Robin ShreeveCEO, Skills Australia12 April 2012

2012 AVETRA Conference

The Value and Voice of VET Research for individuals, industry, community

and the nation

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Aligning tertiary education with the demand for skills and

qualifications in a changing world

What is Skills Australia?

“Skills Australia will provide the Government with recommendations on current and future skills needs (and) inform Australia’s workforce

development needs¹ …”

• Expert independent Board with expertise in industry, economics, education and academia;

• Provides independent advice to the government on current, emerging and future skills needs and workforce development needs

• Remit expanded in March 2009 to look at full scope of labour market and give advice on HE & VET

• 2011 Budget announcements-extended role as Australian Workforce Development and Productivity Agency. Responsible for National Workforce Development Fund – started early – 1 October 2011

Back row (L to R): Dr John Edwards, Heather Ridout,

Keith Spence.

Middle row: Paul Howes, Prof. Gerald Burke, Peter Anderson, Ged Kearney.

Front row: Marie Persson, Philip Bullock (Chair),

Dr Michael Keating AC.

Source:Julia Gillard, Second Reading Speech – Skills Australia Bill 2008 (14 Feb 2008)

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Advice Skills Australia has provided to Government

• Foundations for the Future – June 2009

• Australian Workforce Futures: a national workforce development strategy – March 2010

• Advice to Department of Immigration on Skilled Occupation List for General Skilled Migration program – February 2011

• Skills for prosperity: a road map for vocational education and training – May 2011

• Energy efficiency in commercial and residential buildings: Jobs and Skills Implications – May 2011

• 2011 interim report on resources sector skill needs – July 2011

• Defence Industry Workforce Strategy – January 2012

• Scenario development - phase II of Australian Workforce Futures 3

Benjamin Jowett (1817-1893)Master of Balliol College, Oxford and Regius Professor of Greek

“Research! Research! A mere excuse for idleness; it has never achieved, and will never achieve any results of the slightest value”

In conversation with Logan Pearsall Smith. Reported in Smith's Unforgotten Years (1938) p. 169.

Abraham Flexner (1866-1959)Foundation Head of Institute of Advanced Studies Princeton

"Intellectual inquiry, not job training, [is] the purpose of the university.“

Universities English, American and German (1930)

Professor Joseph Wright (1856 – 1930) – a remarkable pathway

• Professor of Comparative Philology at Oxford University. Expert on dialect. J R R Tolkein was one of his students.

• Seventh son of a navvy, he started work aged only 6 years old as a donkey boy, taking tools from quarry-men to the local blacksmith to be sharpened. Taught himself to read and write aged 15 using the Bible and a “Pilgrim’s Progress”

• Attended evening classes at Mechanics Institute

• in 1876, he had managed to save up £40 to study for a term at Heidelberg University in Germany. He found employment as a Schoolmaster on his return to England.

• He returned to Germany in 1882 where he gained a PhD in Qualitative and Quantitative Changes of the Indo-Germanic Vowel System in Greek at the University of Heidelberg in 1885.

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Why all the fuss about skills and qualifications?

• Skill shortages - as the economy shifts to recovery and growth, concerns are raised again about constraints due to skills shortages

• Experience shortages – do employers prefer those with experience and is there an issue with novice workers

• Productivity - the positive growth in productivity earlier this decade has flattened, and turned negative

• Participation - Australia ranks only 10th out of 34 OECD countries on workforce participation

• Population - Ageing of the Baby Boomers, Migration and International trends

• Underemployment - there are 1.4 million Australians unemployed or underemployed

• Foundation Skills - currently 50% of the population has lower language, literacy and numeracy levels than they need for their jobs

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Australia – the challenge of prosperity

Glenn Stevens Governor of Reserve Bank of Australia

• To put it in very simplified terms, five years ago, a ship load of Australian iron ore was worth about the same as about 2,200 flat screen television sets

• Today it is worth about 22,000 flat-screen TV sets – partly due to TV prices falling but more due to the price of iron ore rising by a factor of six

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Source: ABS cat. no. 5204.0 and Treasury. Dr Ken Henry, Post Budget address to the Australian Business Economists ,

18 May 2010

Australia - Three Speed Economy Output by selected industry sector

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Specialised occupations

•Apply concept of specialised occupations - those occupations with greatest risk of market failure

Scenarios

•Develop, test and model multiple scenarios to achieve flexible policy responses

Demand

Driven

Funding

•Fund users rather than providers – but only after you have sorted out quality and regulation

Our three conceptual pillars in our response to aligning skills, qualifications and the economy’s needs

Matching skills and jobs in a fluid labour market

Initial education or training becomes less relevant over

time

45% workers change jobs every three years

People may not seek or find careers in their field of

learning

40% end up in jobs which match their VET study

Skills are more than qualifications

Importance of generic, cognitive and interpersonal skills in a

service-based economy

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Planning for ‘specialised occupations’

• We cannot plan for everything … we need to adopt a targeted, focused approach

• Skills Australia has found that the labour market is effective in meeting skills needs but there are particular ‘specialised’ occupations where intervention is required

• This planning framework forms the basis for Skills Australia’s advice to government to identify longer term skills needs that are of high value to the economy

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Specialised occupations criteria

1. Long lead time – those skills which are highly specialised and require extended learning and preparation time

– 4 years or more for HE courses; 3 years or more to achieve VET qualification

2. High use – those skills which are deployed for the uses intended (that is, there is a good occupational ‘fit’)

– There is more than 50% match between the training and the destination occupation

3. Significant disruption – where the opportunity cost of the skills being in short supply is high (e.g. registered nurse or doctor)

4. High information – where the quality of information about the occupation is adequate

An occupation is considered ‘specialised’ if it meets at least two of the first three criteria, as well as the fourth criterion

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2011 Specialised Occupations List (SpOL) includes:

• Construction Managers• Engineering Managers• Auditors, Company Secretaries and

Corporate Treasurers• Air Transport Professionals• Aircraft Maintenance Engineers• Electronics Engineers• Mining Engineers• Veterinarians• University Lecturers and Tutors• Medical Imaging Professionals• Optometrists and Orthoptists• Speech Professionals and Audiologists• Pharmacists

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Australian example: shortage of engineers and related employment skills

Factors driving demand for engineering skills• Resources sector• Expansion of Defence acquisitions• National Broadband Network (NBN)• Other infrastructure projects

Labour market supply of engineers• Higher Education – A steady increase in domestic students for

engineering places at Bachelor level and above in universities between 2001 and 2010 (DEEWR HE data, 2011)

• VET – The number of students in VET engineering and related technologies total commencements between 2005 and 2010 increased by 21 per cent (141 471 to 171 354). The vast majority of these commencements were at Certificate III level (NCVER, 2011)

• Skilled migration – Most engineering occupations are currently on Skills Australia’s SOL

• Retention – in 2010, 58.2 per cent of engineering labour force were employed in an engineering occupation

• Recruitment difficulty – employers seeking qualified and experienced engineers often require five to ten years or more of relevant industry experience

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The challenge of forecasting – understanding uncertainty through scenarios

• Return on investment in skills takes many years and therefore requires a long view

• But projections into the future are inherently uncertain – forecasting is difficult particularly beyond 1-3 years

• Scenarios allow for alternative futures to be considered in economic modelling – Help manage uncertainty of the future – Improve longer term decision making

• Important – scenarios are not predictions– Use scenarios to develop & test strategies, understand

risks & generate new ideas and possible responses

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Approach to 2012 strategy

Australian Workforce Futures

• 3 off-the-shelf scenarios by Royal Dutch Shell

• Tailored to Australian conditions

• Informed modelling but focused on the scenario most consistent with government goals and policies

2012 strategy• Progress since 2010• 4 plausible scenarios

developed for Australia in the global context

• Inform economic modelling

• Focus on managing uncertainty across scenarios

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Each process informs the next

Scenarios - Modelling - Analysis -

Strategy

The policy recommendations

balance aspirational goals

and risks, after assessing key differences

between the scenarios.

Analysing the uncertainty,

commonality, differences and risks of

the scenarios

Projections of demand & supply side implications

of the scenarios

Plausible worlds

(but not predicting

future!)

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The key factors driving demand and supply of skills for Australia to 2025

Social, demographic and cultural trends

Economic and financial trends and globalisation

Labour force, industrial and workplace trends

Science, technology and innovation

Governance and public policy

Sustainability (focus on water, energy, population)

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Academy of Social Sciences in Australia - Forum

1. Economic and financial trends and globalisation – Dr David Gruen

2. Social, demographic and cultural trends – Professor Graeme Hugo

3. Labour force, workplace and industrial trends – Professor Sue Richardson

4. Governance and public policy – Professor Glyn Davis and Dr Michael Keating

5. Science, technology and innovation – Professor Anthony Arundel

6. Sustainability (focus on water, energy, population) – Dr Kerry Schott

The Scenarios

• Resource prices fall, a more balanced economy

• Risky world – multiple shocks

• Uncertainty to 2015 with low growth and knowledge-based recovery

• Sustained prosperity but a two-speed economy

1. The Long Boom

2. Smart Recovery

3. Terms of Trade Shock

4. Ring of Fire

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1. The Long Boom

• There is a speedy recovery from the global financial uncertainty of 2011-12. Asia is becoming the world centre of gravity, and the rapidly urbanising populations of China and India provide a continuing market for Australian resources. Mining and construction thrive, bringing continued prosperity to Australia.

• But the high Australian dollar impacts tourism, manufacturing and international education sectors. Large employer and traditionally low-skilled industries, including retail, do it tough. Government introduces a sovereign wealth fund to share prosperity more equally.

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2. Smart Recovery

• Australia experiences a low-growth economy to 2014-15. The European downturn is protracted and there is continuing instability in global financial markets. Growth in the Chinese and Indian economies slows, the demand for Australian resources drops, and the terms of trade and Australian dollar move lower.

• Global growth resumes from 2014-15, heralding better growth for Australia. Our companies and government are challenged to improve productivity and a knowledge-based recovery follows, although the impact of technology means that there are fewer opportunities for those with lower skills.

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3. Terms of Trade Shock

• This scenario sees new global sources of mineral and energy resources come on stream, leading to an oversupply of commodities. Prices fall, Australia’s terms of trade decline and the dollar loses value but resources export volumes are largely maintained.

• Australia seizes the crisis as an opportunity to move to a broad-based economy. We re-establish a viable manufacturing sector and build strong and internationally competitive businesses.

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4. Ring of Fire

• Australia and the rest of the world lurch from one crisis to the next. Recovery from the European downturn is slow. Natural disasters and severe weather events occur on a regular basis, damaging industry and costing human lives.

• Political unrest destabilises parts of Asia. There are ongoing nuclear warfare threats and skirmishes over resources, especially water security.

• Increased protectionism reduces trade between countries and Australia too is protectionist

• In the midst of the doom and gloom, the lower Australian dollar substantially improves the position of trade-exposed industry sectors.

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Next steps...

Quantify scenarios for modelling

Education and training implications of scenarios

Modelling, scenarios and discussion paper published(June 2012)

Consultations and submissions(July – August 2012)

NEW WORKFORCE

DEVELOPMENT STRATEGY 2012

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Possible Futures: workforce growth to 2025

Number of people in Australian workforce in 2025 (based on three

scenarios)

Open Doors: 15.3 mill

Low Trust Globalisation: 13.7 mill

Flags: 12.5 mill

Current: 11.3 mill

Projected total employment growth rates

Source: Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009)

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Qualifications and skill shortfall

THE THREE SCENARIOS

OPEN DOORS LOW-TRUST GLOBALISATION FLAGS

By 2015

Demand 770,000 Demand 646,000 Demand 540,000

Supply 533,000 Supply 524,000 Supply 506,000

BALANCE -237,000 BALANCE -122,000 BALANCE -34,000

By 2025

Demand 828,000 Demand 645,000 Demand 500,000

Supply 659,000 Supply 620,000 Supply 556,000

BALANCE -169,000 BALANCE -25,000 BALANCE +56,000

However, skilled migration plays a significant role in

supplementing the supply of

qualifications, and if it remains at current

levels, these deficits may be made up

through Australia’s skilled migrant intake

Source: Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009)

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Qualifications and skills demand

3030

2015 2020 20250.0 M

0.5 M

1.0 M

1.5 M

2.0 M

2.5 M

Numbers to be trained at Cert III and higher

due toEmployment growth Skills deepeningReplacement/Retirement

From 2010-2025

• Demand for 12 million qualifications

• Demand for nearly 7 million people with qualifications at Certificate III and above

• Demand by 2015 for additional 2.3 million workers with qualifications at Certificate III and above – but not all new jobs – replacement and skills deepening

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Source: Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009)

Recent Trends in the Australian Labour Market

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What are Australian Workforce Futures key findings?

• The current capacity of our tertiary education system will need to

increase by 3% per annum, to deliver the qualifications and skills

Australia needs

• Workforce participation needs to rise from 65% to 69% to provide the workers and skills we need plus improve social inclusion. Women (aged 25-34); men (aged 25-64); older Australians (55-64)

• Numeracy and literacy are a major barrier to increased

participation and a national plan with targets and funding is needed

• Enterprises need to make better use of the skills of their employees

• Forecasting for all occupations is both impossible and impractical. Our

focus should be on ‘specialised occupations’ which we can and

should plan for. The 80/20 rule applies

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Analysing the impact of demand-based funding in HE on meeting Australia’s skills needs

The questions at the centre of this project are about changes in the supply of and demand for specialised skills, indicators of mismatch or disequilibrium in this supply-demand nexus, the impact that the moves toward demand-led education funding have had on that nexus, and the right time, place and mechanism for government intervention to restore market balance.

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Reforms underway in HE

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More integrated tertiary sector

• Progression between education sectors is critical for skills deepening, and should be as simple as possible

– Projected shortfall of 200,000 qualifications at Diploma and above by 2025

• Need to promote a “level playing” field between VET and Higher Education

– to remove incentives for students to choose courses and institutions on the basis of fee structures

– To equalise funding where universities and VET are operating in the same space– As recommended by Bradley Review– But avoiding a mandated “top-down” approach

• VET providers who meet certain quality criteria should have access to Commonwealth supported higher education places for specialist degrees with vocational emphasis

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More integrated Tertiary Education Sector

• One Ministerial Council – SCOTESE (Formerly MCTEE)

• Intention of merging TEQSA and ASQA

• More emphasis on pathways in AQF

• Lower SES enrolment targets for HE an incentive for co-operation with VET with its higher proportion of lower SES students

• Structural Adjustment Funding for regional collaborative ventures to extend participation

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A more connected sector: some joint ventures

• Shared campuses – e.g. Coffs Harbour (TAFE NSW North Coast Institute,

Southern Cross University, Coffs Harbour Senior College; Ourimbah (TAFE

NSW Hunter Institute, University of Newcastle)

• Use of VET premises by HE providers – e.g. UNE Access Centres at

TAFE NSW - New England Institute campuses

• Joint programs – e.g. TAFE NSW Riverina Institute with Charles Sturt

University; Deakin University with Sunraysia, East Gippsland and Chisholm

Institutes

• Dual sector universities – e.g. RMIT; Swinburne; Victoria University,

Ballarat, Charles Darwin

• Possibility of franchising arrangements – e.g. Macquarie University with

TAFE NSW Northern Sydney Institute?

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Dual and mixed sector institutions

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Australian Universities with RTOs 23

Non self accrediting mixed sector (excluding TAFE Institutes, largely private providers)

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TAFE Institutes approved for HE(But includes TAFE SA/ TAFE NSW as single registrations)

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Source: Gavin Moodie, Types of tertiary education institutions, description or prescription? November 2010

Diploma and above (AQF 5 Plus) enrolments in a sample of TAFE Institutes

Institution Total Students Diploma and above

Percentage at Diploma AQF 5 and above

Current Degree Offer

All TAFE Institutes 1,206,934 182,991 15.2% (16.2 with Duals)

Canberra Institute 22,575 7,790 35% Yes

Southbank Institute 25,641 8,441 33% Yes

Central Institute 29,519 9,222 31% Not yet

Metropolitan South 20,740 6,188 30% Not yetThe four above are the only ones with more than 30%

Holmesglenn Institute 39,530 9,366 24% Yes

Sydney Institute 59,778 13,349 22% YesAdelaide South 28,668 5,180 18% Yes

North Coast 35,917 2,777 8% Pending?

Polytechnic West 31,522 2,625 8% Yes

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Distribution of qualifications within occupations

Man

ageria

l & ad

min

Professi

onal

Assoc p

rofessi

onal

Trades

Adv cleric

al & se

rvice

Intermediat

e cleric

al

Intermediat

e producti

on

Elementary c

lerical

Labourers

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71

243 13 12 5 9 4

30

19

38 7336 36

29 28 25

329

35 2248 49

64 60 68

University VETNo tertiary qualification

Source: Derived from ABS Survey of Education and Employment, 2003

Source: A well-skilled Future, Richardson,S and Teece, R (NCVER, 2008)

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Numbers of occupations by skill categories – Tom Karmel (NCVER)

Skills Category 1996 2006

Academic (>50% Higher Degree) 2 3

Professional – uni (>85% Degree plus) 10 18

Professional – tertiary (>85% Diploma plus) 22 18

Lower Professional (>50% Diploma plus) 56 69

Skilled Vocational 1 (>50% Cert 3 to Diploma plus) 46 68

Skilled Vocational 2 (>50% Cert 3) 19 37

Other Vocational (Certificate) 11 3

Unskilled 231 191

Total 397 397

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Student returns – VET and HE

42Source: KPMG Econtech , Economic Modelling of Improved Funding and Reform Arrangements for Universities (2010)

Which pathway for young people?

“......for males two paths stand out: Year 12 followed by university study; and Year 12 followed by an apprenticeship. Apprenticeships and traineeships score well for ‘satisfaction with life’. For females, the best path is Year 12 followed by university study, and this is true for those with a relatively low academic orientation as well as those with a high academic orientation”

Source: Tom Karmel and Shu-Hui Liu (2011), Which paths work for which young people?, LSAY, p. 13.

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Female Students at Newer Universities

University Female Students

University Female Students

Australian Catholic University 73% Swinburne University of Technology 42%University of Notre Dame 69% University of Ballarat 45%Charles Darwin University 69% University of Canberra 56%Charles Sturt University 60% University of South Australia 58%Edith Cowan University 61% University of Technology, Sydney 50%Queensland University of Technology 55% University of the Sunshine Coast 65%Southern Cross University 63% Victoria University 55%

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VET students get poor access to elite Universities

Type of University (Example) Entry on basis of VET qualifications

Group of 8 (Melbourne) 2%

60’s and 70’s (Macquarie) 10%

Australian Technology Network (UTS) 14%

New Generation (UWS) 13%

Regional (Southern Cross) 9%

Dual Sector (Swinburne) 20%

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Source: Gavin Moodie, unpublished research provided to Skills Australia

VET students in “elite university courses”

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Course Total students Vet students Vet students %

Medicine 3348 18 0.5%

Dental Studies 676 37 5.5%

Veterinary Science 605 0 0%

Optical Studies 166 0 0%

Pharmacy 1311 1 0.1%

Nursing 11836 2619 22.1%

Law 8239 196 2.4%

Business and management

19740 2486 12.6%

46Source: Gavin Moodie, unpublished research provided to Skills Australia

VET students discipline in areas in University

Discipline area Entry on basis of VET Qualifications

Education 13.2%

Information Technology 12%

Management and Commerce 11.6%

Building and Architecture 11%

Society and Culture 7.1%

Food, hospitality and personal services 6.9%

Engineering and related technologies 6.1%

Physical Sciences 3.5%

Non award 1.5%

Mixed field 0.3%

Total 9%

4747Source: Gavin Moodie, unpublished research provided to Skills Australia

(HIGHER EDUCATION INSTITUTIONS) HAVE A GENIUS FOR MAKING

HIERARCHY OUT OF DIVERSITY

With apologies to Sir Howard Newby – Former CEO of HEFCE

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2012 Annual Conference – The Future of Work

Confirmed speakers: Tony Jones (ABC’s Q&A)

Hugh Lauder (The Global Auction)Lynda Gratton (The Shift)

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Questions?

Thank you

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