The Intergenerational Report says we need more vocational skills – but federal funding for them is set to drop

The federal government’s Intergenerational Report published this week shows Australia will need significantly more skilled workers if we want to flourish in a rapidly changing world.

The report outlines how over the next four decades we will need:

• more nurses and carers for our ageing population

• more electricians and builders for our energy transition

• more people with the knowledge and skills to enable Australia to benefit from artificial intelligence.

Many of these careers start through Australia’s vocational education and training system, which includes TAFEs, independent providers and community colleges.

But how we will find and fund those workers is less clear.

What the report found

The Intergenerational Report is unambiguous about the need for the vocational education and training system to respond to skilled worker shortages:

responding to these challenges will require education and training systems that better align with labour market demand.

The report forecasts growth in the number of vocationally-educated workers, growing from 28% of the working-age population (25–64 years old) today to 37% in 2066.

Enrolments are falling

But this is unlikely to happen without a change in trajectory. At the moment, Australia’s enrolments in vocational education and training are actually declining.

Between 2016 and 2018, the average number of new students starting a vocational education or training qualification fell from 2 million to closer to 1.6 million. The figure has hovered around this point since. There has also been a declining trend in the last two years of data.

This means hitting the report’s expectation of 37% of the working-age population having a vocational education qualification by 2066 would require an uplift of nearly 40% in the number of people taking these qualifications.

The funding puzzle

But the funding projections in the Intergenerational Report go in a different direction.

Despite the need for more vocationally trained workers, federal vocational education and training payments are one of only two segments (the other being the Family Tax Benefit) which are forecast to decline. These federal payments fund training delivery and employer assistance for apprenticeships, among other purposes.

The report outlines federal vocational education and training payments are projected to decrease 15% by 2066. This suggests there will be a 15% reduction in the number of people taking these courses, or a 15% average funding decrease per student, or a combination of both.

By contrast, higher education payments are forecast to increase 43% over the same period. These payments include student subsidies like Commonwealth Supported Places, as well as research funding, for example through the Australian Research Council.

The report does note the vocational sector is allocated A$12.6 billion from the National Skills Agreement. This provides Commonwealth funding to states and territories to boost the sector. But this is presumably accounted for in the forecast of declining vocational education and training payments.

Will states have to pay more?

The Intergenerational Report is a federal government report, and vocational education and training is largely a state-based policy responsibility.

But without further insights available, we have to assume the average funding per person in vocational education is going to decrease and the number of people going to the sector will go down.

Another outcome might see more responsibility fall onto states and territories to provide a major increase in vocational education and training funding. This will need agreement between the federal government and the states, which could be difficult to come by.

What is needed beyond funding?

Outside of vocational education funding, the Intergenerational Report highlights $85 million set aside to speed up assessment of migrants with skilled trades and occupational licensing, so their skills can be recognised in Australia.

The Intergenerational Report also notes how wider recognition of prior learning and qualifications by educational institutes would help students earn qualifications more quickly and at lower cost to the individual.

But this is mentioned largely as a pathway towards university rather than vocational study.

The risk is that if credit recognition is intended to smooth the pathway towards uni from vocational study, then we are not helping to meet the skills we need.

In the face of persistent skill shortages and growing demand for the skills, Australia needs a more serious plan to turn around enrolments. As a start, this will probably require more money for vocational education and training, not less.