Determining Priorities for Publicly Funded VET: The Industries’ Shares Model Presentation to the VET Research and Planning Network Forum – 22 April 2005

Overview  Priorities work to date  Between Industry Priorities  Industries’ Shares Model  Phase One – Quantitative  Phase Two – Qualitative  Implementation

Re-alignment of Training Within Industries State-wide Priority Advice (2003)  Identify the nature and extent of industry and community training needs (i.e. priority training); and  Map needs against the supply of publicly funded training to identify where there is over-supply and/or poor training outcomes (i.e. lower priority training)

Applying State-wide Priorities Locally Study Area Moderation (2004)  13 Study Area Reference Groups contribute to Study Area Reports  Provides and evidence-base for applying priority advice at a regional level.

Re-alignment of Training Between Industries Industry Share Model (Endorsed by VLESC 2005)  Assess the capacity and develop strategies to re-align lower priority training to high priority training between industry areas.  Refresh Priority Advice in accordance with outputs of Industry Share findings – to guide re-alignment of training effort

The Model – Phase One  Assesses the level of imbalance between an industry’s current share of training ‘delivery’ and its calculated share of training ‘need’ On the Demand Side, the model is comprised of:  Criteria;  Factors; and  Weightings. On the Supply Side:  2004 delivery data  All Government Funded  Excludes ACFE, VETiS Need Share Delivery Share v

The Model - Criteria  Industry Skill Needs:  Primary purpose of government funded training  Not adequate for all needs  Return on Investment:  Assumption that training needs outstrip resources  Scarce resources allocated on the basis of optimal utilisation  Government Policy:  Impacts public training resources

The Model - Factors  Industry Skill Needs  New Entrants to occupations  Skill Gaps in the existing workforce  Return on Investment  Net Replacement Rates (capturing turnover)  Skill Shortages  Contribution to the economy  Government Policy  Current Policy Settings (age targets)

The Model – Weighting each factor  New Entrants – 0.5 weighting  Important source of training  Reflects primacy of Industry Skill Needs within the model  Key interest for government  Reflects motivation for training  Skill Gaps – 0.2 weighting  Less of a focus  Enterprise contribution to training  Looks at workers with and without qualifications

The Model – Weighting each factor  Skill Shortages – 0.1 weighting  Place constraints on the economy  Addressing shortages = higher return on training **Not necessarily training issue  Contribution to the economy – 0.1 weighting  Based on average weekly earnings by industry  Assumption = greater earnings —> greater public benefit  Government Policy – 0.1 weighting  Reflected in age targets and 45+ (0.05 for each)

The Model – Measures for each factor  New Entrants:  VET relevant workforce calculated  Training Intensity Adjustment Factor applied  Forecast Growth and Net Replacement Rates (NRR) applied  NRR used to discount New Entrant number  Shares for each industry determined  Skill Gaps:  Calculated separately for workers with/without qualifications  Up-skilling adjustment factor applied  Training likelihood adjustment factor applied

The Model – Measures for each factor  Skill Shortages:  Limited reliable data  DEWR list – best source of data for useful analysis  Employment within skill shortage occupations calculated  Industry share determined  Contribution to the economy:  Initially, GSP per worker  “What Jobs Pay” – Average Weekly Earnings  Industry share of total ‘wage bill’ for VET workforce

The Model – Measures for each factor  Government Policy:  Number of workers aged and calculated  Each Industry’s share for the total determined  High levels of either = larger share of training need

Applying the Model Building and Construction: Weights Delivery Shares Industry Skill NeedsGovernment policy Return on Investment Need Share 2004 Government funded SCH shares New Entrants Skilled – Skill Gaps Unskilled – Skill Gap Workers aged Workers aged 45 + Average Weekly Earnings Skill Shortages Weighted measure

Applying the Model Building and Construction: Delivery Share=7.9% Need Share=12.2% Need > Delivery=4.3 percentage points* * Potential realignment into Building and Construction

Moderating Outputs – Phase Two After the model is applied:  Any realignment to occur only in industries where the absolute imbalance is greater than 1 percentage point  Usually small industries  Realignment will only have a marginal impact  Realignment should be concentrated in areas where the imbalance is most profound

Moderating Outputs – Phase Two Consideration of qualitative evidence:  ITAB Change Driver Reports  Industry Reports ( 1 st and 2 nd generation )  Study Area Reports ( 1 st and 2 nd generation )  Reference Group advice

Moderating Outputs – Phase Two Factors external to the model:  Equity  Scope and Rates of change in Industry sectors  Volunteers  Student Outcomes  Skills Transfer and HE Pathways  Share for ACFE programs  Second job holders

Implementation Principles:  TAFE ‘P’ profile as the main lever  Within industry priorities to guide realignment  Gradual realignment –  Not a one-size-fits-all approach – consider institute and regional specific factors

Implementation Issues for OTTE:  Assess the impact of realignment at the Institute and State-wide level and guard against new imbalances  Influencing the realignment of training  Monitoring training realignment  Limitations to the realignment of training e.g. employer reluctance to take on apprentices

Implementation Issues for TAFE:  Workforce – re-skill / re-structure  Facilities and Infrastructure  Course Viability – critical mass especially in regions  Client Choice – Student aspirations