TAFE investment equals $92 billion annual economic dividend
A new report demonstrating TAFE’s role in Australia’s decades-long economic success story has warned that failing to invest in the sector will destroy one of the primary engines of economic growth, prosperity and equity in the Australian economy.
The report by the Centre for Future Work at the Australia Institute, An Investment in Productivity and Inclusion: The Economic and Social Benefits of the TAFE System, has revealed that despite years of significant funding pressure and policy failure, the TAFE system plays a huge and fundamentally important role in the Australian economy, contributing an estimated $92.5 billion each year.
According to the report, TAFE:
- creates $84.9 billion in annual productivity benefits, including $25 billion in taxation revenue which alone is more than four times its annual funding
- has a $6.1 billion economic footprint, including purchases of goods and services, supply chain inputs and employment supporting 48,000 jobs
- is responsible for $1.5 billion in reduced social expenses annually, lowering unemployment and supporting a healthier workforce and society
- has created an increase in employment of around 486,000 positions
AEU Federal President Correna Haythorpe welcomed the report, saying it validated the critical role that TAFE plays in the Australian economy, as well as TAFE’s social purpose in providing high-quality vocational education for all students and in particular, those at-risk and from disadvantaged backgrounds.
“TAFE has made a huge contribution to Australia’s economic prosperity, despite years of what can only be described as policy vandalism of the vocational education sector,” Ms Haythorpe said.
“For too long, governments have focused on marketisation, contestability of funding, student loans, reductions in public VET funding, and the direction of public funding towards privatised VET providers.”
“These are policies which have been detrimental to a vibrant TAFE system, and have had a devastating impact on staffing and students with courses and campuses closing across the nation,” Ms Haythorpe said.
“Right now, what Australian workers need in a post-COVID economy is high-quality vocational education from the trusted public provider, TAFE.”
“For students in rural, regional and remote locations, or from disadvantaged backgrounds, TAFE provides benefits that are critically important in addressing systemic inequality in Australia’s economy and society,” Ms Haythorpe said.
”TAFE has a strong social contract with our communities, and as such, must be supported by governments.”
‘It is TAFE teachers who deliver these annual economic and social benefits despite years of skyrocketing workloads and severe cuts to the TAFE workforce,” Ms Haythorpe said.
“For governments to jeopardise this by failing to recognise and invest in TAFE’s proven economic and societal benefits would be a mistake of historic proportions.”
“TAFE is the only institution with the infrastructure, the workforce and the trusted reputation to be able to provide the high-quality vocational education qualifications that we need today to recover from the COVID crisis,” Ms Haythorpe said.
“The report shows that Australia is no longer replacing previous generations of highly-qualified TAFE graduates at the same rate, due to funding cuts over the last seven years, placing the flow of economic benefits generated by well-trained, better-paid TAFE graduates in jeopardy.”
“The AEU welcomes the report’s recommendations including that there is an urgent need for a comprehensive public-led reconstruction program that invests in the skills and vocational education of workers and young people. TAFE is ready to meet this need but needs the backing of all governments to do so.” Ms Haythorpe said.
“This is an historic opportunity to strengthen the essential role that TAFE institutes already play in labour market planning and coordination.”
“This report shows that Australia’s historic investment in TAFE generates huge economic benefits every year. Australia’s post-COVID-19 response must start with revitalising TAFE as the trusted anchor institution of vocational education, and it must be funded accordingly with a minimum 70% of total government VET funding,” Ms Haythorpe said.
“The Morrison Government must support TAFE in the upcoming October Federal Budget so that it can do what it does best––provide a high quality vocational education for all.”
MEDIA CONTACT: NICK BUCHAN, 0418 288 104
AEU BACKGROUND PAPER
Summary of key findings of the Centre for Future Work’s report: ‘An Investment in Productivity and Inclusion: The Economic and Social Benefits of the TAFE System’
This ground-breaking report from the Centre for Future Work at the Australia Institute presents robust and up-to-date evidence on the broad economic benefits of the TAFE system to Australia’s current and future economy. It uses a multidimensional approach to measuring the economic and wider social benefits generated by TAFE, in terms of higher earnings and productivity for TAFE graduates and the resulting increased tax revenues; the additional economic footprint of purchasing and supply chains; and the fiscal benefit of reduced social assistance and public healthcare expenditure arising from TAFE’s contribution to lowering unemployment and supporting a healthier workforce and society.
The report finds that despite years of significant funding pressure and policy confusion, the TAFE system continues to make a strong and disproportionate economic and social contribution to the Australian economy.
Benefits
The total benefit from the accumulated historic investment in the TAFE-trained workforce is estimated at $92.5 billion annually. That represents around 4.5% of Australian GDP. The report identifies these benefits across four streams:
- $84.9 billion in annual productivity benefits, manifesting as increased earnings for workers and increased profits to employers. This includes $25 billion in increased incremental tax revenues annually, which is more than four times the annual combined government expenditure on TAFE
- $6.1 billion from TAFE’s additional economic footprint. This includes purchases of goods and services and supply chain inputs that support a total of 48,000 full time jobs
- $1.5 billion in reduced social expenses annually. The TAFE system increases employability, thereby lowering unemployment and supporting a healthier workforce and society. An important consequence of this is reduced social assistance and public healthcare expenditures.
- The TAFE system has increased the employability of the population, relative to those without post-school education, resulting in an increase in employment of around 486,000 positions.
Additionally, the report finds that the TAFE system underpins a wide range of broader social benefits that are harder to quantify. TAFE promotes stronger economic and labour market outcomes in regional areas and helps ‘bridge’ access to further education and jobs pathways for special and at-risk groups of young Australians.
TAFE students are more likely to come from the lowest quintile of society according to socio-economic disadvantage, more likely to be Aboriginal or Torres Strait Islander, and more likely to identify as having a disability compared with students of private VET providers or universities. All these features confirm that TAFEs are critically important in addressing systemic inequality in Australia’s economy and society.
Costs
The report finds that the costs of operating the TAFE system are modest by any measure when compared to its direct and indirect benefits.
The estimated combined costs of the TAFE system—including government funding for training and administration, employer and student assistance, loans and income support payments, student fees, and employer apprenticeship and traineeship training costs—at $5.7 billion per year - about 0.3% of Australia’s GDP.
Cost-benefit comparisons
Australia’s historic investment in quality public vocational education generates an enormous and ongoing dividend, in the form of the enhanced productivity, higher earnings, increased tax payments, and reduced social benefit costs associated with those workers. This is a valuable and continuing payoff to the funds that were invested in TAFE: both now and in the past.
The flow of annual benefits resulting from the present and past operation of the TAFE system equals 4.5% of Australia’s GDP and exceed the current annual costs of operating that system by a factor of 16 times.
Policy implications
The report finds that these enormous annual benefits are the legacy of Australia’s historic commitment to high-quality public vocational education.A commitment has been undermined in recent years by reductions in fiscal support for public VET, and the direction of public subsidies towards privatised, market-delivered VET programs and providers.
As a result, the flow of economic benefits generated by well-trained, better-paid VET graduates is in jeopardy today. Australia is not replacing its stock of high-quality TAFE graduates – which means that over time that flow of economic benefits will inevitably decline.
It concludes that if Australia wants to continue reaping the benefits of a superior productive TAFE-trained workforce, that damage must be repaired – and quickly.
As the economy staggers in the face of the COVID-19 pandemic and resulting global recession, Australia needs expanded access to vocational education, stronger pathways from training to work, and a more cohesive and coordinated post-school education system.
With the COVID-19 pandemic ushering in an era of unprecedented disruption and transition, this is the moment to strengthen Australia’s investments in its TAFE institutes, which as the most reliable ‘anchors’ of vocational training, must be at the centre of the reconstruction process.
The Centre for Future Work report concludes that Australia will squander the valuable demonstrated annual economic benefits of investments in TAFE institutes and limit post-COVID reconstruction if governments do not act quickly to reinstate the funding and critical role that TAFE plays in the VET system.
Recommendations:
•An adequately funded and stable TAFE system as the centrepiece of a revitalised Australian VET sector. This requires that a minimum 70% of total government VET funding be provided to TAFE
•A new model of funding should reverse incentives to choose university over VET to create a more cohesive and coordinated post-school education system.
•Mass youth unemployment requires additional long-term sustained investments to repair jobs pathways for youth including comprehensive free TAFE nationally
•Public-supported apprenticeships should be dramatically expanded, coordinated through TAFE, with apprentice wage subsidies to employers that reward ongoing employment
•TAFE institutes should be engaged as active and central stakeholders in developing and implementing a new generation of industry policy. A stable, high-quality, integrated public VET system is needed to establish confidence of both students and employers.
