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VET and Australia’s future: where we’ve been and where we’re headed in Australia’s post-COVID-19 recovery – Part 2

This blog post is Part 2 of a 2-part series on key challenges facing Australia’s Vocational Education and Training system and how VET can drive Australia’s post-COVID-19 economic recovery. You can read Part 1 here. The blog series is based on AATIS’s full report which is available here.

Barriers to VET’s primary role in post-COVID-19 recovery

The Institute for Workplace Skills & Innovation (IWSI 2020) has estimated that there are 200,000 jobs in Australia that employers claim cannot be filled because of an apparent skills mismatch. In parallel, the LSAY study has also shown that 25-year-olds in 2019 were finding it significantly harder to secure full-time work than those surveyed in 2009, with more and more barriers faced in job-hunting. This is a remarkable finding, considering that 2009 was a time when the world was only beginning to recover from the worst financial crisis in more than 80 years and yet, 25-year-olds in 2009 reported less obstacles and more opportunity in commencing their careers after education and training, compared with the 2019 cohort. Evidently, the COVID-19 economic crisis has been deeper (if not longer) than the economic turmoil experienced during the GFC and the Great Depression. IWSI has argued that revitalising the Australian Apprenticeship system is key to closing the gap that has emerged in the wake of the COVID-19 economic crisis.

Recent decisions of the federal government have once again reformed higher education, creating a system by which ‘job-ready’ degrees in Science, Technology, Engineering & Mathematics (STEM) fields are prioritised and subsidised over those in the Arts, Humanities and some Professions fields. Higher education has been targeted for change in place of policy to better align VET with the post-pandemic recovery, an outcome that can be interpreted as potentially exacerbating a number of pre-existing problems of education-industry alignment that remain to be addressed systematically. For example, advice provided by career advisors to school-leavers continues to push them towards university, with the implication being that young people are likely “unaware of the full breadth of career options accessible via vocational education, and the high‐paying skilled careers which are being left unfulfilled (IWSI 2020, p. 10). Along with selective career advice being provided to young people, parents, as discussed above, are primary influencers of their children’s’ career aspirations and therefore play a large role in how, and if, information about VET careers reaches the young people suited to pursue them. Altogether, young people are being steered away from VET pathways in information services provided by their schools and via the information their parents share with them in the home.

The IWSI refers to data from the 2019 Quality Indicators for Learning and Teaching (QILT) study which determined that despite a greater push towards university careers, the typical bachelor’s degree is not leading graduates to the commensurate career opportunities they once did. An issue remains that despite the existence of good information regarding the high quality of VET as a pathway and the high satisfaction of career outcomes it prepares apprentices and trainees for, education reforms have consistently pushed more and more young Australians towards university pathways, irrespective of whether this may limit career opportunities or if it is the most suitable pathway for many students.

A major implication of these trends is that policy and funding resources are skewed towards the institutional elements of Australia’s education system that increasingly appear to not reflect labour market realities; but despite the career outcome potential of VET, we can infer that higher education continues to hold ‘cultural cache’ that crowds out the quality and historical reputation of VET when important training and education decisions are being made by young people.

Industry opportunities for aligning with a strong VET-led recovery

For decades, VET has provided a pipeline of highly skilled and competent apprentices, trainees and graduates to Australia’s most productive industries. In the wake of the COVID-19 pandemic, Australian businesses and industries have reckoned more than ever before with the clear dependence on this pipeline for economic growth, particularly where the JobKeeper program that kept thousands of apprentices and trainees in employment status has seen widespread uptake by employers not wanting to let go of their staff-in-training to avoid the consequences of a lack of resourcing when economic recovery occurs. The ongoing structural issues that VET faces in declining apprentice and trainee commencements that feed the industry have taken on this additional dimension and spurred various industry peak bodies and other stakeholders into proposing policy responses that begin with emphasising the importance of information reaching potential apprentices and trainees at critical junctures in their career decision-making process.

In sectors like manufacturing, the Advanced Manufacturing Growth Centre (AMGC 2020) has identified “ten ways to succeed” in the post-COVID-19 world, which includes information provided to VET sector institutions and schools, and online web-based and social media-focused information becoming a core part of communicating the skilled employment opportunities available via apprenticeship and traineeship pathways. The “nine-point plan” released by Engineers Australia (2020) likewise promotes a focus on investment in communities and skills development for emerging generations, inclusive of campaigns to introduce young people to the opportunities that broadened exposure to work experience provides in forming career aspirations. With support from industry and VET institutions indicating that a strong post-pandemic economic and social recovery means rebuilding VET, we outline below how the 2020 Federal Budget addresses these issues and what the possible implications of its initiatives may be.

The 2020 Budget and a roadmap for post-pandemic recovery

Below we provide brief details of several VET-related measures in the federal government’s 2020-21 Budget which was presented in early October. We discuss some potential implications for the VET sector based on AATIS’s knowledge about how initiatives related to the VET sector have rolled out in the implementation process over the past several months and prior to the May 2021 Budget. AATIS will continue to track these and other key initiatives announced in the Budget after its release in early May 2021.

Boosting Apprenticeship Commencements

This wage subsidy program is designed to encourage employers to take on more apprentices and trainees and compliments the existing Supporting Apprentices and Trainees wage subsidy. With 100,000 places made available, there has been strong take-up of the BAC program by employers recruiting apprentices and trainees sooner rather than later to take advantage of the 50 per cent wage subsidy (up to $7000 per quarter) on offer. The BAC initiative applies to new apprenticeships (i.e. businesses engaging an apprentice on or after 5 October 2020), aiming to ensure that commencements continue despite economic downturn to guarantee a continuing pipeline of new apprentices and trainees.

Possible implications

It is not yet clear whether the 100,000 places earmarked for subsidy will equate to the full restoration of VET apprenticeship and traineeship levels pre-COVID-19. At the beginning of the pandemic in Australia, The Mitchell Institute estimated that 35,000 people were already on track to be displaced in 2020 given a collapse in advertised vacancies – a figure based on only the first quarter of the year (Hurley 2020). Since this time, Australia has experienced a second wave of the pandemic in its second-most populous state, Victoria, with other states restricting economic activity to avoid similar outbreaks.

Figures from NCVER (2020) have indicated that in March 2020 there were 272,505 apprentices and training in-training, representing a 2.9 per cent decrease from March 2020. This quarter compared with the March 2019 quarter saw a decrease in commencements by 11 per cent to 49,015; completions decreased by 1.3 per cent to 22,195 and cancellations or withdrawals decreased by 6.1 per cent.

It is important to note that these figures – the latest available from NCVER – include data from only the first few months of the COVID-19 pandemic in Australia and are likely to not completely reflect its negative results which were compounded in later quarters amidst economic recession. The decrease in cancellations and withdrawals owes partially to federal government emergency response measures including the ‘JobKeeper’ program, but with these payments being reduced significantly in September 2020, it is yet to become fully clear whether data regarding cancellations or withdrawals since March have increased.

There is potential for a significant number of individuals to have lost their apprenticeship or traineeship in 2020 thanks to ongoing measures. Although the total fallout of the pandemic will not be known for some time, figures may together represent a net loss of apprenticeships and traineeships despite the BAC program announced in the October Budget.

At a time of economic crisis, funding for these programs has been required to meet multiple needs – of upskilling and workforce development of existing workers, and transitioning jobseekers into the labour market via on-the-job training – both with an aim to increase the levels of individuals engaged in apprenticeships or traineeships, whether continuing or commencing. A drawback of using a combined resource to meet multiple elements of labour market participation and outcomes is that funding could quickly run out or become less effective where it is not more actively targeted at matching labour market trends as the Australian economy now begins to “shift gear” out of recession.

This is made a distinct possibility when considering the National Apprenticeship Employment Network (NAEN) July 2020 market update which indicated that 56 per cent of businesses employing apprentices and trainees were receiving JobKeeper payments as of July, equating to 154,000 apprentices and trainees benefiting from the measure, or 2.48 times higher than the rest of the working population. Although JobKeeper has been extended, the payment amount has been halved and NAEN’s figures indicated that nearly one fifth of employers employing apprentices or trainees remained undecided as to whether they would cancel their arrangements. Even with the extension of the JobKeeper payment to March 2021, a $200 reduction from September could still equate to a significant number of these employers deciding on cancellations and forthcoming figures may reflect this reality.

Even if the program does lead to some growth in VET commencements, the opportunity does not specifically correspond to apprenticeship and traineeship losses in sectors that have been hardest hit by the pandemic, including manufacturing, hospitality, electrotechnology, construction and beauty services. With the BAC program targeting “commencements” without any further specifics, a lack of targeting important sectors despite losses also misses opportunities to coordinate initiatives to boost apprenticeships with other Budget measures aimed at driving economic recovery through growth in these industries. The rationale for a passive policy response is reinforced in the Productivity Commission’s indication that reaffirming a market-driven response to workforce skills development is the government’s priority for structuring a national agreement.

Ultimately, whilst there may be adequate demand in areas of significant industry need to attract the bulk of the 100,000 places eligible for subsidisation, there remains potential for growth in areas of apprenticeship or traineeship position supply rather than demand. As employers can only receive one wage subsidy per apprentice or trainee, they may have already accessed JobKeeper or the Supporting Apprentices and Trainees wage subsidies; in such cases – as well as whether commencements occurred before or on/after 5 October 2020 – they cannot receive the BAC subsidy for the same apprentice or trainee.

Therefore, there is a possibility that employers that create additional apprenticeships and/or traineeships may do so only to take advantage of subsidies. Safeguards exist at state level, however, with new positions needing to be approved as an Australian Apprenticeships Training Contract and thus requiring involvement of an Australian Apprenticeships Support Network (AASN) provider. The relevant State Training Authority must then approve the contract. This safeguard is important, but also a level of coordination between federal programs and networks and State and Territory governments, relating to reviving key sectors of the economy.

Incentives for Australian Apprenticeships Program

Changes to the Incentives program have been postponed to July 2021. Existing incentives are thus applicable until the new program is implemented from 1 July next year. The reason behind this postponement was ostensibly to avoid further disruption to the VET sector during the first stage of economic recovery.

Possible implications

Delaying the new Incentives program to mid-2021 could lead to significant opportunities being missed, such as efforts to better target assistance in areas where the pandemic has exposed weaknesses. The new Incentives program designed to deliver non-COVID-19-related outcomes has been postponed in favour of a broader economic recovery approach which will perhaps not directly address some of the issues facing regional Australia. For example, maintaining employer incentives under the existing arrangement for rural and regional skills shortages or for drought affected areas may be cases in which the conditions of the pandemic have led to more cancellations or withdrawal of apprentices and trainees in these areas.

Likewise, support for school-based apprenticeships in states like Victoria have for much of the year been unsuitable, with students unable to attend schools and worksites over the course of the State’s lockdown. Living Away From Home allowance incentives to apprentices is another case where apprentices may not be able to access support; and where they are receiving Youth Allowance, Austudy or ABSTUDY, JobSeeker will have in many cases replaced these benefits.

National Skills Priority List for Apprenticeships

The allocation of $1.7 million for the development of a single National Skills Priority List for Apprenticeships (NSPLA) is aimed at replacing the three existing skills shortage lists. The National Skills Commission (NSC) is heading up this project and focuses significantly on emerging skills and occupations. This will give scope to the NSC to consider the future of work and establish a strong focus on innovation in VET provision to train and skill apprentices and trainees for the digital future.

Possible implications

A key feature of the NSPLA is an Additional Identified Skills Shortage (AISS) Payment which targets ten key occupations experiencing national skills shortages (Carpenters & Joiners; Plumbers, Hairdressers, Airconditioning & Refrigeration Mechanics; Bricklayers & Stonemasons; Plasterers; Bakers & Pastrycooks; Vehicle Painters; Wall & Floor Tilers; and Arborists). To be eligible, apprentices must have commenced from 1 July 2019. Along with BAC and the Skills Priority List consolidation, it aims to grow the number of apprentices and encourage more people to take up an Australian Apprenticeship.

The NSPLA initiative will consolidate the three existing skills priority lists in line with what the Productivity Commission’s report on the National Agreement on Skills and Workforce Development considers achieving goals of “consistency” across state-level Training Packages, which lead to occupational Qualifications and are comprised of accredited courses, which in turn require apprentices/trainees meet minimum units of competency that determine their acquisition of skillsets.

Therefore, one issue of taking this approach is the extent to which consistency between states will be effective at streamlining apprenticeship and traineeship pathways. It may be beneficial for the ten occupations identified as candidates for additional payments to be prioritised for consistency because beyond these ten occupations, consistency may not be relevant for specific states where there is no demand for specific skillsets and therefore no need for training approvals. As it is not completely clear the extent to which “consistency” impacts the achievement of qualifications to take on specific occupations, consistency may lead to significant complications where measures of consistency vary between states for many occupations – this, of course, will be determined by a particular occupation’s relevance to a given state’s labour market and its legal/qualification frameworks.

Concluding remarks

AATIS sees significant opportunities for the VET sector to capitalise on the federal government’s budgetary measures discussed above. As we have outlined above, these measures have possible negative implications that have repeatedly emerged in the VET sector in the years since the Dawkins Review – specifically, a preference for market-oriented policy responses that risk only narrowly bridging the gap between employer and labour market demand and the provision of education and training by VET sector stakeholders.

From an information perspective, nothing specific has appeared in the Budget allocated to communication and information, but as the National Careers Institute (NCI) is one of the major outcomes of the Joyce Review undertaken in 2019 and is tasked with providing a national perspective on careers information with an extensive focus on VET career pathways, its role will be critical going forward. Another major institute that will be essential to driving opportunities in the recovery is the National Skills Commission (NSC), which will actively provide intelligence across the Australian economy to advise on future education, skills and jobs emerging in the digital age. Both the NCI and the NSC will be instrumental in the post-pandemic recovery where ongoing federal budget measures that seek to align pieces but not necessarily coordinate them will help to (drawing on Pilcher & Hurley 2020) shape the emerging policy leadership around effective quality frameworks aligned to industry demand.

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