Why Investing In Vocational Education Makes Economic Sense
As we’ve covered before, Australia is experiencing a skills shortage that is only set to worsen if action is not taken. Upskilling and retraining the existing workforce is therefore essential for Australia’s success in a rapidly digitising world. In order to meet the qualification requirements of Industry 4.0, the VET and University sector needs to grow by 3% this year and the next.
Government investment in vocational education, however, has always lagged behind other education sectors. Between the 2005/2006 budget and the 2014/2015 budget, spending for pre-schools increased by 125% (albeit from a small base), school budgets increased by 24% and higher education spending went up by 45%. The figure for VET not only fails to match other education sectors, but has actually dropped by 4% in the same time frame.
With the elections just around the corner, the incoming government will need to commit to greater investment in the vocational education for Australia’s long term economic prosperity. Increased investment for the VET sector allows Australia to address its STEM skills shortage, provide better job prospects to graduates, increase labour productivity, attract foreign investors and international students, all of which offer numerous socio-economic benefits to the nation and its people.
Addressing the skills shortage
Increased funding for vocational education is essential for addressing Australia’s dangerous skills shortage. According to the OECD’s Survey of Adult Skills, 50% of Australians lack basic IT skills. Australia risks falling even further behind unless upskilling opportunities for the current workforce and proper training for the next generation of workers becomes more readily available.
The VET sector is one of the most efficient and effective pathways for upskilling, and is also one of the most relevant avenues for young Australians wishing to pursue education or develop skills.
Boosting skills by even 10% can have massive economic benefits, with the UK seeing an increase in their GDP of £163bn (or AUD$299bn) by upping their workforce skills.
Better job prospects and increase in full time workers
The number of higher education graduates not finding work in their field is so high that it is almost a cliche that your local barista will have a degree. There are simply too many students training for oversaturated occupations instead of going into industries that are suffering from a shortage of skilled workers. In fact, there are three times as many courses than occupations in the VET sector, with only one in three VET graduates working in the occupation they trained in, according to Claire Fields’ submission to the Review of the VET System.
In addition to reforming the system, government funding would also be beneficial in certain sectors in order to encourage students to pursue in-demand fields rather than over-saturated ones. According to KPMG’s report entitled ‘The importance of TAFE to Victoria’s prosperity’, students who obtain vocational qualifications are 4% more likely to be employed full-time, boosting the economy.
Increased labour productivity and wages
Promotion of the VET sector also allows for greater labour productivity. According to TAFE Directors Australia, individuals with VET qualifications tend to receive higher wages than those with lower levels of education. This wage premium, so to speak, indicates the uptick in productivity from VET. In fact, their research shows that a woman previously completed year 12 is likely to be 10% more productive if she goes on to complete a Diploma. Consequently, her wage is also projected to be 10% higher than if she had not received a Diploma.
As VET is also one of the most effective pathways for upskilling, those further on in their careers can also obtain new skills and transition into higher paying positions.
Both labour productivity and higher wages are beneficial to the economy, increasing workplace output and individuals’ purchasing power. A KPMG report entitled ‘The importance of TAFE to Victoria’s prosperity’ found that TAFEs alone increased household consumption by $1.17 billion per annum in education spending and additional consumption enabled by higher household incomes.
Attract foreign investors and international students
A rich and vibrant VET sector will also draw foreign investors and international students to Australia, increasing the investments made in the country as well as the number of students paying for an Australian education. Just in the Victorian context, KPMG found that international VET students contributed hundreds of millions of dollars to the economy annually.
In terms of attracting foreign investors, a NCVER report found that a quality VET-skilled workforce was the third most important factor (out of 15 factors) when deciding to invest in Australia.
Clearly, the VET sector is an integral part of the Australian economy, ensuring the nation has enough skilled workers, providing better job prospects for workers, increasing workplace productivity and wages, and attracting foreign investors and international students. In order to maintain a robust economy, the Australian Government must increase their investment in the VET sector.
Ai Group Talent Solutions are proud to support vocational education, offering Higher Apprenticeships for stable careers. The value of Higher Apprenticeships and other vocational endeavours must be prioritised in the next term of government.
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