Robin Shreeve CEO, Skills Australia 12 April 2012

1. 2012 AVETRA Conference The Value and Voice of VET Research for individuals, industry, community and the nation Aligning tertiary education with the demand for skills and qualifications in a changing world Robin Shreeve CEO, Skills Australia 12 April 2012

2. 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 AustralianWorkforce 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)

3. 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 interimreport on resources sector skill needs – July 2011 • Defence Industry Workforce Strategy – January 2012 • Scenario development- phase II of AustralianWorkforce Futures

4. 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.

5. Abraham Flexner (1866-1959)FoundationHead of Institute of Advanced Studies Princeton "Intellectual inquiry, not job training, [is] the purpose of the university.“ Universities English, American and German (1930)

6. 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.

7. 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 7

8. 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

9. Australia - Three Speed Economy Output by selected industry sector Source: ABS cat. no. 5204.0 and Treasury. Dr Ken Henry, Post Budget address to the Australian Business Economists , 18 May 2010

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

11. Matching skills and jobs in a fluid labour market

12. 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

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

14. 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

15. 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

17. 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

18. 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 18

19. 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!) Each process informs the next 19

20. The key factors driving demand and supply of skills for Australia to 2025 20

21. Academy of Social Sciences in Australia - Forum • Economic and financial trends and globalisation – Dr David Gruen • Social, demographic and cultural trends – Professor Graeme Hugo • Labour force, workplace and industrial trends – Professor Sue Richardson • Governance and public policy – Professor Glyn Davis and Dr Michael Keating • Science, technology and innovation – Professor Anthony Arundel • Sustainability (focus on water, energy, population) – Dr Kerry Schott

22. The Scenarios • Sustained prosperity but a two-speed economy • Uncertainty to 2015 with low growth and knowledge-based recovery 1. The Long Boom 2. Smart Recovery 4. Ring of Fire 3. Terms of Trade Shock • Risky world – multiple shocks • Resource prices fall, a more balanced economy 22

23. 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. 23

24. 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. 24

25. 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. 25

26. 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. 26

27. Next steps... NEW WORKFORCE DEVELOPMENT STRATEGY 2012 27

28. Possible Futures: workforce growth to 2025 Projected total employment growth rates Source: Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009)

29. Qualifications and skill shortfall 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)

30. Qualifications and skills demand • 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 Source: Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009) 30 30

31. RecentTrendsintheAustralianLabourMarket

32. What are Australian Workforce Futureskey 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

33. 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.

34. Reforms underway in HE

35. 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

36. 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

37. 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?

38. Dual and mixed sector institutions Source: Gavin Moodie, Types of tertiary education institutions, description or prescription? November 2010

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

40. Distribution of qualifications within occupations Source: A well-skilled Future, Richardson,S and Teece, R (NCVER, 2008)

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

42. Student returns – VET and HE Source: KPMG Econtech , Economic Modelling of Improved Funding and Reform Arrangements for Universities (2010)

43. 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.

44. Female Students at Newer Universities

45. VET students get poor access to elite Universities Source: Gavin Moodie, unpublished research provided to Skills Australia 45

46. VET students in “elite university courses” 46 Source: Gavin Moodie, unpublished research provided to Skills Australia

47. VET students discipline in areas in University 47 Source: Gavin Moodie, unpublished research provided to Skills Australia

48. With apologies to Sir Howard Newby – Former CEO of HEFCE (Higher Education Institutions) have a genius for making hierarchy out of diversity

49. 2012 Annual Conference – The Future of Work Confirmed speakers: Tony Jones (ABC’s Q&A) Hugh Lauder (The Global Auction) Lynda Gratton (The Shift) 49

50. Questions? Thank you 50