The Australian Government moves to start investing in vocational education and training

May 3, 2017

The Australian Government looks like it is about to start investing in vocational education and training (VET) again. It’s about time.

It’s also important to examine some recent history. Last July, Malcolm Turnbull’s Coalition ran its election campaign under the slogan “jobs and growth”, although announced no new training policies or programs. Instead, it promoted a $48 billion tax cut for business, part of which has partially been approved by Parliament.

In June of last year, Monash Business School and the Economic Society of Australia (ESA) polled the ESA National Economic Panel for their opinion on this proposition: “Australia will receive a bigger economic growth dividend in the long-run by spending on education than offering an equivalent amount of money on a tax cut to business.”

Economists are famously not the most left-leaning group of professionals, but their responses to this question – while not uniform – were overwhelming: almost two-thirds of the panel (19 of 30) “agreed” or “strongly agreed” with the statement, with only 6 economists disagreeing and 4 “uncertain”. Comments included:

  • Bruce Chapman: “Literacy and numeracy skills of the population are the most important contributors to long-run growth. So long as the additional education contributes importantly to these capacities there should be little doubt that expenditure in this area is of the most critical significance.”
  • Chris Edmond: “Business tax cuts offer a ‘one-off’ level effect and so has no long-run growth dividend at all, while investment in education has a very real prospect of increasing the growth rate of real GDP over an extended period.”
  • James Morely: “Estimates on returns to education are larger and more precise than estimates on the effects of tax cuts on investment and long-run growth.”
  • John Quiggin: “Social and private returns to education are higher than marginal returns to business investment.”

One of those who disagreed – Professor Rodney Maddock (who will be speaking at Community Colleges Australia’s Annual Conference in Melbourne in July) – cautioned that, “I do not expect any payoff from increased educational spending unless there are very significant reforms to the system.” In other words, it’s not just about investment, but also about how the system uses that investment.

Jessica Irvine, senior economics writer for Fairfax Media, agrees with focussing on education investment:

Much of Australia’s low-hanging fruit has been picked when it comes to economic reform. We’ve floated the dollar, privatised the banks, deregulated the labour market. There’s less obvious work for government to do to reform the economy. But if I had to nominate the remaining lowest-hanging fruit, it’s spending money to help disadvantaged students get the best out of their education. Kids from low socioeconomic backgrounds are our greatest untapped source of potential growth. They are our most undervalued stock.

Irvine’s prescription:

Want to innovate? Educate. Want to create the jobs of the future? Educate. Want more tax revenue? Educate. Investments in our human capital offer the best returns around.

In May 2016, writing in The Guardian Australia, former Citibank Chief Economist Stephen Koukoulas stated:

The relationship between educational attainment and growth and income is a given. The more skilled and educated a workforce, the better off is the economy and the population. The consequences for countries with a poorly trained workforce are devastating. Australia saw this just prior to the global financial crisis in 2007-08 when the economy ran out of suitably educated people. The “skills shortage”, as it became known, meant that rapidly expanding companies could not find the people needed to work in their bigger and better businesses.

Koukoulas accurately predicted how and why the Coalition Government might turn to investing in skills:

In the period from the end of 2005 to the start of 2009, unemployment hovered around a 30-year low at between 4-5%. In human terms this was around 450,000 to 500,000 people. None of these half a million people had the skills required in a strong economy, so businesses had to resort to hiring foreign workers. While this was appropriate at that time of unforeseen economic strength, it overlooked the issue that the education and training system allowed 450,000 people in the workforce to remain unemployed despite the unprecedented demand for labour.

Fast forward just 11 months to April 2017: The ABC recently reported that the “May budget will establish a training fund worth $300 million, funded by visa charges. This will sit alongside a bigger focus on vocational and non-university skills training.” This announcement is set in the context of abolishing the “457 temporary work visas” and introducing new language and skills testing for foreigners who seek to work in Australia.

So investing in vocational education and training appears to be on the Coalition’s agenda, although (apparently) tied to new immigration rules. Next week’s budget will reveal how much.

(Note: I originally published this article on 27 April 2017, under the title “Investment in Training Back on the National Agenda”, on the Community Colleges Australia website.)


Increase investment in community education to tackle disadvantage and unemployment in rural Australia

March 3, 2017

Community Colleges Australia issued the following press release in late February – reproduced below.

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Australian governments should increase investment in community education to address higher levels of disadvantage and unemployment in rural and regional Australia, according to a new report from Community Colleges Australia (CCA).

The report, The Role of Community Education in Australian Regional and Rural Economic Development, finds that not-for-profit community-based vocational education and training (VET) providers play a disproportionately large role in rural and regional Australia, educating at least 10% of VET students in New South Wales and 20% in Victoria.  This makes community providers a significant national force in providing skills to non-metropolitan Australia.

Participation rates in VET courses are 50% higher in rural and regional Australia than in metropolitan areas. A much larger percentage of rural and regional VET learners also study lower level qualifications: Certificate III and below – just those qualifications that community education providers excel in, with their focus on vulnerable and disadvantaged learners.

“This report shows how community education is crucial in providing skills and in driving economic development in rural and regional Australia, and includes numerous examples of ‘bottom-up’ innovative community-based approaches. Community education providers are uniquely positioned to act as ‘passing gear’ vehicles, accelerating new ideas and helping our regions to prosper,” said Dr Don Perlgut, Chief Executive Officer of CCA.

“Yet governments have not been investing enough in community education, particularly in high need, disadvantaged rural and regional areas where youth unemployment remains stubbornly high. We have not seen any national infrastructure investment in community education since 2009 – it’s now 2017. On top of this, Australia lacks a coherent national statement on the role of community education in VET. This policy vacuum makes it difficult for community providers to operate effectively,” said Dr Perlgut.

“CCA looks forward to working collaboratively with the Australian, state and territory governments to fix these issues, and to utilise the capacity that community VET providers have to meet pressing rural and regional skills needs,” said Dr Perlgut.

The report makes a number of key recommendations, including that the Commonwealth, state and territory governments should:

  • Boost funding for community education, including providing more support for infrastructure, professional development and staff training, pilot funding programs, and community service obligation activities.
  • Utilise regional and rural community education providers to engage with vulnerable and disadvantaged Australians, particularly young people.
  • Develop a coordinated national-state-territory policy statement on the value and place of community and adult education.
  • Examine VET funding programs to ensure community providers are not disadvantaged by unnecessary regulations.
  • Collect and publish annual data on regional and rural student outcomes and provider comparisons.

The full report The Role of Community Education in Australian Regional and Rural Economic Development is available here on Community Colleges Australia’s website.

 

(image below: logging truck driving through Armidale NSW)

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Australian post-school education in the age of Trump

January 17, 2017

My new blog post on “Australian post-school education in the age of Trump” has been published by Open Forum.

The post addresses the question: “With the upcoming inauguration of Donald J. Trump as US President on January 20th, what ‘spill-over’ impact will his presidency have on Australian vocational education and training (VET)?”

You can read it here on Open Forum or here on the Community Colleges Australia website, under the title “Australian VET in the age of Trump”.


Make education an investment not a commodity

January 10, 2017

My letter to the editor appeared in today’s (10 January 2017) The Sydney Morning Herald, under the title “Time to value education as investment, not commodity.”  As published by the Herald, the letter reads:

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Time to value education as investment, not commodity

The Australasian College Broadway will not be the last private for-profit vocational education and training college to close its doors (“Australasian College Broadway: Teenagers left ‘devastated’ by collapse and in thousands of dollars of debt”, January 9). We have a virtual absence of Commonwealth government policy on the future of vocational education and training (VET).

The replacement of the scandal-ridden VET FEE-HELP loans, which Australasian College Broadway relied on as virtually its sole business model, with the new VET Student Loans program, does not go to the core of the problem: an unbalanced system created by the marketisation/privatisation of VET.

Both the Australian schools sector and higher education sector are coherent compared to VET. Not coincidentally, neither of those two educational sectors have a 67 per cent private for-profit “market penetration” the way that the VET sector has (3 million of 4.5 million VET students in 2015).

It’s time to return to quality education over a so-called “efficient” private market, which turned out not to be so “efficient” after all, relying on unsustainable government subsidies. It’s time to value education as an investment and not as a commodity.

Don Perlgut, Chief Executive, Community Colleges Australia, Sydney

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Click here to view the letter online (note: you will need to scroll down the page) or view a copy of the paper edition below.

For more details of this discussion, go to the website of Community Colleges Australia.

You can also view a copy of the letter in the paper edition below:

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Putting ‘community’ back into Australian vocational education and training

May 11, 2016

My blog post entitled ““Re-inserting ‘community’ into Australian Vocational Education and Training” has just been published by Open Forum (11 May 2016).

In this article, I discuss how in the lead up to the federal election on July 2, Australian vocational education (VET) has now entered the political debate. I argue that the most cost-effective VET policy initiative is to reinvigorate the community education providers and build on their capacity.

I discuss the VET FEE-HELP loan scandals, the collapse of private for-profit vocational education colleges and how VET has entered the political debate – given a high priority by Bill Shorten (Leader of the Opposition) in his “Budget Reply” speech last week, and the recently announced Commonwealth Discussion Paper on the re-design of VET FEE-HELP.  I conclude by describing the vitality and importance of community education – particularly in regional and rural Australia, ending with a message to the politicians of all political persuasions: reinvigorating the community education providers and building on their capacity, can and will be one of the most cost-effective VET policy initiatives you can implement.


Social Mobility: fact and fiction

April 21, 2014

In the March 3, 2014 issue of The New Yorker, business columnist James Surowiecki devotes his column to the myth of social mobility (“The Mobility Myth”, page 28). He points out that, “Since at least the days of Horatio Alger, a cornerstone of American thinking has been the hope of social mobility – the idea that, as Lawrence Samuel put it … anyone can, ‘through dedication and with a can-do spirit, climb the ladder of success.’”

I understand that Horatio Alger background, having grown up in middle class American suburbia in the 1960s, the child of parents who were born to Eastern European immigrants. In many undefinable ways, I carry that ingrained (and increasingly misplaced) American optimism with me still. (The first self-help book I can remember reading was Norman Vincent Peale’s The Power of Positive Thinking, still in print some 62 years after first publication).

Surowiecki refers to the 1962 book by Michael Harrington, entitled The Other America: Poverty in the United States (a book that I picked up in college in the USA and have around carried with me to subsequent residences in two countries). Unfortunately, Harrington’s famous statement (pp. 14-15 of my edition) is still true:

The real explanation of why the poor are where they are is that they made the mistake of being born to the wrong parents, in the wrong section of the country, in the wrong industry, or in the wrong racial or ethnic group. Once that mistake has been made, they could have been paragons of will and morality, but most of them would never have had a chance to get out of the other America.

Surowiecki goes on to point out that:

The middle class isn’t all that mobile, either: only twenty per cent of people born into the middle quintile ever make it into the top one. And although we think of U.S. society as archetypally open, mobility here is lower than in most European countries.

Nevertheless, “this wasn’t always the case”, back in the late 19th and early 20th centuries, but the myth continues. As a result, “Americans are less concerned than Europeans about inequality and more confident that society is meritocratic. The problem is that, over time, the American dream has become increasingly untethered from American reality.”

In an article in American Prospect (29 May 2013, “The Wealthy Kids are All Right”), Chuck Collins refers to the luck of the wealthy as the “born on third base factor”. This refers to the game of baseball: when you make it to third base, you have an awfully good chance of scoring a “run” and making it “home”. So starting out on “third base” is a very privileged spot.

Collins’ article is one of the best guides of what to do if you want to give your university (college) age children the best start in life. He continues:

The idea that people’s futures might be economically determined deeply offends U.S. sensibilities. We want to believe that individual moxie matters, that a person’s creativity, effort, and intelligence will lead to economic success. Stories of exceptional strivers, heroically overcoming a stacked deck of obstacles, divert our attention from the data. But the large mega-trends are now indisputable. If you fail to pick wealthy parents and want to experience the American dream today, move to Canada.

Or to Australia. Yes, Australia.

That’s the good news for us who live here. As The Economist (“Rich Rewards”, 12 June 2013) puts it:

This is no joke: the people of Australia and Canada have twice the social mobility of their counterparts in America and Britain despite having Gini coefficients in the same ballpark. No one quite knows why, but possible factors include America’s thinner safety net and deeper poverty.

The key study here is one funded by the Sutton Trust on social mobility in the USA, Canada, Australia the United Kingdom. Miles Corak, a professor of labour economics at the University of Ottawa, has three key conclusions:

1. The extent that a son’s earnings are related to his father’s is a good proxy (my word) for social mobility. “The tie between father and son earnings is almost twice as strong in the United Kingdom and the United States than it is in Canada and Australia, two countries to which they can reasonably be compared.”

2. “This variation occurs in a particular way: mobility is higher where inequality is lower.” And finally,

3. “In an era of growing inequality, the more unequal societies—like the United Kingdom and the United States—will likely not experience more mobility without concerted and effective public policy addressed not just to inequality but also to how families function, how the education system develops the human capital of relatively disadvantaged children, and how families interact with a labour market that is increasingly more polarized.”

Here in Australia, one of the most articulate proponents of dealing with rising inequality is parliamentarian Andrew Leigh.  His recent (27 March 2014) speech to the National Press Club provides a good summary of Australian issues.

May 21, 2014:  An Australian postscript – The Evatt Foundation, in a carefully argued article, details the three most important reasons for Australia’s better-than-the-USA equality of wealth:

1. Australia’s “horizontal fiscal equalisation” (and the pre-requisite “vertical fiscal imbalance”), which takes some explanation.  Effectively, it means:

That Washington only collects about 20 per cent more tax than it spends, whereas Canberra collects about 50 per cent more. These funds are then distributed back to the states and territories in a way designed to ensure all jurisdictions have the capacity to provide the same average level of services. In school funding, for example, every Australian state and territory government has the capacity to provide the same average level of service, whereas in the US, rich states such as New York and New Jersey spend three times the money per pupil as poor states such as Utah and Idaho. Such gross inequity cannot happen in Australia.

2. Universal access to health care services and reasonably priced medicines (through Australia’s Medicare system) is the “major reason why Australia has a lower infant mortality rate and longer life expectancy than the US”.

3. A substantially higher minimum wage in Australia has prevented the development of the “working poor” on the same scale.


MoneySmart Rookie financial literacy resources for young people go live

June 9, 2013

For the past year, I have been the project manager for ASIC’s “MoneySmart Rookie – financial literacy for young people” project and educational initiative.  A few days ago, the first of these resources went live on ASIC’s MoneySmart website, including twenty different videos and coverage of seven different topics (credit and debt, mobile phones, moving out of home, first job, first car, shopping & banking online and study).

Have a look here and find the educator resources on the MoneySmart Teaching website.

MoneySmart Rookie banner

Postscript on 19 June:

– The project was launched yesterday (18 June 2013) here in Sydney at the UTS function centre.  You read the ASIC media release here, Deputy Chair Peter Kell’s launch speech here and a news.com.au article here.

And here are the poster images of the “rookie errors” campaign aimed at young people aged (16 to 25) that accompanies the MoneySmart Rookie education initiative:

Rookie errors phone Rookie errors car Rookie errors credit Rookie errors job Rookie errors moving out Rookie errors online