skilled labour.

• Changes that should be made to the State-regulated system to assist in meeting future demands, including the State’s regulatory framework and governance structures. Commonwealth-State agreements that have implications for any recommendations should also be considered.

The Tribunal will address these and other key issues in its draft report, which will be provided in July 2006. To assist it in identifying and understanding the key issues for this review, the Tribunal has prepared this issues paper to encourage stakeholder comment.

1.1 Purpose of the review The principal future challenges facing the VET system emanate from changes in the nature of work, and an ageing population that could lead to declining labour force participation unless policies are changed. This review will therefore consider how labour force participation and productivity can be increased over the next twenty years through education and training. The specific purpose of this review is to determine the future demand for skills in NSW, consistent with the achievement of high levels of labour force participation and productivity, and identify what action is required to ensure NSW’s VET system is in a position to support the state’s long-term skill requirements. For more than a decade the NSW labour market has benefited from a sustained period of economic growth. This has led to a substantial reduction in the official unemployment rate to around 5 per cent1. But there is currently a structural mismatch in the NSW labour market. On the one hand, employers are reporting that skill shortages are emerging, which 1 ABS, catalogue number 6202.

1

Independent Pricing and Regulatory Tribunal

could limit economic growth both now and in the future. On the other hand, male employment participation has dropped substantially over the last thirty years, and many people currently employed would work additional hours given the opportunity. For some groups and occupations employment outcomes have been deteriorating. • Full time employment and labour force participation of males aged 35 and over has

been decreasing. This decline in male employment participation is strongly associated with greater inequality in labour market outcomes. It also represents a substantial loss in potential economic output.

• The decline in male participation reflects a decline in the number of traditional ‘blue-collar’ jobs, which has severely limited the employment opportunities for those who have lower levels of educational attainment and skills. As a result the decline in employment participation from age 25 to 55 is largely concentrated among those men who leave school early and/or with no post-school qualifications.

• While female participation rates have increased over the last 20 years, it is still well below male levels of participation. In addition, there are still many females who are currently underemployed.

• Education levels for young people have been improving but there are still many people under the age of 25 who are not studying or employed.

The mismatch currently being experienced in the labour market could worsen in the future as the population ages. The immediate impact of the ageing population will be to reduce labour force participation – simply because people tend to work less as they get older. This tendency will be partly offset as employment can be expected to respond to some extent as labour supply shortages worsen and more people become dependent on a relatively smaller work force. But over time, these market responses are unlikely to induce a sufficient increase in labour force participation. Instead, without policy intervention, the ageing of the population is expected to reduce economic growth and pose increasing budgetary difficulties for both the Commonwealth and State governments2. Therefore, policies designed to lift labour force participation rates in the future are critical to offset the economic impact of an ageing population. There is, of course, a range of policies that affect the incentives and disincentives for employment participation. Retirement income and pension policies may have allowed men to remain withdrawn from the workforce, even where job loss is the direct cause of the recent decline in male participation for older age groups. Personal characteristics and attitudes to work will also explain why some people opt out of participating in the labour market. However, the concentration of the decline in employment participation among men who early school leavers with no post-school qualifications suggests that one of the key methods to lifting employment participation in the future, and resolving the current structural mismatch in the labour market, is to increase the quality and quantity of the education and training provided.

2 Intergeneration Report, Budget Paper 5, Budget 2002-03 and Productivity Commission, Economic Impact of

an Ageing Australia, April 2005.

2

Introduction

Given this key role for education and training in increasing the supply of skilled labour, improving labour market outcomes and, ultimately, raising potential economic growth, it is therefore imperative that NSW’s VET system is able to respond to current and future challenges. The nature and source of these challenges mean that, although schools and universities are key parts of any ‘training solution’, we particularly need strategies for training and retraining adult or mature labour. In turn, this means that the VET system requires specific attention to ensure it can respond to the special training needs of adult labour. It will also be important to ensure that the training of young people adequately equips them to readily adapt and learn new skills as technology and patterns of demand continue to change more rapidly than historically. In sum, the review needs to consider the policies involving VET that will ensure sufficiently high levels of employment participation so as to eliminate the potential problems posed by an ageing population in the next twenty years. Critical issues will be: • the nature, magnitude and cost of the expected increase in demand for VET services

• the rough balance of skills likely to be demanded, and the consequent training needs, distinguishing between the possibly different needs of males and females, and between young and mature adults.

1.2 Process for review As part of this review, the Tribunal will undertake public consultation, including calling for submissions and holding a public round table discussion. It will also engage a consultant to assist it in determining the future demand for VET. It intends to release its draft report and recommendations and invite comments from interested parties. After considering these comments, it will provide its final report and recommendations to the Minister for Education and Training. The proposed timetable for the review is a follows: Action Timetable

Release issues paper and invite submissions December 2005

Make consultant’s report available March/April 2006

Hold public roundtable discussion April 2006

Release draft report and recommendations and invite submission

July 2006

Provide final report and recommendations to the Minister for Education and Training

End of 2006

Details on how to make a submission can be found at the front of this paper (before the Table of contents). Please note that the closing date for submissions is 28 February 2006. Also note that while Chapter 4 of this issues paper lists a range of issues and questions on which the Tribunal particularly seeks comments, the list is not exhaustive and stakeholders should feel free to raise and discuss any other issues that they believe are relevant to this review.

3


1.3 Structure of issues paper This issues paper is structured as follows: • Chapter 2 provides background information on the future challenges for the VET

system emanating from changes in the labour market and the impact of an ageing population

• Chapter 3 presents an overview of the VET system in NSW

• Chapter 4 outlines a range of issues and questions that stakeholders may wish to consider when preparing their submissions.

4

Future challenges for VET

2 FUTURE CHALLENGES FOR VET

As Chapter 1 identified, the principal future challenges facing the VET system emanate from: • changes in the labour market that are affecting the nature of work

• an ageing population that could lead to declining labour force participation and an increase in the aged to working age population ratio unless policies are changed.

The sections below provide information about each of these changes as background to the issues that the review must consider.

2.1 Changes in the structure of the labour market Several significant structural changes have occurred in the Australian and NSW labour markets over the last couple of decades. The most important labour market trends in Australia and NSW have been:

• changes in the participation rate by sex and age

• a dramatic increase in part time and casual employment

• a decline in full time employment participation for males aged between 35 and 54

• a decline in traditional ‘blue-collar’ work, offset by rapid increases in employment for managers/professionals and some increase in jobs in the services sector

• an increasingly strong link between skills, education and employment. One consequence of these trends is that there are currently many people who would or could work more, given sufficient opportunity. Each of these trends and their implications are explored below.

2.1.1 Changes in labour force participation rates Over the last three decades, the labour force participation rate for males in NSW has declined, but this decline has been more than offset by a substantial and ongoing increase in the participation rate for females (Table 2.1). As a result, the overall labour force participation rate has increased.

Table 2.1 Labour force participation rate for NSW (per cent)

1978 1986 1996 2000 2005

Male 78 75 73 71 71

Female 43 47 52 53 55

Persons 60 61 62 62 63 Source: ABS data catalogue 6202.0.55.001.

5


One of the key factors that affect people’s labour force participation rates is their age. For both males and females, the likelihood of participating in the labour force declines substantially once a person reaches 60. Over the last 30 years in NSW, there has been an ongoing decline in the participation rates for males in all age groups (Figure 2.1). A lthough this decline in participation has been most marked for those aged 55 to 59, the total loss of potential employment is more significant for those men aged 35 to 54 who are in their most productive years and because of the much larger numbers in that twenty year age group.

Figure 2.1 Participation rates of workers aged 35-64 years in NSW

0

10

20

30

40

50

60

70

80

90

100

35-44 45-54 55-59 60-64

Age group

%

1978 males

2005 males

1978 females

2005females

Source: ABS data catalogue 6291.0.55.001 Table LM1 October 2005.

2.1.2 Dramatic increase in part time work Over the last 20 years, there has been significant growth in employment. However, part time employment has accounted for most of this employment growth, increasing at a much higher rate than full time employment, especially for males. From 1986 to 2005, the total number of males 15 and older employed in full time work in NSW grew by 14 per cent, equivalent to an annual average rate of increase of only 0.7 per cent. In contrast, the total number of males employed in part-time work increased by 177 per cent. For females, there was somewhat more balanced growth in employment, with full-time employment for those aged 15 and older in NSW increasing by 37 per cent, and part-time employment increasing by 90 per cent.3

3 ABS data catalogue 6291.0.55.001 Table e13 Aug 2005.

6


Figure 2.2 compares the growth in full and part time employment for males and females combined over the last 20 years in NSW. It clearly shows the substantial growth in part time employment. It also shows that this growth has resulted in only a moderate increase in the total hours worked. Overall, this dramatic increase in part-time employment is often linked to changes in the structure of demand in favour of the service industries (see section 2.1.4). However, it may also be partly due to workplace reform, as employers have sought to re-organise work by adjusting working hours downwards so that many workers are now only employed when they are needed.

Figure 2.2 Full time & Part time employment indices for NSW (1986-2004)

0.9

1.1

1.3

1.5

1.7

1.9

2.1

1986 1989 1992 1995 1998 2001 2004

Total hours w orked index

Full time employment index

Part time employment index

Source: ABS data catalogue 6291.0.55.001 Table e13 August 2005.

2.1.3 Decline in full-time employment for males aged between 35 and 54 The main driver of the fall in male employment participation in NSW over the last 20 years has been a substantial and ongoing decline in full time employment participation by males aged between 35 and 54. Figure 2.3 shows that although the total employment participation by males in this age group has remained relatively constant since 1986, full time employment fell from approximately 85 per cent as a percentage of the total population in 1990, to about 78 per cent in 2004. In contrast, both total employment participation and full time employment participation for males aged between 55 and 64 increased over the last decade.

7


Figure 2.3 Male full time versus total employment to population ratio – 35 to 54 aged group in NSW

40%

50%

60%

70%

80%

90%

100%

1986 1989 1992 1995 1998 2001 2004

Total employment (aged 35-54yrs)

FT employment (aged 35-54 yrs)

Total employment (aged 55-64yrs)

FT employment (aged 55-64 yrs)

Source: ABS data catalogue 6291.0.55.001 Table 13 August 2005. This is a significant issue for the economy as a whole because males aged between 35 and 54 are of prime working age and their declining participation represents a considerable loss of potential output. The ongoing decline in their full time employment participation is a worrying trend given that this group will be approaching retirement over the next 10 to 20 years. But equally it should be possible to reverse this trend. Such a significant improvement in employment participation would then go a long way towards reducing the prospective burden of an ageing population.

2.1.4 Decline in blue collar work and increase in employment of managers, professionals and services sector workers

There are probably a number of reasons for this trend towards lower male employment participation, including a cultural change in favour of early retirement. But for the many people who have experienced ‘forced’ retirement, and especially those who are men of prime working age, the fall in their employment participation seems to be closely associated with some major changes in the occupational structure of employment. Over the last two decades in Australia, the greatest increase in jobs has been for skilled occupations, such as Managers, Professionals and Associate Professionals. There has also been significant growth in jobs in unskilled or semi skilled occupations in the services sector. In contrast, there has been negligible or even negative growth in traditional ‘blue-collar’ jobs. These trends reflect underlying structural changes in the Australian economy, especially the increase in productivity in traditional ‘blue-collar’ industries such as manufacturing, and the relative growth in consumer demand for services.

8


Table 2.2 highlights the changing occupational structure of employment in NSW. It clearly shows the growth in employment for professionals and managers since the mid 1980s and the substantial decline in ‘blue-collar’ employment over the same time period.

Table 2.2 Changing structure of employment in NSW (per cent)4

Share of employment (per cent)

Managers & professional

Clerks & services

Blue collar group

Males 1986 33 15 52

1995 33 18 49

2005 42 16 42

Females 1986 25 55 19

1995 28 56 17

2005 41 48 11 Source: ABS data catalogues 6291.0.55.001 August 2005 and 6291.0.55.001 August 1986.

2.1.5 Link between skills, education and employment Most people who are employed in skilled occupations also have high levels of education and training. Thus it is not surprising that the growth in jobs in highly skilled occupations is also reflected in the close link between employment participation and education and training. Figures 2.4(a) and 2.4(b) show that for both males and females in Australia, the labour force participation rate of those who have post-school education or training is higher that of those who do not. But what is perhaps more interesting is that most of the decline in male employment participation for those aged up to around 53 is accounted for by the fall in participation for those males who have no post school qualifications, most of whom are known to have left school before completing year 12 (see Figure 2.4(c)). By contrast, females who have no post school qualifications have been much less impacted by the decline in blue collar employment, and have been better placed to take advantage of the job opportunities that are appearing for people with lower level skills in many of the service industries. This analysis suggests that to increase employment participation, particularly male participation, it will be necessary to take advantage of the job opportunities that are being created in the more highly skilled occupations. But at present these jobs opportunities represent bottlenecks because of the shortfall of people with the necessary qualifications. Therefore, a key priority is to upgrade the skills of the workforce focussing on those who are currently most at risk because of their relative lack of qualifications. In addition, even if it proves difficult to retrain all the older people who are presently under or unemployed, it is important that the next generation does not suffer the same experience. In the future, everyone will need to be able to develop their personal capabilities so that they can adapt to the changing nature of future demands for skills.

4 Data for this table was derived from ABS data catalogues 6291.0.55.001 August 2005 and 6291.0.55.001

August 1986. A change in occupation classification occurred between the 2 data source and thus the sub-categories of occupations are not directly comparable. The data has been aggregated into the 3 major groups of Managers & Professional, Clerks & Services and Blue Collar Group and is considered to present a reasonable indication of the changing structure of employment over this period.

9


Figure 2.4 Labour force participation rates by age, gender and education in Australia

2.4(a) - Male participation by age and education, 2001

2.4(b) - Female participation by age and education, 2001

2.4(c) – Change in Male participation by age

and education, 1981 to 2001 2.3(d) – Change in Female participation by age

and education, 1981 to 2001

Source Kennedy and Hedley, A Note on Educational Attainment and Labour Force Participation in Australia, Treasury Working Paper, 2003.

2.1.6 Link between education and productivity In addition to the clear link between education and labour force participation, there is also evidence of a strong link between education and training, and increased levels of labour productivity. In turn, this higher productivity contributes to higher rates of economic growth (see section 2.2.3). Access Economics, in its report to the Business Council of Australia and the Dusseldorp Skills Forum, outlined how education has a direct effect on the level of productivity in the economy by increasing the productivity of individuals.5 If workers are better educated they are more productive. Therefore, investment in education provides a pool of more skilled workers. In addition, individuals benefit from higher levels of education as a result of the positive relationship between earnings and the level of education.

5 Access Economics, The Economic Benefit o Increased Participation in Education and Training, a report to the

Business Council of Australia and Dusseldorp Skills Forum, April 2005.

10


Hall, Buchanan and Considine, in their paper for the Dusseldorp Skills Forum, argued that the key challenge for the future is to ensure that future improvements in labour productivity arise from a greater use of higher order labour skills generated through training.6 They put the view that this is because there are finite limits in how much labour productivity can be improved in the future through more intensive use of existing labour, given that much of the recent improvement in labour productivity reflects this trend towards intensification.

2.1.7 Number of people who could work more The trends towards lower employment participation and increased part-time work, discussed above, suggest that there are currently many workers who could or would work more without adding to inflationary pressures, given the opportunity or sufficient inducement. These include those who are currently unemployed, those who are employed part time but are able to work longer hours, and those who are marginally attached to the workforce and who would like to work.7 For example, a recent survey of workers who are currently working part time indicates that 29 per cent of males and 20 per cent of females are willing to work more hours.8 The Tribunal has estimated the total potential additional hours that could be worked in a fully-employed NSW economy without adding to inflationary pressures.9 The outcomes of this analysis are summarised in Table 2.3.

Table 2.3 Potential additions to employment in NSW

NSW Number Numbers

able to take more

employment

Average number of additional

hours

Potential total of

additional hours

(000) (000)

Males already employed 1,790.8 81.9 17.1 1,400.5

Females already employed 1,441.3 101.3 14.3 1,448.6

Unemployed males 99.9 74.9 34.0 2,548.0

Unemployed females 73.9 55.4 28.0 1,550.9

Marginally and potentially attached males 175.1 131.3 20.0 2,626.3

Marginally attached females 194.3 177.0 21.0 3,716.7

Total 3,775.3 621.8 13,291.1 Source: Estimates based on ABS Catalogue numbers 6220.0 and 6265.0 and the methodology as presented in Keating, Increasing Employment Participation in Australia and How to Finance It.

6 Hall, Buchanan and Considine, “You Value What You Pay For” – Enhancing Employers’ Contributions to Skill

Formation and Use, discussion paper for the Dusseldorp Skills Forum, June 2002. 7 The ABS define marginal attachment to the labour force as people actively looking for work, who were not

available to start work in the reference week, but were available to start work within four weeks and discouraged job seekers who are people who want to work and are available to start work within 4 weeks and whose main reason for not looking for work was that they believed that they would not find a job for reasons associated with the labour market (for example, skills and experience).

8 ABS catalogue number 6220.0, September 2004. 9 In calculating these estimates, the Tribunal has utilised the methodology set out in Keating, Increasing

Employment Participation in Australia and How to finance It, in a paper which will appear in a forthcoming issue of the Australian Bulletin of Labour.

11


What stands out in Table 2.3 is that, relative to total employment of 3.2 million people in September 2004, as many as 0.6 million people want or could be reasonably induced to want more work. This represents a potential increase in total employment of 19 per cent. If we exclude those people who are already employed, although underemployed, the number of extra people who could have been employed falls to 0.4 million people, representing an increase in total employment of 14 per cent. However, the additional hours that would be worked by most of these people who want more employment would be less than a full-time working week. Thus, the potential addition to the labour supply measured in terms of hours worked would be of the order of 11-12 per cent.10

Interestingly most of these people who it is estimated could work more believe that, consistent with the earlier findings in this issues paper, that it is their lack of relevant skills that is standing in their way. Thus the ABS reports that most of those workers who are currently unemployed, believe that their inability to achieve their employment objectives is because they lack the necessary skills or there has been a decline in the employment opportunities in their respective occupations or industries.11 Similarly those workers who are currently working part time but want additional work considered that either their lack of skills, no vacancies in their line of work or the lack of vacancies at all at all were the main reasons for not working more.12 While those workers not in the labour force considered that their main reasons for the departing the labour force were health issues, retirement or family reasons13. However, it may well be that lack of skills and/or opportunity played some role in decisions to take up early retirement and/or a disability support pension. The actual numbers estimates for people who could work more and their reasons for not doing so is not the main point of this rough analysis. Rather the critical conclusion is that there are sufficient people who would like to work more, if they were given the opportunity, to ensure that the dependency ratio does not need to be any higher in twenty years time than it is today. The challenge that this review is taking up is how best to provide these people with that opportunity, which would then not only solve many personal and family problems but would also remove the major source of future fiscal stress that has implications for our whole society.

2.2 The ageing population and its impact At the same time as the labour market has been changing, the profile of the Australian and NSW population has been ageing. Figure 2.5 shows how the age profile of the NSW population changed between 1975 and 2005, and how it is forecast to change by 2035. The number of people aged more than 40 increased significantly over the period to 2005, and this number is expected to continue to increase in the period to 2035.

10 Argy (2005) has suggested that labour underutilisation in Australia is equivalent to about 9 per cent of the

total number of hours potentially available. Keating suggests that the total number of hours potentially available in Australia is 11 per cent. From the limited information provided by Argy, Keating considers that the small difference between Argy’s and his estimates seems to reflect: 1. the different denominators used, with Argy using the workforce as his denominator whereas Keating’s paper uses employment as the denominator; 2. the more detailed estimates in Keating’s paper of the hours that under-employed people would be willing to work; and 3. an allowance in Keating’s paper for the effect of possible policy changes on the number of people seeking work.

11 ABS Year Book Australia 2005. 12 ABS catalogue number 6265.0 September 2004. 13 ABS catalogue number 6220.0 September 2004.

12


Figure 2.5 NSW population by age groups (,000)

0

100

200

300

400

500

600

0-4 5-910

-1415

-1920

-2425

-2930

-3435

-3940

-4445

-4950

-5455

-5960

-6465

-6970

-7475

-7980

-84

85 an

d ove

r

1975 2005 Series B 2035

Source ABS data catalogue number 3105.0, 3235.0 and 3222.0 There have been numerous reviews into the economic implications of the ageing population, most notably the Intergenerational Report14 and the Productivity Commission’s report into the economic impact of an ageing population.15 Some of the key findings from these reviews in relation to the impact of this trend on the dependency ratio, government fiscal positions and the labour market are discussed below.

2.2.1 Impact on dependency ratio In 1971, the aged to working-age population ratio in NSW was 13 per cent.16 By 2005, this ratio has increased to 20 per cent. ABS population projections for NSW indicate that this ratio is likely to continue to increase and will reach 39 per cent by 2035.17 Conversely, the child to working-age population ratio has decreased from 43 per cent in 1971 to 29 per cent in 2005, and is expected to continue to decrease to 25 per cent in 2016, where it is likely to remain. As Figure 2.6 shows, the combined effect of these two ratios indicates that the ratio of all dependents to the working age population of NSW will rise from 2013 onwards. The scenario for the whole of Australia is similar.

14 Intergeneration Report, Budget Paper 5, Budget 2002-03. 15 Productivity Commission, Economic Impact of an Ageing Australia, April 2005. 16 The working-age population are persons aged between 15 and 64. 17 Projections based on ABS data catalogue 3222.0 Series B.

13


Figure 2.6 Changing dependency ratios in NSW

0%

10%

20%

30%

40%

50%

60%

70%

1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031

Child ratio Aged ratio Combined

Source ABS data catalogue number 3105.0, 3235.0 and 3222.0

2.2.2 Impact on government fiscal positions Both the Intergenerational Report and the Productivity Commission report found that the impact of population ageing will take some time to affect the fiscal positions of governments. However, without any change in policy, these fiscal positions will deteriorate as expenditure increases in the areas of health, aged care and pensions, and revenue decreases due to reduced numbers of Australians of working age and reduced economic growth. NSW Treasury estimates that the primary fiscal balance (the gap between revenue and spending excluding interest transactions) could deteriorate by 4.3 per cent of Gross State Product from 2004/05 to 2041/42, as a result of the ageing population and other non-demographic factors. 18

2.2.3 Impact on labour market The major impact of the ageing population on the labour market will be to reduce participation rates. The Productivity Commission estimated that there would be a decrease in the participation rate of more than 7 per cent for Australia and 6 per cent for NSW over the next four decades.19 Based on current trends, as people get older their labour force participation tends to reduce or they work fewer hours reducing the total hours worked, and thus the effective labour supply. The relationship between population, participation and productivity is essential in determining the impact of an ageing population on the Australian and NSW economies. The Productivity Commission report found that because the ability to reverse population ageing

18 NSW Government submission to the Productivity Commission’s research study into the economic

implications of an ageing Australia, November 2004, p 23. 19 Productivity Commission, Economic Impact of an Ageing Australia, April 2005, p 82.

14


through migration and fertility policy is limited, the potential to increase participation and productivity is critical for addressing the problems posed by population ageing. Figure 2.7 shows that population and population age structure is a vital component in determining both labour supply and productivity. Over time, the supply of labour and productivity determine economic growth. This is why addressing labour market issues such as increasing participation rates, labour productivity and improving labour market skills will be important to address the challenges posed by the ageing population.

Figure 2.7 Relationship between population, labour supply and GDP

GDP per capita Fertility

Net migration Mortality

Productivity (labour)

Labour supply (total hours)

Capital deepening

Multifactor productivity

Labour force participation rate Unemployment rate

PT and FT average hours

Population age structure

Part time employment shares

Population

GDP

Direct links Possible indirect linksDirect links Possible indirect links

Source: Productivity Commission, 2005, Economic Implications of an Ageing Australia, p 51. The projected ageing of the population will increase the demand for labour relative to its supply. Consequently some tightening of the labour market can be expected, which will in turn encourage some increase in employment participation. But it cannot be assumed that this increased participation in response to market forces will be sufficient to prevent a rise in the dependency ratio or that it will happen in an acceptable time period, without separate policy action to increase the number of skilled people. Also continuing technological change means that peoples’ skills need to be refreshed and upgraded through life-time learning if we are not to face a continuing problem of structural imbalances in our labour market. Increasing the skill base of NSW and then maintaining it is essential to long-term growth prospects. As Gruen and Garbutt found, increasing labour force participation rates gradually over the next 20 years for Australia, would result in national output being approximately 9 per cent higher in 2025 than that projected in the Intergenerational Report, and would remain about 9 per cent higher for the following twenty years.20

20 Gruen and Garbutt, The Output Implications of Higher Labour Force Participation, Treasury Working Paper,

October 2003, p 32.

15


16

Overview of the vocational education and training system in NSW

3 OVERVIEW OF THE VOCATIONAL EDUCATION AND TRAINING SYSTEM IN NSW

The VET system can potentially play a critical role in increasing and maintaining the state’s skill base to address the problems associated with the labour market and population profile changes discussed in the previous chapter. This chapter provides an overview of the current arrangements for VET in NSW--including the role of Technical and Further Education (TAFE) institutes and other training institutions, the characteristics of the VET system, governance arrangements and current sources of funding. It also outlines recent reforms of the VET system.

3.1 Role of TAFE and other training institutions Vocational and Education Training (VET) is the study and practical training that equips people with skills that enhance their job prospects and assist them in entering or re-entering the workforce, or in re-training or upgrading their existing skills. VET provides people with occupational or work-related knowledge and skills. It also offers programs that provide the basis for subsequent vocational programs. Other parts of the education system are the schools sector, the higher eduction sector and the adult and community education sector. There are connections between the qualifications in the different parts of the eduction system, and it is possible for a person to have what they learned in one sector recognised in another.21

The VET sector covers recognised VET programs undertaken through a registered training provider. Most VET programs are undertaken in a TAFE institute, although private training organisations and adult community education providers are becoming increasingly important providers of VET. Some enterprises, schools and universities are also registered VET providers.22

The VET system provides vocational training to school leavers through the apprenticeship system. Apprenticeships and traineeships combine work and structured training. Although they vary from one industry to another, all apprenticeships and traineeships in NSW include: • paid employment under an appropriate industrial arrangement (for example, an award

or enterprise agreement)

• a training contract signed by both the employer and apprentice or trainee and registered with the NSW Department of Education and Training (DET)

• a training program delivered by a registered training organisation that meets the requirements of the apprenticeship or traineeship in NSW and leads to a nationally recognised qualification.

There are more than 100 apprenticeships available in NSW.23 Apprenticeships generally last four years and cover traditional trade areas such as building and construction, hairdressing, cooking, the automotive industry, engineering and manufacturing.

21 TAFE NSW Industry Partnership Centre (NSW Department of Education and Training, TAFE NSW), A

Plain English Guide to the Australian and NSW Vocational and Training Systems, September 2002. 22 NCVER 2000, Developments in Australia’s Vocational Education and Training System, www.ncver.edu.au. 23 See http://apprenticeship.det.nsw.edu.au/fa.htm

17

http://www.ncver.edu.au/

http://apprenticeship.det.nsw.edu.au/fa.htm


Over 700 traineeships have been introduced in NSW to provide employment and training opportunities in a range of areas not generally covered by apprenticeships, including information technology, multimedia, sport and recreation, hospitality, retail and primary industries.24

3.2 Characteristics of the VET system The total number of students enrolled in the VET system in NSW has increased since the mid 1990s (Figure 3.1). By the end of 2004 there were nearly 520,000 VET students. This number is down from a peak of nearly 590,000 in 2003, consistent with student numbers in most other states and territories.25 The Tribunal notes that the drop in number in the year between 2003 and 2004 cannot be considered a trend.

Figure 3.1 Total number of VET students in NSW by sex 1995-2004 (,000)

100

200

300

400

500

600

700

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Total student numbers

Female students

Male students

Source: NCVER, National VET provider collection 2005, NSW, Table 1. As a percentage of the labour force in NSW, VET students currently represent 17 per cent for males and 22 per cent for females (Table 3.1). While these levels of participation are similar to those in 1995, there has been some variation in the intervening 10 years.

24 Ibid. 25 While the highest number of students studying VET in NSW was in the year 2000, it should be noted that

from 1999 to 2000 the number of VET students increased as a result of volunteer work associated with the 2000 Olympic Games, which affected predominately the older age cohorts. For example, between 1999 and 2000 the number of VET students in NSW aged between 60 and 64 increased by 75 per cent with the majority undertaking courses associated with volunteer work at the Olympic Games.

18


Table 3.1 VET students in NSW as a percentage of the labour force (25-64 years)

. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Males 16 16 17 17 18 21 19 19 19 17

Females 22 24 24 25 26 30 26 24 25 22Source: NCVER, National VET provider collection 2005, NSW, Table 3; ABS catalogue no. 6291 Table LM1

Most VET students study part time, with 90 per cent of students choosing this mode of study in 2004 (Table 3.2).

Table 3.2 VET students in NSW by study mode 2000-2004 (,000)

2000 2001 2002 2003 2004

Study mode

Full time 51 58 61 62 51

Part time 587 512 493 526 466

Total students 638 571 553 588 518 Source: NCVER, National VET provider collection 2005, NSW, Table 11; any differences due to rounding.

Table 3.3 sets out the employment status of VET students in NSW. While it is difficult to draw any firm conclusions from these data, given the number of students with unknown employment status, it seems likely that most students want to combine part-time study with their employment.

Table 3.3 VET students in NSW by employment category (,000)

2000 2001 2002 2003 2004

Employment status

Employed 275 265 252 255 217

Unemployed 91 91 87 81 73

Not in labour force 51 53 55 53 46

Unknown 220 162 159 198 182


Around half of all VET students in NSW are between 14 and 29 years, 27 per cent between 30 and 44, and 19 per cent are 45 or older (Table 3.4). The proportion of students in each age group has remained relatively stable over the last five years. However, research by the National Centre for Vocational Education Research (NCVER) indicates that the number of VET students over 40 has increased since 1990.26

26 Ball, Australia’s Ageing Population and its Implications for our Future, NCVER, paper presented to TAFE

director’s conference 30 April to 2 May 2003.

19


Table 3.4 Total number of VET students in NSW by sex and age 2000-2004 (,000)

2000 2001 2002 2003 2004

Males 14-29 years 151 144 142 145 139 30-44 years 79 73 73 77 67 45-54 years 36 32 32 35 31 55+ years 28 20 20 23 20 Females 14-29 years 136 122 120 127 117 30-44 years 98 88 82 85 72 45-54 years 48 42 39 43 37 55+ years 27 21 22 25 20 Total 14-29 years 287 266 262 272 256 30-44 years 177 162 155 162 139 45-54 years 84 74 71 78 69 55+ years 55 42 42 48 40 Total all students* 638 571 553 588 518

Source: NCVER, National VET provider collection 2005, NSW, Table 3. * The difference between the total all students and sum of age groups is students whose age is unknown. Table 3.5 provides the total number of VET students for Australia by age and sex. The proportion of students in each group across Australia is consistent with the NSW proportions and displays the same trends.

Table 3.5 Total number of VET students in Australia by sex and age 2000-2004 (000s)

2000 2001 2002 2003 2004 Males 14-29 years 439 445 449 450 442 30-44 years 233 233 237 238 218 45-54 years 99 99 101 104 97 55+ years 59 53 56 60 56 Females 14-29 years 358 357 365 369 352 30-44 years 259 248 243 244 221 45-54 years 123 117 116 123 112 55+ years 61 57 59 69 57 Total 14-29 years 799 803 814 820 796 30-44 years 492 482 480 483 439 45-54 years 223 216 218 228 210 55+ years 120 110 116 130 113 Total all students* 1,708 1,679 1,683 1,718 1,595

Source: NCVER, National VET provider collection 2005, Australia, Table 3. * The difference between the total all students and sum of age groups is students whose age is unknown.

20


Turning to VET teaching staff, the proportion of part-time VET teaching staff in Australia is around 50 per cent.27 From 2000 to 2003, the proportion of part-time teaching staff has been between 43 and 53 per cent of total staff. The proportion of female part-time staff is much higher than males. For example, in 2003 female part-time staff accounted for 60 per cent of total female staff while for males the proportion of part-time staff was only 34 per cent. The substantial proposition of part-time teaching staff could indicate that more flexible staffing arrangements have been introduced into the VET system as a way of managing the changing demand for VET and increased competition for funds putting more funds at risk. Although the number of VET students has potentially stabilised (or even started to fall) in the last few years, there is still an unmet demand for VET places. In 2004, there were more than 45,000 unsuccessful applications for VET by provider sector across Australia (Table 3.6). However, Table 3.6 also indicates that the total unmet demand for VET across Australia is relatively low (around 2-4 per cent of the total number of students), and even if all unmet demand were met the number of VET places would still be less than five years ago. This relatively low level of unmet demand could be affected by many factors which impact on the incentives to undertake training; for example, retirement income and pension policies, personal and employer attitudes to training, and the perceived returns to training. This review will explore the extent to which increasing the quality and quantity of the education and training provided can assist in lifting the rate of employment participation in future and thus the returns from training. This in turn implies that the current unmet demand for VET is likely to increase into the future relative to present training capacity as policies are introduced to lift participation rates.

Table 3.6 Unmet demand for VET in Australia 2000-2004 (,000)

2000 2001 2002 2003 2004

Unmet demand

TAFE institutes 49 40 44 46 34

Unknown 17 17 11 10 11

Total VET 66 57 55 55 46 Source: Annual National Report of the Australian Vocational Education and Training System, 2004, DEST; any differences due to rounding.

27 ABS catalogue number 1301.0, Year book of Australia, Vocational Education and Training 2002-2005.

21


In the last three years management and commerce has been the most popular subject choice among VET students in NSW (Table 3.7). Nearly twice as many students studied this field than the next most popular field (engineering and related technologies).

Table 3.7 VET students in NSW by major course field of education 2002-2004 (,000)

2002 2003 2004

Field of education

Natural and Physical Sciences 2 2 2

Information Technology 39 28 22

Engineering and Related Technologies 67 70 66

Architecture and Building 42 44 45

Agriculture, Environmental and Related Studies 30 28 25

Health 23 33 25

Education 16 21 16

Management and Commerce 136 143 121

Society and Culture 57 70 58

Creative Arts 16 17 19

Food, Hospitality and Personal Services 51 61 53

Mixed Field Programs 69 71 62

Subject only (no field of education) 7 1 4

Total students* 553 588 518 Source: NCVER, National VET provider collection 2005, NSW, Table 20; any differences due to rounding. Apprentices and trainees comprise less than ten per cent of VET students in NSW (Table 3.8). Section 3.5.2 discusses the growth in apprenticeships and traineeships over the past decade. While this growth appears to have reached a plateau in the last year or so, it is too soon to determine whether this is in fact a trend.

Table 3.8 Apprentices and trainees undertaking off-the-job training in NSW 2003-2004 (,000)

2003 2004

Apprentices and trainees

An apprentice or trainee in training 52 43

Not an apprentice or trainee in training 537 475

Total students 588 518 Source: NCVER, National VET provider collection 2005, NSW, Table 12; any differences due to rounding.

Table 3.9 clearly shows that TAFE institutes provide places to the vast majority of VET students in Australia. Nearly 80 per cent of VET students are enrolled at a TAFE. As a percentage of annual hours studied TAFE’s share of the market is nearly 90 per cent.

22


Table 3.9 Provider of VET Australian wide 2000-2004 (,000)

2000 2001 2002 2003 2004 % of total

Students

TAFE and other government providers 1,316 1,290 1,316 1,299 1,257 79

Community education providers 228 230 209 244 171 11

Other registered providers 165 160 158 168 161 10

Students attending various providers 0 0 0 7 6 0

T

T

otal students 1,708 1,679 1,683 1,718 1,595 100

Annual hours

TAFE and other government providers 268,157 293,980 301,437 304,727 297,843 87

Community education providers 12,402 12,689 12,548 14,210 12,441 4

Other registered providers 30,782 33,738 31,081 32,777 32,113 9

otal annual hours 311,341 340,406 345,066 351,715 342,397 100 Source: NCVER, National VET provider collection 2005, Australia, Table 4; any differences due to rounding.

3.2.1 Completion rates and outcomes for VET students It is difficult to precisely calculate the completion rates for VET students. This is because unlike universities (where the objective is to complete a course of study to attain a degree or diploma, and success against this criterion can be assessed) the objectives of VET students vary. While a number of VET students are studying to attain a formal qualification, others are only attempting to complete modules aimed at attaining specific skills. A study by the NCVER into course completion rates highlights the difficulty in assessing VET course completion rates. It found that full-course completions in TAFE are approximately 27 per cent and partial-course completion 49 per cent.28 Ball and John found that the completion rates for apprentices and trainees are 60 per cent and that completion rates for traditional apprenticeships have declined for students enrolled since the mid-1990s.29 However, as set out in Table 3.10, the completion rates for course modules are generally high, with module pass rates for NSW of around 70 per cent and withdrawal rates of approximately 15 per cent.

28 Foyster, Fai and Shah, Student Flows through Australian TAFE Courses, NCVER, 2000. 29 Ball and John, Apprentice and Trainee Completion Rates, NCVER, 2005.

23


Table 3.10 VET subject enrolments in NSW by subject result 2000-2004 (000s)

Module outcomes 2000 2001 2002 2003 2004

Assessed - pass 2,578 2,788 2,842 2,915 2,737

Assessed - fail 191 194 187 192 186

Withdrawn 561 646 614 547 485

Recognition of prior learning 128 150 144 153 125

Continuing studies 84 50 62 56 47

Not assessed - completed 415 261 258 297 237

Not assessed - not completed 38 38 27 36 13

Not available 13 2 0 0 0

Total subject enrolments 4,008 4,130 4,133 4,196 3,830 Source: NCVER, National VET provider collection 2005, NSW, Table 33; any differences due to rounding. Tables 3.11 and 3.12 below set out the reasons why VET graduates and module completers in Australia undertake training and the proportion of these people who achieved their main reason for undertaking training, and were satisfied with the quality of training received.

Table 3.11 Profile of VET graduates and module completers in Australia 2000-2004

2000 2001 2002 2003 2004

Graduates

Seeking an employment related outcome 76% 74% 77% 75% 75%

Seeking a further study outcome 5% 5% 6% 7% 7%

Seeking a personal development outcome 19% 21% 17% 19% 19%

Module completers

Seeking an employment related outcome 65% 64% 65% 64% 64%

Seeking a further study outcome 4% 4% 4% 4% 4%

Seeking a personal development outcome 30% 32% 31% 32% 32% Source: Annual National Report of the Australian Vocational Education and Training System, 2004, DEST.

Table 3.12 Satisfaction of VET graduates and module completers Australia 2000-2004

2000 2001 2002 2003 2004

Graduates

Achieved main reason for undertaking training 80% 80% 77% 78% 81%

Satisfied with overall quality of training 79% 81% 77% 82% 85%

Module completers

Achieved main reason for undertaking training 71% 71% 69% 68% 71%

Satisfied with overall quality of training 76% 76% 74% 76% 77% Source: Annual National Report of the Australian Vocational Education and Training System, 2004, DEST.

24


The NCVER has recently released its report into the training outcomes for students who completed their VET in 2004.30 This report demonstrates that VET provides students with good employment outcomes. In NSW, 75 per cent of graduates and 73 per cent of module completers are employed after completing their training. 87 per cent of graduates in NSW are either employed or in full time study after completing their VET. The report also demonstrates that the vast majority of students were satisfied with the quality of VET they received and that it provided them with personal benefits. In NSW, 87 per cent of graduates and 85 per cent of module completers were satisfied the training they received. While across Australia, 74 per cent of graduates and 62 per cent of module considers that the training they received was highly or somewhat relevant to their current job, and 77 per cent of graduates and 62 per cent of module completers received at least one job related benefit for their training.

3.3 Governance arrangements The Australian VET system is a joint responsibility of Commonwealth and State and Territory governments. Until recently, the Australian National Training Authority (ANTA) was the key national agency responsible for advising on national planning, funding and strategic objectives to achieve a national focus for VET. ANTA’s Board oversaw its operations, and advised the Ministerial Council of Commonwealth and State ministers for VET (MINCO). MINCO was responsible for making decisions on strategic policy and planning, including funding, and national objectives and priorities for VET. 31

3.3.1 The National Training Framework (NTF) In cooperation with the Commonwealth, States and Territories, ANTA was responsible for developing, managing and promoting the National Training Framework (NTF). The NTF provides a nationally consistent approach to VET throughout Australia. It was developed to simplify the way training was regulated and who was responsible for it, and to guarantee high standards of quality within the VET system. The two key features of the NTF are the Australian Quality Training Framework (AQTF) and National Training Packages. The AQTF is a set of nationally agreed registration and audit standards that ensure the quality of the VET services provided throughout Australia. Similar to the ISO quality standards approach, the AQTF is made up of two sets of standards: • standards for Registered Training Organisations (RTOs), which specify what an RTO

needs to do or have in order to demonstrate compliance with the AQTF

• standards for State and Territory Registering / Course Accrediting Bodies, which strengthen and clarify the audit process undertaken by the Vocational Education and Training Accreditation Board (VETAB) and other State and Territory registering/course accrediting bodies, and also support a national approach to registration.

30 NCVER, Australian Vocational Education and Training Statistics: Student Outcomes 2005 – Summary, NCVER,

November 2005. 31 The responsibilities and functions of the Australian National Training Authority (ANTA) were transferred

to the Department of Education, Science and Training (DEST) on 1 July 2005. While the transition of ANTA functions and knowledge to DEST is in progress the arrangements remain broadly the same (See http://www.dest.gov.au/sectors/training_skills/policy_issues_reviews/key_issues/anta/default.htm)

25

http://www.dest.gov.au/sectors/training_skills/policy_issues_reviews/key_issues/anta/default.htm


States and Territories apply the AQTF when registering organisations to deliver training, assess competency and issue Australian Qualifications Framework (AQF) qualifications, and auditing RTOs to ensure they meet (and continue to meet) the requirements of AQTF. National Training Packages contain: • competency standards as defined by industry (ie, skills and knowledge required to

perform workplace tasks)

• assessment guidelines for assessing these competency standards

• packaging of the competency standards into qualifications aligned to the AQF. National Training Packages are developed by industry through industry skills councils, other recognised bodies and industries to meet the identified training needs of specific industries or industry sectors. There are currently around 120 endorsed National Training Packages covering a wide range of industries including information technology, business, film, TV, radio and multimedia, manufacturing and engineering, retail, construction, tourism, hospitality, asset security and property development and management.32 Just over 40 per cent of VET students in NSW studied under National Training Packages in 2004 (Table 3.13), compared to other course accreditations.

Table 3.13 VET students in NSW by major course accreditation (,000)

2000 2001 2002 2003 2004

Course accreditation

National Training Package 108 147 187 225 222

Nationally accredited courses 312 305 253 139 114

Locally accredited course 215 109 107 223 178

Subject only (no qualification) 2 10 7 1 4


3.3.2 The Australian Qualifications Framework Introduced in January 1995, the AQF covers all qualifications in post-compulsory education and training, and was developed to meet the need for an overall system of qualifications to support reforms in VET. The qualifications issued by the VET sector are: • Certificate I

• Certificate II

• Certificate III

• Certificate IV

• Diploma

• Advanced Diploma.

32 See http://www.ntis.gov.au/cgi-bin/waxhtml/~ntis2/pkg.wxh?page=1

26

http://www.ntis.gov.au/cgi-bin/waxhtml/%7Entis2/pkg.wxh?page=1


Table 3.14 below shows the number of VET students in NSW by major qualification.

Table 3.14 VET students in NSW by major qualification 2000-2004 (,000)

2000 2001 2002 2003 2004

AQF Qualification level

Diploma or higher 42 44 46 48 45

Certificate IV 53 59 60 66 56

Certificate III 107 110 108 117 116

Certificate II 99 82 75 73 68

Certificate I 21 24 26 24 21

Secondary education 0 0 4 4 3

Sub-total 321 317 321 332 309

Non-award courses 217 102 87 106 82

Miscellaneous education 98 142 139 149 123

Subject only (no qualification) 2 10 7 1 4

Total students 638 571 553 588 518 Source: NCVER, National VET provider collection 2005, NSW, Table 19; any differences due to rounding. Accreditation is the formal recognition that a VET course conforms to the National Accreditation Principles and to the AQF. This means that the course content and standards are appropriate to the qualification; the course fulfils the purpose for which it was developed; and the course is based on national competency standards where these exist. A course can only be accredited if VETAB is satisfied that it does not duplicate a qualification in a National Training Package.

3.4 Sources of funding VET in Australia is funded by both the government and private sources (eg, companies purchasing training for their employees). Individuals also contribute through the payment of fees. According to the NCVER, ANTA estimated that in 1998 expenditure on VET totalled $8.5 billion. Of this amount, 45 per cent was contributed by employers (or enterprises), 44 per cent by government and 11 per cent by individuals.33

In the case of employers, funding training for employees may go beyond contributions to VET and includes contributions to both structured and unstructured on the job training. The ABS produces statistics on employer training expenditure.34 The net direct expenditure of employers in NSW on training in the 2001/02 financial year was $1,360 million or $485 per employee, while for Australia as a whole it was $3,650 million or $458 per employee.35 This exceeded expenditure in 1996, which amounted to $2,400 million or $377 per employee.

33 Dumbrell, Resourcing Vocational Education and Training in Australia, NCVER, 2004. 34 ABS catalogue number 6362.0, April 2003. 35 It should be noted that this net direct training expenditure by employers includes more than

employer-funded VET. Net direct training expenditure is the sum of employers’ expenditure on: structured training (wages and salaries of dedicated trainers); fees to external training providers; training facilities; travel and accommodation expenses for attending training minus the sum of any subsidies received for training and payments received from external attendees for internal training courses.

27


While it is difficult to ascertain precise figures on employers’ funding of VET, it has been suggested that such employer funded training has been declining since the 1990s, both in terms of expenditure per employee and average hours spent training.36

In 2002/03, government funding of TAFE in Australia totalled $4.35 billion.37 This equated to approximately 0.6 per cent of GDP, compared to 5.4 per cent of GDP spent by Australian governments on all forms of education in total.38 In NSW, State and Local Government funding of TAFE increased from $1,160 million to $1,311 million over the period 1998/99 to 2003/04.39

According to the Senate Employment, Workplace Education Committee (the Senate Committee),40 the Commonwealth funds approximately a third of public expenditure on the VET system, in the form of grants to the states and territories, State and Territory governments provide the other two thirds. The Australian VET system is a joint responsibility of Commonwealth and State and Territory governments. The role performed by ANTA as the key national agency responsible for advising on national planning, funding and strategic objectives to achieve a national focus for VET, has, since July 1 2005, been assumed by the federal Department of Education Science and Training. DEST has reinstituted bilateral resource agreements with states. New Commonwealth legislation has been introduced, the Skilling Australia’s Workforce Act 2005. It implements the new governance apparatus of Ministerial Council for Vocational and Technical Education, the National Industry Skills Committee and the National Quality Council and is the instrument for commonwealth grants to states. Apart from providing the framework for a national approach to the planning, delivery, and accountability for VET, the legislation sets up a number of conditions for funding to States including, workplace reforms, increased use of publicly funded training infrastructure and compliance with increased user choice. The funding and governance of VET is illustrated in the diagram over the page. State and Territory governments provide funding for VET services through the state and territory training authorities. The bulk of government VET funds are allocated to government VET providers based on the planned activity set by State and Territory training authorities. In 2003, the proportion of government funding allocated to non-government providers for VET delivery in NSW was 3.7 per cent.41

Registered training organisations also receive revenue from individuals and organisations for fee-for-service programs, ancillary trading revenue, other operating revenue and revenue from Commonwealth, State and Territory government specific purpose funds. The funding source of VET enrolments in NSW is shown in Table 3.15 below.

36 See Hall, Buchanan and Considine, “You Value What You Pay For” – Enhancing Employers’ Contributions to

Skill Formation and Use, discussion paper for the Dusseldorp Skills Forum, June 2002. 37 Productivity Commission, Report on Government Service Delivery, 2005, AGPS, Canberra. 38 Ibid. 39 ABS Cat. No. 5518.0.55.001 Government Finance Statistics, Education, Australia, Table 9, 2005. 40 Report of the Senate Employment, Workplace Relations and Education Committee, Bridging the skills divide,

6 November 2003. 41 Productivity Commission, Report on Government Service Delivery, 2005, AGPS, Canberra.

28


29

Table 3.15 VET subject enrolments in NSW by funding source 2000-2004 (,000)

2000 2001 2002 2003 2004

Funding source

Commonwealth and state recurrent 3,414 3,617 3,519 3,516 3,256

Commonwealth and state specific funding 159 215 248 279 167

Fee for service 398 248 316 353 365

Overseas fee paying 38 50 51 48 42

Total enrolments 4,008 4,130 4,133 4,196 3,830 Source: NCVER, National VET provider collection 2005, NSW, Table 31; any differences due to rounding. Individuals undertaking training generally pay an enrolment fee (usually between $315 and $1,260 as per the NSW TAFE fee schedule for 200642) although TAFE NSW exempts a large number of individuals from paying an enrolment fee. However, under the Commonwealth government’s New Apprenticeships Incentives Program, apprentices and trainees may be eligible for subsidies such as the living away from home allowance ($78 per week), a trade and learning scholarship ($500 on successful completion of the first and second year stages) and a special incentive payment of $1,100 where the training will fill rural and regional skill shortages. Other assistance available through Centrelink includes the Youth Allowance (Austudy for over 25s and ABSTUDY).43

Industry and employers participate in policy development and contribute to training programs. Employers may also be eligible for subsides under the New Apprenticeships Program. These include standard payments on commencement of a new apprentice or trainee ($1,375 to $1,650), as well as payments for mature-aged workers ($825), women in non-traditional trades ($1,100), and where the employer is in a drought-declared area ($1,650).44

42 See http://www.tafensw.edu.au/about/money.htm43 See http://www.newapprenticeships.gov.au/employer/incentives.asp44 Ibid.

http://www.tafensw.edu.au/about/money.htm









































http://www.newapprenticeships.gov.au/employer/incentives.asp






































30

$

$

$

Persons receiving training

• TAFE students pay enrolment fee ($315 - $790 per course)

• Private/Community RTO’s set their own enrolment fees • Some Commonwealth programs offer subsidies to

persons undergoing training

Subsidies to persons

Examples of Commonwealth assistance include • Living away from home allowance

$77.17/week • Trade learning scholarship $500 tax free at

completion of 1st and 2nd year stages • Youth allowance and Abstudy • Rural and regional skill shortage special

commencement $1,100 NSW government also offers travel and accommodation assistance to apprentices.

Funding Sources Commonwealth-State Funding Agreement

• Replaces previous ANTA agreement • Sets outs

- Funding (block and specific) - Training policies, goals and plans - Sanctions for non-achievement by

states - Allows for bilateral agreements

Funds provided based on

approved VET plans

NSW Department of Education and Training(DET)

• Plan vocational training • Funds training institutions • Regulates and funds training providers • Accredits/registers providers based on national

standards and guidelines

Publicly funded institutions

• Registered Training organisations (RTO) - TAFE (part of DET) - Private providers - Enterprises - Community based providers

• Providers need to be registered in NSW with the Vocational Education and Training Accreditation Board (VETAB), who is also responsible for accrediting the training courses

- Registration needs to be renewed every 5 years

• RTOs can tender to provide publicly funded training programs. Successful RTOs are placed on an approved provider list (APL)

Payment to RTO for training through approved provider list

• Payments in stages for commencement, mid training

and completion • Payment based on number of pupils and hours of

contact. - Hourly rate per tender contract

• Other payments include - enrolment fees for pupils exempt from

paying directly to RTO

NSW Board of Vocational Education and Training (BVET)

• Advises NSW Minister on VET plans and

resource allocations

State Training Centres (STC)

• Runs various training programs like: - Apprenticeship & Traineeship program - Strategic Skills program

• Liaise with RTO for training capacity • Purchase training from RTO

$ $ $

$

$

$

$

Other VET funding

Australian Technical Colleges (to be implemented)

National VET programs Eg:

- New apprenticeship access - New apprenticeship incentives program

Centrelink - Youth allowance - Austudy/Abstudy

$ Employers

• Some Commonwealth programs offer subsidies to employers

• Depending on training programs, RTOs may seek contributions from industries and/or employers of pupils undergoing training

$

Subsidies to employers

Examples of Commonwealth subsidies include • Wage support • Workplace modification assistance • Assistance for tutorial, interpreter and

mentor services • New apprenticeship incentives

program - Standard apprenticeship

commencement $1,375 (Certificate II) and $1,650 (certificate III or IV)

- Completion incentive $2,750 (certificate III or IV)

- Women in non-traditional trades – special commencement $1,100 (certificate II-IV)

- Mature aged worker – special commencement $825 (certificate II-IV)

- Declared drought areas – additional commencement $1,650

Examples of NSW subsidies • Pays for the costs of training with

RTOs • Payroll tax exemptions for apprentices’

salaries

Ministerial council for vocational education and training

• Approves vocational education training

plans of the States/Territories for which funding is granted

• Harmonise national training • Determines guidelines for vocational

education funding and programs • Set training standards • Set assessment and accreditation

guidelines

Industry • Participates in policy developments $ Participate/contributes to training

schemes

Department of Education, Science and Training

(DEST)

Commonwealth funds one third of total VET education • Allocates funds amongst

States and Territories based on Commonwealth-State Funding Agreement

NSW Government

State funds two thirds of total public VET funding • State Funds support delivery of NSW VET

plans

TAFE NSW Private Community VET in schools

Registered training organisation (RTO)

• Provides training under various modes eg: - Institutional based - Distance education - Work based - Enterprise based

$

$

$


3.4.1 Introduction of competition The disbursement of VET funding on a competitive basis was introduced in the early 1990s to allocate additional Australian government funds to government providers and private registered training organisations. Processes used to allocate funds on a competitive basis include: • competitive tendering, whereby government and private registered training

organisations compete for funding contracts from State and Territory training authorities in response to government offers (tenders)

• user choice, whereby the employer and apprentice/trainee choose a registered training provider and negotiate key aspects of their training, and then government funds flow to that provider

• preferred supplier arrangements (an extension of competitive tendering) whereby a contract is awarded to providers (chosen by the tender process) to provide training on a longer term basis.

Competitive tendering mechanisms for allocating funds to VET providers were designed to expose the sector to greater competition by facilitating the entry of new providers and the expansion of existing providers. In 2003, an estimated $700.3 million of government VET funding was allocated on a competitive basis (including ‘user choice’ arrangements).

3.5 Recent reform of VET The introduction of competition among training providers is one of the reforms made to the VET system in the past 20 years. Two other reforms of interest to this review are the move away from time-based to competency-based training and the introduction of the New Apprenticeships program and User Choice policy.

3.5.1 Move away from time-based to competency-based training Since the late 1980’s Australia has been developing and implementing a system of competency-based training. Under this approach, the Industry Training Advisory Bodies (ITABs) have been heavily involved in: • Identification of the competencies required by industry from formal training at

different levels.

• Developing industry competency standards for each training program with a system of national training packages for each industry (see section 3.3.1 above).

• Identifying the qualifications that are included in each industry’s national training package.

• Developing assessment guidelines for assessing whether or not competencies specified in national training packages have been achieved by each trainee.

According to the NCVER, there has been widespread agreement with the move to make VET provision more relevant to industry needs, rather than continuing with the previous system where training providers largely determined the content of VET courses.45 This view is supported by the Senate Committee’s findings that “evidence from industry strongly supported the concept of training packages, industry’s continued role in the identification of competency and assessment standards and the inherent scope for flexible pathways and 45 NCVER 2000, Developments in Australia’s Vocational Education and Training System, p 32.

31


delivery approaches. The requirement for individuals to demonstrate actual competency is seen as far preferable to certification purely on the basis of time served.”46

A key element of competency-based training has been the shift away from curriculum content and standard amounts of time in each level of training, towards only assessment of the competencies required in each case. This can be seen in Table 3.16 below, which illustrates the growth of achieved training package units of competency versus the decline in assessed modules.

Table 3.16 Units of competency and modules achieved each year by VET students in Australia 2000-2004 (000s)

2000 2001 2002 2003 2004

Training Package units of competency 2,785 4,142 5,121 5,959 5,765

Annual growth (%) 49% 24% 16% -3%

Growth since 2000 (%) 84% 114% 107% Assessed modules 4,835 4,073 3,384 2,435 2,190

Annual growth (%) -16% -17% -28% -10%

Growth since 2000 (%) -30% -50% -55% Units of competency/Modules 7,621 8,216 8,505 8,393 7,955

Annual growth (%) 8% 4% -1% -5%

Growth since 2000 (%) 12% 10% 4%

Average number per VET student 4.5 4.9 5.1 4.9 5.0 Source: Annual National Report of the Australian Vocational Education and Training System, 2004, DEST; any differences due to rounding. While there has been support within industry for the move to competency standards and competency-based training,47 there has also been criticism that the development of competency-based training has been overly complex, and too focused on detail being prescribed at the national level, with industry bureaucracies replacing the government bureaucracies that once existed.48 In addition, it has been suggested that the shift to competency-based training has led to a short-term focus on specific tasks and skills related to existing jobs, with insufficient emphasis on broader vocational knowledge, particularly in emerging technologically based industries and occupations. 49

46 Report of the Senate Employment, Workplace Relations and Education Committee, Bridging the skills

divide, 6 November 2003, Chapter 3. 47 A study conducted by the Allen Consulting Group for the Australian Industry Group found that 70 per

cent of all companies surveyed supported competency-based training, while only three per cent did not (27 per cent were neutral). See The Allen Consulting Group, Training to Compete, Study for the Australian Industry Group.

48 NCVER 2000, Developments in Australia’s Vocational Education and Training System, p 33. 49 NCVER 2000, Developments in Australia’s Vocational Education and Training System, p 32.

32


This view is supported by submissions to, and the findings of, the Senate Committee, which recommended that:

ANTA’s review of training packages address the full range of concerns about their design and implementation, including:

the need for greater focus on the development of underpinning knowledge, critical thinking and generic skills;

more consideration of the requirements of Small and Medium Enterprises (SMEs) and the differing industry structures in the smaller states;

provision for all qualifications within a package to articulate to higher level qualifications within the package;

greater scope for combining competencies from a range of packages into national qualifications;

the need for quality learning and assessment support materials to be included with the release of every package; and

measures to strengthen the integrity, consistency and informative nature of assessments, which might include one or more of: greater use of graded assessments, moderation of assessments, involvement of state industry advisory bodies and better integration with workplace and institutional learning.50

3.5.2 New Apprenticeships and User Choice In 1998 the Commonwealth’s New Apprenticeships system commenced, with the aim of introducing greater flexibility to apprenticeships and traineeships.51 Under the New Apprenticeships system the Commonwealth aimed to remove the distinction that formerly existed between apprenticeships and traineeships. NSW has retained the distinction between apprenticeships, which occur in traditional trades based occupations, and traineeships. Flexible, rather than fixed, amounts of on-the-job and off-the-job training can now be provided in line with employer and apprentice/trainee requirements. According to the NCVER, “other important features of the New Apprenticeship system include: • ‘User Choice’, where employers can select their own vocational education and training

provider for the formal (ie off-the-job) component

• the option of undertaking the formal part of the training entirely in the workplace

• allowing training contracts to apply to part time as well as full-time employment situations

• the option of commencing the training program while still at school

• subsidies and incentive programs to employers to encourage them to take on New Apprentices, to encourage training at higher skill levels (as measured by the level in AQF), and for successful completion of the training program. “52

50 Report of the Senate Employment, Workplace Relations and Education Committee, Bridging the skills

divide, 6 November 2003, Chapter 3. 51 NCVER 2000, Developments in Australia’s Vocational Education and Training System, 2000, p 19. 52 Ibid.

33


Figures 3.2, 3.3 and 3.4 below illustrate trends in apprenticeship and trainee numbers, distinguishing between traditional apprenticeships (eg trades and related workers) and other apprenticeships and traineeships, since 1998. The figures show: • the number of apprentices and trainees in training (at year end)

• the number of apprenticeship and traineeship commencements each year

• the number of apprenticeship and trainee completions per year.

Figure 3.2 Apprentices and trainees in training in Australia (at year end) 1999-2004 (,000)

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

1999 2000 2001 2002 2003 2004

Total apprenticeships

Traditional apprenticeships

Source: Australian vocational education and training statistics, Apprentices and trainees December quarter 2004 - Table 11.

34


Figure 3.3 Apprenticeships and traineeships commenced in Australia 1999-2004 (,000)

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

1999 2000 2001 2002 2003 2004




Figure 3.4 Apprenticeships and traineeships completed in Australia 1999-2004 (,000)

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

1999 2000 2001 2002 2003 2004




35


While the figures show strong growth in the overall number of apprenticeships and traineeships since the introduction of the New Apprenticeship system, figures for traditional apprenticeships have remained relatively stable. This is supported by the finding of DEST in December 2004 that “the strongest areas of growth of New Apprentices in terms of percentages have been in the advanced clerical and service workers (up 5,700 or over 2,500% - albeit from a low base), intermediate transport and production workers (up 28,360 or over 1,800% - again from a fairly low base) and associate professionals (up 31,100 or 1,100%). In terms of absolute numbers, intermediate clerical, sales and service workers have shown the strongest growth (up 75,600 or 415%).”53

The trend in apprenticeships since the mid 1990s is characterised by an increasing participation of female and older age students. However, traditional apprenticeships are still largely made up of young males studying for an AQF level III certificate.

Table 3.17 Apprentices and trainees in-training at December by Age (percentage)

1996 1997 1998 1999 2000 2001 2002


Age 19 and under 47 47 48 49 48 46 46

Age 20 to 24 46 46 44 42 42 42 42

Age 25 to 44 7 8 8 9 10 11 11

Age 44 and over 0 0 0 1 1 1 1

Total 100 100 100 100 100 100 100 Total (‘000) 101 102 103 108 113 111 115


Age 19 and under 45 41 38 36 34 31 29

Age 20 to 24 42 39 36 32 30 28 27

Age 25 to 44 12 17 22 24 27 30 31

Age 44 and over 1 3 6 7 9 11 12

Total 100 100 100 100 100 100 100 Total (‘000) 163 186 217 255 295 325 369 Source NCVER, Australian vocational education and training statistics: Trends in ‘Traditional apprenticeships’, 2004, Table 8; any differences due to rounding.

53 Department of Education, Science and Training, Skills at Work – Evaluation of New Apprenticeships,

December 2004.

36


Table 3.18 Apprentices and trainees in-training at December by gender (percentage)

1996 1997 1998 1999 2000 2001 2002


Male 89 89 89 89 89 88 88

Female 11 11 11 11 11 12 12


Male 80 75 70 69 68 66 64

Female 20 25 30 31 32 34 36 Source NCVER, Australian vocational education and training statistics: Trends in ‘Traditional apprenticeships’, 2004, Table 11; any differences due to rounding. As noted in section 3.4, there are a variety of employer subsidies available under the New Apprenticeships program. According to DEST, the Commonwealth government spent $1.7 billion on such incentive payments between 1998 and 2004, and New Apprenticeships comprise around 20 per cent of the publicly funded VET system. 54

3.5.3 User choice Associated with New Apprenticeships program is the ‘User Choice’ policy under which employers and employees choose their training provider for publicly-funded VET and can negotiate on the timing, location and mode of delivery of training. In line with national training agreements and user choice policy, NSW operates a competitive training market where both public and private training providers are contracted to deliver publicly-funded training. The NSW Apprenticeship and Traineeship Training Program is the main element of the NSW Training Market. All existing traineeships are available under user choice in NSW. In addition 14 apprenticeships are available under user choice in selected geographic and apprenticeship areas identified as strong, sustainable markets. These account for almost half of all apprenticeship commencements. Overall, user choice in NSW accounts for around 80 percent of all new entrant trainee and apprentice commencements. More than 460 registered training organisations, over a quarter of which are interstate registered, have been approved for the 2006 Approved Providers List to deliver publicly-funded training under the NSW Training Market. There has been a 14 per cent increase over 2005 in the number training organisations employers can choose from to provide the training component of traineeships and selected apprenticeships. The 2005 budget for the NSW Training Market was $68 million.55

54 Ibid. 55 Information provided by the Department of Education and Training.

37


38

Key issues for stakeholders

4 KEY ISSUES FOR STAKEHOLDERS

The Tribunal will need to consider issues within five broad areas as part of this review: • the forecast supply and demand for skills in NSW over the next 20 years

• the likely demand for VET if policies for increasing labour force participation to eliminate the potential problems posed by an ageing population were to be successful

• the need to manage the cost of meeting this demand for VET, while also increasing the effectiveness of VET

• the factors that will affect the take-up of VET

• the capacity of the VET system to provide the training that will be required over the next 20 years.

The sections below explore these broad areas, and highlight some of the specific issues and questions on which the Tribunal particularly seeks stakeholder input. As noted in the Chapter 1, the issues and questions listed are not exhaustive – stakeholders should feel free to raise and discuss any other issues they consider relevant to the review when making their submissions.

4.1 Forecast supply and demand for skills in NSW over the next 20 years

Chapter 2 highlights the principle future challenges facing the VET system stemming from changes in the labour market and the ageing population. It highlights a number of significant labour market changes; including:

• decline in the labour force and employment participation of males of prime working age (35-54 years) and the link between this trend and levels of education and training

• dramatic increase in part time work

• decline in ‘blue-collar’ work. These changes have contributed to a mismatch in the labour market where there are many people who would work more given the opportunity. This mismatch represents a loss in potential output, it also represents a social inequity in that individuals are achieving less than they desire in terms of their labour market outcomes. The ageing of the population will present a number of important challenges, including:

• increase in the dependency ratio

• deteriorating fiscal positions for governments

• lower participation rates. All of these issues are important when considering the supply and demand for skills in NSW over the next 20 years.

39


For additional background information, stakeholders may wish to refer to the Access Economics report provided to the Commonwealth Department of Education, Science and Training on future demand for VET.56 The Tribunal intends to engage a consultant to undertake a similar study focusing on the demand for VET in NSW as part of this review. It will be examining the types of skills that will be demanded if the potential for economic growth is to be realised over the next 20 years—that is, if the impact of an ageing population is to be eliminated through an increase in labour force participation and productivity—and then relate those projected demands for skills back to the specific demands for different types of VET courses. It has been argued that some industries and employers are currently facing skills shortages—that is, the demand for workers for a particular occupation is greater than the supply of workers who are qualified, available and willing to work under existing market conditions.57 The Tribunal would like to know more about specific skills shortages to assist it in its assessment of the demand for skills into the future. While the Tribunal welcomes views on skills shortages as a whole, it is particularly interested in skills shortages which VET can address. The Tribunal invites views on: • What types of skills are currently in short supply within NSW?

• Are these skills shortages likely to be resolved through the normal operation of the labour market or do they require specific attention?

• What skills and occupations are likely to be in demand in NSW over the next 20 years?

• Are these skills and occupations likely to be very different from those in demand now? While some skill and/or labour shortages may be occurring across NSW, others may be restricted to regional or rural areas. The Tribunal would like to better understand this issue. What are the strategies that need to be used in addressing skill shortages and other structural issues in rural, regional and remote labour markets? How are training opportunities to be provided equitably and effectively across NSW in order to meet the needs of regional communities and industries? How can the needs of regional communities undergoing significant demographic change or economic restructuring be addressed? As stated noted in Chapter 1, the Tribunal will be engaging a consultant to forecast the future demand for skills over the next 20 years in NSW. It anticipates that this will be a complicated task. The Tribunal invites views on the difficulties in calculating and forecasting the demand for skills and potential skill shortages in the future.

56 Access Economics, Future Demand for Vocational Education and Training, report to the Department of

Education, Science and Training, May 2004. 57 Shah and Burke, Skills Shortages: Concepts, Measurement and Implications, Working Paper, Melbourne,

Centre for the Economics of Education and Training, Monash University, 2003.

40


One of the factors that will affect the forecast of the future supply of skilled labour is the tendency of labour to move occupations and industries. Indications are that labour mobility is increasing and people are now more likely to change both employers and occupations during their careers. The Tribunal invites views on the increased labour mobility and the tendency of workers of different ages to change careers more frequently and the reasons underlying these trends. Another issue that relates to labour mobility is the tendency for some workers who have skills to work in an occupation or industry that does not require their skills. If some occupations have poor retention rates, this has a long-term impact on the supply of skilled labour within those occupation and industries. The Tribunal invites views on the number of workers who work in occupations and industries in which they are not using their skills. It would also like comments on: • What factors contribute to people working in occupations where they are not using

their skills?

• Are retention rates for certain occupations affecting the supply of skilled labour?

• What are the reasons for some workers with skills and formal training to be detached from the workforce?

4.2 Demand for VET if participation rates were to be increased The review also needs to consider what the demand for VET would be over the next 20 years if policy were to be successful in increasing labour force participation so as to eliminate the potential problems posed by an ageing population. Some of the main themes will be the nature, magnitude and cost of this increased training effort. Others will be the appropriate balance between youth and adult training, and the different implications for males and females, both of which will require consideration of supply as well as demand issues. The Tribunal welcomes views from stakeholders on the demand for VET over the next 20 years if participation rates were to be increased. Stakeholders may wish to distinguish between: • the implications for males and females

• the rough balance of skills that should be demanded

• the magnitude of the respective training efforts directed at youth and at adults who are being retrained or upgrading their skills.

4.3 Managing the cost of VET and increasing its effectiveness Once the nature, magnitude and cost of the increased training effort needed in NSW have been identified, it will be important to examine options for managing the costs of training, including increasing the effectiveness of the training delivered. This raises a number of issues about future changes in the nature of work and how this is reflected in the demand for training, and whether the present training system has the flexibility to respond to such changes in demand.

41


The changing nature of work has been widely recognised.58 The implications of globalisation, the information age and the pace of technological change include: • access to employer-provided training (particularly for new modes of employment such

as casual, project and part time)

• a shorter life for technical skills (with a subsequent need to retrain within the working life).

As recognised by the NCVER,59 these implications suggest that VET should be structured to provide adequate coverage of the underlying vocational knowledge and understanding, and not just the skills required at any one point in time. Going forward, these generic skills are likely to be as important, if not more important, than technical or job-specific skills. Currently, recognition of prior learning at present plays a very small part in VET module outcomes (three per cent in 2004, see Table 3.10). As the nature of work changes, the need for and effectiveness of refresher courses and continuing learning will become more important. The Tribunal invites views on the extent to which future changes in the nature of work require changes in training that favour generic and institutional training, for example, to provide more emphasis on foundation skills that promote problem solving and human interrelations. Introduction of the New Apprenticeship system increased the flexibility of apprenticeships by removing the stipulation of fixed amounts of on-the-job and institutional training. As discussed in section 3.5, flexible amounts of training can now be provided according to employer and trainee requirements and the system has been accompanied by a significant increase in the number of New Apprenticeship commencements. The Tribunal invites views on the outcomes from VET, and in particular, whether the proliferation of New Apprenticeships reflects value for money. Are there any steps that could be taken to improve the value for money of New Apprenticeships, including the possibility of changing their funding in some way? The move away from time-based training to competency-based training in Australia since the 1980’s is documented in section 3.5. There is widespread support for this move, and Training Package units of competency-based training increased as a proportion of overall units of competency and assessed modules from 37 to 75 per cent between 2000 and 2004. However, it has been suggested that this has led to “a short-term focus on specific tasks and skills relating to existing jobs, with insufficient emphasis on broader vocational knowledge and the general skills that are required in the continuous shift on technological knowledge, particularly in emerging technologically based industries and occupations.”60

The Tribunal invites stakeholders to comment on how well Training Packages reflect current workplace requirements and the future skill needs of NSW. Comments are invited on the appropriate balance in training between generic skill development and competency outcomes.

58 NCVER 2000, Developments in Australia’s Vocational Education and Training System, www.ncver.edu.au. 59 Ibid. 60 Ibid.

42

http://www.ncver.edu.au/


The governance and accountability framework for VET is discussed in section 3.3. The responsibilities and functions of the ANTA were transferred to the Department of Education, Science and Training (DEST) from 1 July 2005. While the transition of ANTA functions and knowledge to DEST is in progress the arrangements remain broadly the same.61

The Tribunal invites views on the suitability of the current regulatory and quality assurance arrangements of the VET system in relation to registration, accreditation and auditing in order to best support future skill requirements. What mechanisms can be developed to address the quality assurance of training system outputs including the skills and knowledge of graduates? While over 80 per cent of VET students study at TAFE, section 3.2.1 highlights some of the difficulties associated with assessing completion rates for VET courses. This is driven by the fact that while a number of VET students are studying to attain a formal qualification, others are only attempting to complete modules aimed at attaining specific skills. The Tribunal invites views on completion rates for VET courses, how they have been trending, and what this implies for the effectiveness s of these courses. Section 3.4 outlines the current funding arrangements for VET. These arrangements include the provision of subsidies to people receiving training, such as the living away from home allowance, trade learning scholarship, youth allowance and Abstudy, rural and regional skill shortage special commencement. The Tribunal invites comment on changes to funding, and assistance or incentive arrangements which might assist take up and completion of courses.

4.4 Factors affecting the take-up of VET Once the Tribunal has established the nature and scale of the additional VET required over the next 20 years, an important issue for this review is the factors that impact on employers’ and trainees’ take-up of VET opportunities. Chapter 2 sets out the positive relationship between education and training and productivity. If skilled workers are more productive, increasing the supply of skilled labour brings benefits not only to the economy as whole through enhanced rates of economic growth, but also to employers and businesses through the enhanced productivity of individual employees. Chapter 2 also notes the positive relationship between education and earnings. The question is then what are the benefits from further education and training relative to the costs, especially for trainees, and what other factors reduce both employers’ and trainees’ preparedness to support and undertake more training.

61 See


43



The Tribunal invites views on the actual and perceived returns to training for employers and individuals—for example: • Are there differences between the returns for initial training from those stemming from

retraining and upgrading of qualifications?

• If there are differences in the perceived returns to different forms of training, is the apportionment of funding between different qualifications/courses appropriate in terms of the incentives to undertake training?

• How important is the cost of providing VET for employers, and the cost of undertaking study for learners in determining their take-up of VET?

Chapter 3 provides a summary of recent trends in total VET student numbers. Some recent research indicates that the take up of some VET, such as apprenticeships, has increased significantly over recent years.62 While the numbers of students may be increasing for some forms of VET, completion rates could be an issue for the VET system. A survey by the NCVER found that the reasons for apprentices and trainees not completing their courses vary. However, some of the key factors are: their employment ended with that employer (for apprentices and trainees the employment and training relationship is related); and a feeling that apprentices and trainees are treated as cheap labour.63 There also are some suggestions that employers are not using employees’ skills, and that career paths have been truncated thus reducing the incentives to train.64

The Tribunal invites views on the impact pay structures and other aspects of the industrial relations system might be having on decisions to undertake training. For example: • If competency-based training were accompanied by competency-based pay, what

difference would this make to take- up and completion of VET?

• Is the shift to casualisation and part-time employment inhibiting training, and if so, how could those inhibitions be reduced or offset?

• How well is training leading to career paths, particularly in the case of New Apprenticeships?

• Has restructuring and labour flexibility let to truncation of career paths in some sectors?

• Are there ways in which work and jobs could be reorganised so as to make better use of employees’ skills and thus improve incentives?

One of the key issues raised in Chapter 2 is the need to provide training for mature labour in ensuring its ongoing labour force participation. Research by the NCVER shows that the number of VET students aged 45 to 64 years doubled from 1994 to 2002 and that older students are more likely to be found in the VET system than in the higher education system. However, these students are more likely to be studying shorter, less formal training courses that do not lead to nationally recognised qualifications.65 Therefore, these courses are less likely to enhance their employment participation.

62 Toner, Getting It Right – what employers and apprentices have to say about apprenticeships, Dusseldorp Skills

Forum, October 2005. 63 Cully and Curtain, Reasons for new apprentices’ non-completions, NCVER, 2001. 64 Lansbury and Hall, Skill development and skills transformation: between mining and minding, School of Business,

University of Sydney, 2005. 65 Anlezark, Australian vocational education and training statistics – older learners 2002, NCVER, 2004.

44


Other research suggests that the factors preventing mature workers from increasing their skills and undertaking additional training include attitudes to older workers, personal circumstances and attitude to learning, and government policies (such as retirement incomes and pension policies). The Tribunal invites views on the factors preventing mature workers from increasing their skills and undertaking additional training. In its 2005 report on the learning and work situation for young Australians, the Dusseldorp Skills Forum emphasise that while the educational attainment of young Australians increased between 1994 and 2004, 15 percent of 15 to 19 years olds and nearly a quarter of 20 to 24 years olds are not fully engaged in learning or work.66 Based on its research, it concluded that the younger women are being more disadvantaged in the labour market than younger men because of their predominance in casual, part time and low-skilled jobs. The Tribunal invites views on the specific issues preventing more young people from undertaking education and training. It also welcomes views on: • What the VET system can do to encourage more younger people who are currently not

studying or working to do so.

• How we can ensure that young people in low-skilled occupations receive adequate training that will enhance their employment opportunities over their careers.

Turning to employers’ attitudes, research shows that where employers invest heavily in the skills of their workforce they have a strong incentive to keep that skilled labour and deploy it most effectively.67 The issue for this review is to identify the factors that affect an employer’s decision to invest heavily in the skills of its workforce through education and training. It is often claimed that the level of funding provided to training by Australian employers is below that in comparable nations.68

The ABS research indicates that the provision of training varies across industries, with government, utilities, education, finance and health services providing the highest levels of employer-provided structured training, and transport, manufacturing and retail the lowest.69 According to employers, the main reason they do not provide training to their employees is that employees are already adequately trained. Other reasons include that the work their employees undertake is unskilled, that they recruit qualified people and costs and time constraints.70

The Tribunal invites views on the factors that impact on employers’ decision to provide training. For example: • Does the capacity to hold onto skilled staff affect this decision?

• Is the VET system offering the right services?

• Is there sufficient flexibility in the system to accommodate employers’ needs? 66 Dusseldorp Skills Forum, How young people are faring – key indicators 2005, 2005. 67 Hall, Buchanan and Considine, “You Value What You Pay For” – Enhancing Employers’ Contributions to Skill

Formation and Use, discussion paper for the Dusseldorp Skills Forum, June 2002. 68 Ibid. 69 ABS data catalogue 6362.0, April 2003. 70 Ibid.

45


• Has the flexibility from the introduction of user choice increased the willingness to provide training?

• What sort of relationships between employers, training providers and funding bodies could assist the availability of trained staff into the future?

4.5 Capacity of training system to provide training required over the next 20 years

The above sections have raised issues relating to the demand and supply for VET and factors impacting on that demand and supply. An important factor that affects the supply of workers with VET is the capacity of the training system. Given demand, how well is the NSW training system positioned to cater for changing demands over time? To answer this question, the review will need to consider: • the flexibility of the training system

• the governance and funding structures

• the impacts of changes to the training system, both past and future. Forecasts of demand for specific skills may prove to be wrong. Therefore, the VET system will need to have the flexibility to quickly adjust. The greater the flexibility of the training system, the better the capacity of the system to respond to VET needs as they arise. The Tribunal seeks views on the current flexibility of the training system. • Which aspects of the system supports flexibility and which aspects need

improvements?

• Of the aspects requiring improvement, how should these be improved? Part of the rationale for introducing user choice was to increase flexibility of the training system. User choice is generally believed to have increased competition in the training market. However, the Senate Committee noted that although:

…a mixed training market, including user choice, have played a role in promoting a more responsive and flexible training system. But they are not necessarily the best or only means of promoting a VET system that meets industry needs.71

The Senate Committee also noted that some of the short comings of user choice include that it has led to a fragmentation of the training market, duplication of resources and made the system more supply driven, because of the incentive for providers to generate demand for their ‘standard product’ funded under a competitive model. The Tribunal seeks comments on how user choice has been implemented in NSW, including: • What has been the impact of user choice in terms of the flexibility and responsiveness

of the training system?

• What have been the impacts of competitive funding arrangements in NSW for users and providers of the VET system?

71 The Senate, 2003, Employment, Workplace Relations and Education References Committee, Bridging the

skills divide, p 105.

46


• What are the implications of user choice for VET governance structures and whether they should be more decentralised to respond to a more competitive training market?

Governance arrangements have a bearing on the capacity of the training system. The level of centralisation and decentralisation of various aspects of the training system will impact on the system’s flexibility and hence capacity to respond to demands. The Tribunal invites views on the level of decentralisation of the current training system, including • Who determines which type of training is provided?

• Will VET be more responsive to changing patterns of demand if there is more decentralisation to allow for local initiatives within an overall policy framework determined by the State and Commonwealth governments?

The flexibility of the training system may also be influenced by other factors such as employment and labour market conditions. Section 3.2 notes that the significant number of VET teachers work part time. The Tribunal invites comments on other factors affecting the capacity and flexibility of the training system. What changes in employment conditions and any other changes might improve the flexibility of the VET system to respond to changing demands? The training system includes more than the direct provision of training. It also includes accreditation, trainer quality, standards and guidelines. Currently, policies on training, standards and accreditation are determined at a national level, though they are implemented separately by the states and territories. The Senate Committee raised issues associated with inconsistency in implementation and the resulting detriments to the training system. It could be argued that some aspects of the training system need to be more centralised while others more decentralised. The Tribunal invites views on the balance between decentralisation and Commonwealth pressures for national uniformity and transferability of VET qualifications. Are the ways of reconciling these competing pressures without undue damage to either? Discussions on governance structures cannot be detached from issues of funding. The current funding arrangements involve the Commonwealth government providing about one third of VET funding, while states and territories provide the remainder. However, degree or higher level education is largely the responsibility of the Commonwealth. The Tribunal seeks comments on the current funding arrangements, including: • What effects have these funding arrangements had on the capacity and flexibility of

the training system?

• Are there any areas where improvements are needed? So far we have considered the aspects of training provision, funding and governance. However another important aspect is the training outcomes. What is the quality of the skills attained by persons undergoing training? Do they acquire the needed technical skills to perform the job-specific tasks, as well as the skills to adapt to changing employment needs?

47


The Tribunal invites comments on impacts of the reforms over the last decade. In particular, has the shift towards an ‘industry-led system’ resulted in an over-emphasis on job-specific skills at a risk to later adaptability? Similarly, in considering comments on future improvements to the system, the potential impact on the various parties in the training system is also important. Vocational training is still largely provided by TAFE (see Table 3.9). As the major public provider of vocational training, it is important to consider the implications of suggested changes for TAFE. The Tribunal seeks comments on the impacts of suggested changes and improvements. • What are the likely implications of Commonwealth policies for future TAFE capacity,

including the implications of Commonwealth-State agreements?

• How well placed is TAFE to meet the competitive challenges that it will be facing, including from the Commonwealth, and what changes will be necessary in that regard?

• What are the risks to the VET system if a large part of TAFE funding is contestable and many staff are part-time casuals (given that TAFE is often seen as providing the necessary reserve capacity for the VET system)?

• What can be done to ameliorate these risks?

48

review of the skills base in - ipart · all submissions should be sent to: review of skills base in...

Documents