10.7 Vocational Education and Training

Background

The Vocational Education and Training (VET) sector is an integral part of the higher education system, training 1.9 million students in 2012. Commonwealth funding to the sector, through the National Agreement for Skills and Workforce Development and supporting national partnerships, is $1.8 billion in 2013-14 (Australian Government, 2013).

The VET sector provides the technical skills required by employers, entry-level skills for those leaving the schools system and retraining for those already in or re-entering the workforce. Whilst the other two sectors of education have more clearly defined roles (schools by age and the universities by qualification) VET provides for the other educational needs of the community and industry.

Australia’s VET system dates back to the first half of the 1800s when the colonies began to replicate Britain’s apprenticeships system of training. The Commonwealth’s first involvement in the VET system was during the First World War, when it set up temporary technical education institutions to support the war effort, in parallel to State systems, arguing that it could not fund the State systems for constitutional reasons. During the Second World War, the Commonwealth initially declined State requests for financial assistance to provide technical education. However, technical education became such an important part of the war effort that the Commonwealth agreed to assist the States with the cost.

In 1992, the Commonwealth offered to take full responsibility for VET funding from the States in exchange for substantial growth in Commonwealth funding. While the proposal had some support, it was ultimately rejected by most States, resulting in a compromise which is still the basis of the current national VET agreements (Australian Government 1992).

The 1996 National Commission of Audit recommended that the Commonwealth and States should negotiate a delineation of education roles, with the Commonwealth’s role being VET and higher education and the States taking responsibility for schools and pre-schooling. Like the 1992 proposal, this recommendation was not implemented.

Rationale for government intervention

Government intervention in the VET sector promotes the provision of skills training to meet the needs of industry. This contributes to a more productive workforce that is skilled and flexible, leading to higher wages and lower unemployment. Positive externalities flowing from this include higher tax revenues, reduced unemployment expenses and improved international competitiveness.

Commonwealth interventions have recently been targeted to improve the number of qualified Australians, consistent with key recommendations of the Bradley Review (Australian Government, 2008). This includes efforts to improve the VET sector’s responsiveness to the skills needs of employers and the needs of students. Examples of interventions have included VET FEE-HELP, which reduces the up-front financial burden of students undertaking advanced VET qualifications, and introducing a range of incentives for apprentices pursuing qualifications in an area of national skills shortage.

Current arrangements

The VET sector has experienced steady growth, with Chart 10.7.1 showing the number of students undertaking VET studies and the number of qualifications completed. Recent efforts to improve completion rates, particularly in apprenticeship programmes, have demonstrated some success, although the latest data available, which is for the 2008 cohort of students (those students commencing apprenticeships in 2008 and finishing in the years to 2012), indicates that completions remain low at around 50 per cent — see Table 10.7.1.

Chart 10.7.1: VET student and qualification trends

This chart shows Vocational Education and Training sector student numbers and qualification trends over the period 1981 to 2011.

Source: National Centre for Vocational Education Research (NCVER), 2013a and NCVER, 2013b.

Efforts to alleviate skills shortages have contributed to strong apprenticeships growth since the late 1990s. Non-trade qualifications (traditional traineeships) have increased much faster than trade apprenticeships, reflecting the decline of Australia’s manufacturing industry — see Chart 10.7.2.


Table 10.7.1: Completion and attrition rates for apprenticeships commencing in 2008
 

2008

Occupation (ANZSCO) group
Technicians and trades workers

Completion
rates
%

Attrition
rates
%

Continuing or
outcome not
known
$

Number of
contracts
('000)

31  Engineering, ICT and science technicians 58.6 36.3 5.1 3.5
32  Automotive and engineering trades workers 50.1 46.5 3.4 26.9
33  Construction trades workers 42.5 53 4.5 28.8
34  Electrotechnology and telecommunications trades 54.1 39.5 6.4 14.3
35  Food trades workers 30.4 65.4 4.2 14
36  Skilled animal and horticultural workers 46.3 47.9 5.8 5.1
39  Other technicians and trades workers 44.6 51.9 3.5 15.5
   391  Hairdressers 37.8 59.5 2.7 8.4
   392  Printing trades workers 57 37 6 0.7
   393  Textile, clothing and footwear trades workers 47.8 47.3 4.9 0.2
   394  Wood trades workers 38.9 57.3 3.8 2.5
   399  Miscellaneous technicians and trades workers 61.4 34.1 4.5 3.7
Total trade occupations 45.4 50.2 4.4 108.2
Total non-trade occupations 55.4 38.7 5.9 209.3
All occupations 52 42.6 5.4 317.5

Source: NCVER, 2013c

Chart 10.7.2: Apprentices in-training by qualification type

This chart shows the number of apprenctices in training by the types of qualfication they acquire, over the period 1981 to 2011.

Source: NCVER, 2010 and NCVER, 2013a.

The national regulatory system for vocational education and training was established in 2011 through a referral of powers to the Commonwealth from most States (except Victoria and Western Australia which retain their own regulatory systems). The Australian Skills Quality Authority is the national regulator, with responsibility for registering training organisations and accrediting courses in participating States.

In recent years COAG has embarked on reforms in the VET sector aimed at improving skills and better aligning skills to labour market demand. The reform agenda recognises that the VET sector must be responsive to changes in the labour market. Market based reforms are being introduced to develop an entitlement based system with greater contestability. This includes strategies to ensure TAFE’s operate effectively in an environment of greater competition and improving information for students and employers about training options, training providers and provider quality.

These reforms are given effect through the National Agreement for Skills and Workforce Development and supporting national partnership agreements. The National Agreement sets two targets for 2020:

  • halve the proportion of Australians without qualifications at Certificate III level or above by 2020 (from 47.1 per cent of 20 to 64 year olds to 23.6 per cent); and
  • double the number of higher level (Diploma and Advanced Diploma) qualification completions by 2020.

The Commonwealth’s contribution to the States to deliver upon these outcomes is $1.76 billion in 2013-14. Most of the Commonwealth’s other VET expenditure is through Commonwealth Own-Purpose Expenditures, which target specific areas of VET reform, such as improving apprentice completion rates.

Trends

The 2013-14 Budget forecasts VET agreement expenditure growth over the forward estimates of 13.9 per cent, which is around 3.3 per cent annualised – see Chart 10.7.3.

Chart 10.7.3: VET funding trends

This chart shows expencted VET expenditure trends over the period 2006-07 to 2016-17.

Source: National Commission of Audit.

Drivers

VET student numbers are impacted by many factors, with the strongest being population growth then unemployment. During times of high unemployment Commonwealth programmes direct welfare recipients into the VET system for training/re-training to improve their skills, job prospects and employability.

A large part of the Commonwealth’s funding to States is targeted at reforming the VET sector to make it more responsive and demand driven.

Issues

Commonwealth and State roles

There is a clear overlap between the Commonwealth and the States in terms of VET funding, with implications for efficiency. Chart 10.7.4 below illustrates the complex system of COAG committees and reporting arrangements. Some States have proposed a consolidation of responsibility at the State level. For example:

  • the Victorian Government (2013) has recommended to the Commission that ‘consolidating youth transitions and VET activity at the State level would enable both levels of government to get more value for their investment’; and
  • the Queensland Government (2013) has noted that ‘over recent years there has been increasing duplication of effort and confusion in the vocational education and training market due to both States and the Commonwealth Government undertaking the role of purchaser of training and related services’.

The COAG VET reform agenda

Progress towards a contestable, entitlement-based system varies across the jurisdictions. At this stage, Victoria and South Australia have made the most progress.

A Productivity Commission research report into the impact of COAG reforms stated:

over time, there would be a gain in moving from a regulated and supply driven system to a demand driven contestable market, provided quality is maintained. In fact, with improved information to prospective students and employers, and stronger auditing and validation of course outcomes, improved quality should result over time (Productivity Commission 2012).

The Productivity Commission also concludes that a more efficient and flexible VET sector would be expected to also improve the functioning of the labour market through faster retraining and better matching of people to vacancies.

Chart 10.7.4: National Reporting relationships within the VET system 2012

This chart shows the national reporting arrangements within the VET system.  The arrangements are complex with the system governed ultimately through the Council of Australian Governments.

Source: Productivity Commission, 2014.

There are several areas where the Productivity Commission concludes VET reform efforts could be improved, including:

  • the information available to prospective students;
  • regulatory systems that can identify and respond to poor performance by training providers;
  • mechanisms for timely information collection and data analysis;
  • provision of adequate information about employment outcomes to potential VET clients;
  • governance arrangements that allow public providers greater autonomy and capacity to compete with other providers; and
  • systems to pay providers on outcomes achieved.

Occupational licensing

For over a decade there has been recognition that jurisdictional differences in occupational licensing hinders mobility between States.

  • At present, occupations are licensed by each State or Territory and the licence held determines the work to be performed in that jurisdiction.
  • Under mutual recognition arrangements that have been progressively introduced since 1992, some occupational licensees in a given jurisdiction may apply for an equivalent licence in another jurisdiction. However, they may be required to undertake additional training and must pay additional licence fees. It can also take up to a month to receive mutual recognition.
  • In July 2008, COAG agreed to establish the National Occupational Licensing System for a number of specified occupations to ensure licences issued by any jurisdiction allow a licensee to operate in all participating jurisdictions.
  • However, in December 2013, COAG agreed to abandon the national scheme in favour of re-focussing on improving mutual recognition arrangements.

Potential areas for reform

Roles and responsibilities

VET is a complicated area of Commonwealth-State relations with cumbersome governance arrangements. Market based reforms are at different stages across the States, with various COAG committees overseeing a range of initiatives. Yet VET completion rates remain low.

The Commission is of the view that the States should take responsibility for VET, including the current reform agenda. This simplified governance and accountability would be more efficient than the current arrangements.

Transferring responsibility for VET would require an equivalent adjustment in funding. Should the Government move to improve vertical fiscal imbalance between the Commonwealth and the States, VET could be funded under the new arrangement. Alternatively, the Commonwealth could provide the States with an annual lump sum, with limited conditions, including appropriate national reporting and quality assurance requirements.

Occupational licensing

Slow progress on streamlining occupational licensing has been a frustration for business, tradespeople and other professions for many years. The current arrangements hinder mobility in Australia.

Given the COAG decision to abandon a national licensing scheme, it is now incumbent upon the States to quickly settle improved mutual recognition arrangements.

References

Australian Government 1996, National Commission of Audit 1996, Australian Government, Canberra.

Australian Government 2008, Review of Australian Higher Education, Australian Government, Canberra.

Australian Government 2013, Budget Papers 2013-14, Australian Government, Canberra.

National Centre for Vocational Education Research (NCVER) 2010, Historical Time Series of Apprenticeships and Traineeships in Australia from 1963, NCVER, Adelaide.

National Centre for Vocational Education Research 2013a, VOCSTATS, NCVER, Adelaide.

National Centre for Vocational Education Research 2013b, Historical Time Series of Vocational Education and Training in Australia from 1981, NCVER, Adelaide.

National Centre for Vocational Education Research 2013c, Completion and Attrition Rates for Apprentices and Trainees 2012, NCVER, Adelaide.

Productivity Commission 2012, Impacts of COAG Reforms: Research Report, Business Regulation and VET, Canberra.

Productivity Commission 2014, Report on Government Services 2014, Productivity Commission, Canberra.

Queensland Government 2013, Queensland Government Submission to the National Commission of Audit 2013, Brisbane.

Victorian Government 2013, Victorian Government Submission to the National Commission of Audit 2013, Melbourne.