An historic opportunity to rebuild Australia’s broken vocational education system

27 April 2023

After decades without a national plan, the creation of Jobs and Skills Australia sparks an ember of hope for the future of vocational education and training (VET). The independent body will work across state, territory and federal governments, employers, business peaks, training institutions and unions to provide advice to the government on how to equip VET to meet skills and workforce needs.

The body certainly has its work cut out for it. Years of policy vandalism and fiscal mismanagement have eroded the capacity of the VET system to rise to the challenges ahead. Australia faces labour shortages in key VET-intensive industries, an imminent need to ramp up support and quality in care sectors and a challenge to navigate through the coming macroeconomic slowdown resulting from the Reserve Bank of Australia’s rapid interest rate rises.

A strong VET system with TAFE as its anchor is vital to supporting a dynamic, innovative economy, and to building more inclusive labour markets. The system requires urgent rebuilding to ensure it can support new skills development, job creation and opportunity – particularly for disadvantaged segments of the population. This makes it all the more important for the government to tackle these mounting problems – and soon.

The government’s recent Jobs and Skills Summit set some broad goals to realise the full productive capacity of the workforce, with a plan for revitalising VET with TAFE at the heart. The government has committed to investing in additional Fee-Free TAFE places, incentivising and expanding apprentice and traineeships and establishing support institutions.

Now they need to repair the damage to accomplish these goals.

Policy and funding failures

Unfortunately, the TAFE and the VET sector enters the present tumultuous period having already experienced a profound and multidimensional crisis from policy failures and fiscal mismanagement during recent decades. These problems remain entrenched. Understanding where policy went wrong will be critical to ensuring that TAFE plays its proper role in a comprehensive public policy-led national reconstruction effort.

Australia’s vocational education system was once the source of well-established and dependable education-to-jobs pathways through apprenticeship and traineeship programs. However, the system underwent dramatic restructuring after 2012, with funding cuts to the TAFE enforced by government through marketised funding models, expanded scope for private training providers, and delivery of large public subsidies to for-profit private providers in the guise of loans for students.

It’s clear now that these experiments in marketising skill development have failed. A recent index comparing education systems and labour market outcomes across 80 countries indicated that Australia’s VET system, once the envy of the world, had fallen to 20th place. For mid-level skills capability, including Certificate I-IV, the ranking was even lower, at 38th.

In the five consecutive years to 2020, VET funding had fallen 22 per cent in real terms. Reduced funding after 2012 was compounded by further expansion of the VET FEE-HELP regime, as restrictions on private providers eligible for Commonwealth student loans were lifted. States were required to subsidise training through private providers with uncapped fees, concurrently reducing direct support for the TAFE system.

The subsequent proliferation of poor-quality private programs and providers, combined with a deliberate policy of reduction of capacity in the TAFE system, and scandals involving the misallocation of public subsidies, have deeply damaged once reliable vocational pathways.

Short-form, piecemeal units of study (including the current fad of ‘microcredentials’) have expanded, while accredited quality training has collapsed by over 500,000 enrolments since 2015. Shockingly, all VET enrolment growth over the last five years has been in non-accredited programs, which have grown by almost 70,000 enrolments since 2015. As a proportion of all enrolments by provider since 2015, the TAFE system has experienced the greatest losses.

Apprenticeship positions have been another casualty of the crisis in Australia’s VET system – falling dramatically since 2012. Even though the government has focused on lifting the number of workers contractually defined as ‘apprentices’, it has done little to guarantee genuine skills training is undertaken or completed. The number of apprentices and trainees in training plunged by almost half after 2012, to just 267,000 in 2020.

Reductions in funding for vocational education are both a cause and a consequence of the decline in participation in programs, contributing to a damaging cycle of cumulative causation: reduced enrolments allow governments to further cut funding, which in turn further damages the quality of vocational training, and further reduces the incentive for students to enrol (and undermining the confidence of employers in the whole system).

Continued collapse in enrolments and eight years of declining apprenticeship completions make it very clear: Australia’s domestic skills pipeline is in disarray. This has implications for whether Australia will have the right workforce with the right skills for the future economy.

Importance of vocational skills for the future economy

TAFE and the VET system are critical to supporting millions of Australians to access training, facilitating crisis-accelerated employment transitions, and meeting skills shortages.

According to the National Skills Commission, 47 per cent of new jobs created and 64 per cent of total employment by 2026 will require qualifications from a VET provider, including Diploma, Advanced Diploma and Certificate I/II/III/IV courses. A strong VET system with TAFE as its anchor is essential for the economy and inclusive labour markets.

In 2022, 286 or 31 per cent of all defined occupations were identified as experiencing skill shortages, up from 153 or 19 per cent in 2021. By occupational grouping, shortages of technicians and trades workers were the most acute, with 47 per cent of all occupations in that category facing shortages – including electricians, carpenters, chefs and motor mechanics.

While technicians and trades fields experienced the greatest number of occupational shortages, large feminised healthcare and services industries present the greatest skills demands measured by volume of workers. Of over one million new jobs generated in the next five years, the highest job growth will occur in health care and social assistance (increasing by 301,000 jobs).

TAFE’s role in early childhood education and care

The Australian Children’s Education and Care Quality Authority has identified the critical demand for more and better-skilled graduates in the early childhood education and care (ECEC) sector. An additional 85,000 ECEC workers are expected to be required to raise Australia’s system to the OECD average by 2030, and almost 260,000 new ECEC workers would be required if we are to emulate the Nordic countries (doubling the sector’s total employment).

At the moment, ECEC is underdeveloped relative to the needs of both working parents and employers, with the sector only providing care to one-third of children under five. This can be attributed to lack of access to quality and affordable care – but also the challenge of recruiting and retaining enough qualified staff for expanding the capacity of the sector.

Clearly, if Australia is going to expand its ECEC system in line with the needs of working parents and employers, to match the level of provision of other industrial countries, ramping up high-quality vocational education for ECEC workers must be an immediate priority.

The only institution with the capacity for this task is TAFE.

A massive investment in education, certification and regulation of the workforce will be essential to building a bigger, better ECEC system. But the benefits do not stop there. Investment in ECEC will boost labour supply, employment, incomes and gender equality, benefiting all Australians.

Social and economic benefits of TAFE

Despite years of significant funding pressure and policy mismanagement, the TAFE system continues to make a strong economic and social contribution to workers, businesses and governments every year. The combined economic and social benefits arising from both the direct activity of TAFE and the larger skilled higher-earning workforce that it creates are enormous.

TAFE generates billions of dollars in economic activity and revenue, including through employing staff and paying wages, the purchase of supplies and services, and boosted earnings and productivity of TAFE-trained workers. These benefits all inject additional spending power into the economy, including for governments in the form of higher tax revenues.

But TAFE is more than just an economic powerhouse. It also delivers wider social and fiscal benefits to the Australian community. A more educated, productive and employable workforce reduces government expenditure on health and welfare. And there are the other, harder-to-quantify benefits of greater participation and social cohesion, resulting from the delivery of skills and education to people from disadvantaged backgrounds.

A recent report from the Centre for Future Work estimates the total social and economic benefits arising from TAFE were worth $92.5 billion in 2019. This is a huge contribution, worth just over 4 per cent of GDP. The benefits TAFE delivers Australia far outweigh the public investment put back into the system. Governments currently spend around $5.7 billion on TAFE per year. That’s a small amount relative to the huge benefits the TAFE system delivers for the people in Australia.

Time to act

Revitalising the TAFE system to its full potential, as the central element of a broader strategy to rebuild a more coherent and effective VET system, is a vital prerequisite for Australia’s post-COVID recovery and to meet future skills needs.

At a moment in Australia’s economic history when further growth and job-creation is threatened by unprecedented uncertainty and risk, both at home and abroad, this positive anchoring function of high-quality, public vocational education is especially crucial.

Australia will not produce enough high-quality graduates in high-demand growth sectors like ECEC unless it plans for it now. But low VET sector funding, declining enrolments, plunging apprenticeship completions and the loss of the TAFE system’s decades-old network of skills planning and coordination does not bode well for the future domestic skills system.

It is necessary for the government to move ahead quickly with the fundamental repair of the overall VET system in Australia. The rebuilding task must revitalise TAFE as the trusted, accountable and accessible anchor institutions of Australia’s vocational training infrastructure.

Australia’s VET system once provided well-established and dependable education-to-jobs pathways and, with the right policy interventions, it can again. Let’s hope Jobs and Skills Australia is up to the task.

Eliza Littleton

[Eliza Littleton is a senior economist at the Centre for Future Work at the Australia Institute. She has published research on higher education policy, gender, employment and taxation.]

This article was originally published in The Australian TAFE Teacher, Autumn 2023