Part four “assessment” – T J Ryan Foundation: Key policy issues in vocational education and training

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Graduates with broader skills will have a greater range of opportunities in the labour market.

Many researchers (see for example Shah and Burke) have identified a range of issues that may cause skill shortages, the factors involved may include, wages and the speed of adjustment as well as other conditions of employment, whether people doing the training have other characteristics that don’t attract an employer. Some of these may be age, literacy, attitude, interpersonal skills etc. Whether people are attracted to the jobs on offer, for example location, career prospects, physical aspects etc. The length of the training time may determine how quickly a training response can address the problem. Many of the reasons for skill shortages may not be addressed by adding more people to the training queue.

The T. J. Ryan Foundation is a progressive think tank focusing on Queensland public policy. The aims of the Foundation are to stimulate debate on issues in Queensland public administration and to review policy directions of current and past State governments on economic, social and cultural issues.

This Foundation focuses on evidence-based policy, and provides links to a range of public accessible online resources.

The Full Report is available here: http://bit.ly/1EsKUUg

by Peter Henneken AM BBus BA FIPAA FAICD Research Associate, TJRyan Foundation.

What is the appropriate role of occupational labour assessments in Vocational Education and Training?

The conflict between industry-driven or individual-driven Vocational Education and Training is being addressed in Queensland by assessing labour demand and supply in various occupations. Then, based on these assessments, adjusting the subsidy levels for various courses depending on whether the occupation is subject to shortage, is in equilibrium, or is over supplied.

It is worth looking at these processes, their underlying assumptions, and whether they can work as envisaged by Queensland officials.

But occupational labour markets are complex systems. In general, occupational assessments look at both demand and supply. On the demand side projections are made of occupational growth and estimates are made of ‘replacement demand‘ arising from retirements, people leaving the occupation etc. The various sources of supply include people completing education and training, informal training, migration etc.

These various supply sources have to be estimated and will all have a margin of error which can compound on each other. Not all graduates will choose, or find a job, in the relevant occupation. Replacement demand can fluctuate with, for example economic conditions. It is likely to be a much bigger component of demand than growth, but difficult to measure.

Then there are job supply responses by employers which might include substituting people with related skills, changing work practices to affect the skills mix, and using technology to replace particular skills.

So any assessment of occupational labour markets can only be indicative. They are improved substantially by adding qualitative information from employers, unions and professional associations, but they are still only broadly indicative.

Certainly I have been impressed by the work done by the Australian Workforce and Productivity Agency. However, this agency is, unfortunately now to be merged into the Commonwealth Department. My concern is whether, in an environment of constrained resources, the ‘agency’ retains appropriate resources and priority. In any case the agency was only ever able to do a small number of comprehensive assessments a year. The labour assessments prepared for Queensland by Deloitte Access Economics were affected by deadlines and are quite limited in that they focuses mainly on growth demand. There is very little supply analysis.

It is important to note that when shortages are identified, the situation where supply from the training system is deficient might be only one possible reason for the problem. The shortage may be in a sub-speciality of the occupation, where skills can only be gained on the job, or the demand may be for experienced workers.

Many researchers (see for example Shah and Burke) have identified a range of issues that may cause skill shortages, the factors involved may include, wages and the speed of adjustment as well as other conditions of employment, whether people doing the training have other characteristics that don’t attract an employer. Some of these may be age, literacy, attitude, interpersonal skills etc. Whether people are attracted to the jobs on offer, for example location, career prospects, physical aspects etc. The length of the training time may determine how quickly a training response can address the problem. Many of the reasons for skill shortages may not be addressed by adding more people to the training queue.

Many of these conditions or barriers, causing shortages, can only be addressed by working with employers.

So if our occupational assessments have indicated shortages, will the reduced price of training (through the subsidy adjustment) to the prospective student, increase numbers in that area? Will it attract the right sort of prospective employees that employers are looking for? I would suggest that the impact of the adjusted subsidy, in many cases will be marginal.

Even if we increase numbers, we have previously shown that many graduates aren’t matched to the relevant occupation, so increasing numbers may be an inefficient way to address the problem. If the wrong students choose the course, ie they don’t have other characteristics employers are looking for then they may also not be employed. The occupation may not be attractive to job seekers even if the training is free.

In any case I am concerned, that even with the higher subsidy, fees in many programs will be quite high for many prospective students, especially those from disadvantaged backgrounds. Many VET programs don’t have the same pay-offs in terms of life time earnings as higher education programs. Some analysis of this and its implications for policy is warranted.

Conclusions on occupational labour assessments:

1. occupational assessments are worthwhile particularly if the underlying cause for skill shortages can be identified. They provide one check on the balance of provision as long as planners are aware of their limitations and changes in subsidy levels are modest from year to year. They are also useful as part of the market information available to prospective students, employers and providers;

2. shortages are best solved by working with employers on the underlying causes. For example it may be as simple as employers being involved in selecting course entrants and guaranteeing employment for successful completion. If this strategy is followed I suspect that price subsidies for training may be more of an incentive for employers; and

3. graduates with broader skills will have a greater range of opportunities in the labour market.

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