Future-proof: the future of Australia's post-secondary education and skills system

05 November 2018

I would like to start by acknowledging the Traditional Owners of the land we are meeting on today and pay respect to their elders past and present.

I would also like to thank the University of New South Wales for hosting this event and asking me to talk to you about the Business Council’s vision for the future of post-secondary education.

In October last year I got up at the National Press Club to launch our discussion paper, Future-Proof.

Future-Proof outlined our vision to build a more efficient post-secondary education and skills system and create a culture of lifelong learning that encourages all Australians to upskill and retrain throughout their lives.

Following the release of Future-Proof, we commissioned Nous Group to run a national consultation process to gather feedback on our proposals and seek ideas for potential improvements.

We got some really constructive feedback out of the consultations that allowed us to improve our proposals and I’d like to thank the VCs and other stakeholders who engaged positively with us.

We published our final report in August this year.

What we were trying to fix for

For those of you who haven’t read our papers, let me take you through the key components starting with what we were trying to fix for.

While we had proposals about schools in our paper, it was unashamedly focused on VET and higher education.

The first problem is there is no common information base.

Kids in school, parents trying to help their kids, and workers who want to change jobs or careers don’t have that single information platform that helps them:

−          Figure out the potential jobs or careers they’re suited for

−          Pick between VET and higher education, and compare providers

−          Get all the information on a course, including how long it will take, how much of a subsidy they’ll get, what they’ll earn, and how long it will take them to pay their loan back.

I know some people in the audience will point to Quality Indicators for Learning and Teaching (QILT) as an answer to this.

As we’ve said before, QILT is a good start but it’s still only limited to higher education, and it doesn’t provide all the information I just listed.

The second big problem is that the two funding systems create a set of perverse incentives for both the learner and provider.

The incentives have created a system that is geared towards higher education, so learners are encouraged to participate in higher education even if VET would be a much better fit.

This encourage bad choices, which are compounded by the lack of information.

And those funding incentives are something we can fix by changing the funding system.

I’m not saying it’s an easy fix or designing a new funding system wouldn’t require significant work, but it is something to control for.

What is harder to fix, and what is continually reinforced by the perverse incentives in the funding systems, is the cultural bias in our post-secondary system.

A cultural bias that is created by teachers, our educational institutions, government, businesses, media and parents.

A cultural bias that ‘smart’ people go to university, and the not so smart kids go to VET.

A cultural bias that VET is just for tradies and is easy, when it fact VET offers highly technical applied learning.

A cultural bias that continues into work where jobs that come from VET qualifications are seen as innately inferior and less valuable than jobs from university qualifications.

For example, when I was doing an interview after launching our Future-Proof paper a journalist could not understand why we had highlighted the different treatment of enrolled nurses and registered nurses.

The journalist asked, ‘why should an enrolled nurse get the same subsidy as a registered nurse?’.

As though someone who studied at university should of course be treated as superior to someone who had studied in VET.

Blatant snobbery and elitism.

And the cultural bias also exists alongside good intentions.

When we were creating our Work Ready Guide to explain what employers expect from people on the job, several of our members argued that tradies didn’t need high levels of numeracy.

They thought we were setting too high a standard.

This is despite the fact that tradespeople run businesses and need to do quotes.

Even more importantly, many tradespeople need numeracy to do their core job.

Take a bricklayer or tiler as an example. How do you think they figure out how many bricks or tiles they need?

We don’t need to bring higher education down, but we do need to just stop thinking that VET is lesser.

Other countries realise the importance of vocational learning:

−          Germany has a dual system, where VET is seen as an equal partner to universities.

−          Singapore has transformed its Institutes of Technical Education into three major world-class education and training facilities with a strong focus on future skills.

−          US has invested heavily in P-Tech schools.

As do some businesses:

−          Rio Tinto partnered with South Metropolitan TAFE to develop data analytics, robotics and automation content for a Certificate II (for secondary students) and Certificate IV courses.

−          To help upskill Australia’s IT workforce, industry partnered with Boxhill Institute of TAFE to develop Australia’s first dedicated cyber security VET qualifications.

Culture change takes time, but it also needs a system that doesn’t reinforce the bias as our current system does.

The third big issue is that we are going to have tremendous transformation in the workplace.

Work is changing and will continue changing.

But this change isn’t about wholesale job destruction.

The biggest implication is task change and the need for workers’ skills to adapt.

−          Every single job will experience change in the tasks they perform.

−          Jobs will become more technical, more digital and use machines and software to augment people’s capabilities and enable new ways of working − even jobs that are not technical now.

Last week, at the National Press Club, I spoke about the concept of the future of work and research from Alphabeta on the impact of transition on jobs.

This research tells us the most significant impact on our working lives will be in the way we perform the tasks that make up our jobs.

Over the past five years, the average level of change in tasks within an occupation has been almost ten per cent.

Australian workers now spend about half a day a week doing different tasks than someone with the same job just five years ago.

Architects; secretaries; and retail managers have experienced the most change.

The reason task change is so important is because it is the best weapon to protect jobs and create new jobs.

Jobs with a higher rate of task change are less vulnerable.

Jobs with a lower rate of task change are at greater risk.

Our research also shows that over the last five years, workers in low-skilled jobs had the lowest rate of task change but the highest rate of retrenchment.

Workers in high skilled jobs were the reverse.

They had the highest rate of task change and the lowest rate of retrenchment.

My central message was: to keep people working and to keep jobs in Australia, we need to embrace the change within our jobs and be ready to adapt.

Resisting task change leaves us vulnerable.

The changes in jobs and tasks will need to be matched by changes in the skills of workers.

−          People will have to work with machines, harnessing/augmenting technology.

−          There will be a greater focus on human interaction - empathy, communication, problem-solving, persuasion, good judgement and interpersonal skills.

And our post-secondary system needs to be ready to move beyond the school to work transition and support all workers through the transitions they’ll encounter across the working lives.

Some universities are already capitalising on this change.

For example, the University of New England has introduced short, bespoke courses because their market research told them that ‘many working adults are simply not able to commit to a full degree’.

They want flexible study options to help them capitalise on and move with a fast-changing world.

So, what are our solution to these problems?

Our paper calls for a post-secondary education and skills system that:

−          places the learner at the centre of the system (monopolies are the opposite of learner-centred)

−          maintains the unique characteristics of both the VET and HE sectors

−          has a single source platform of market information where kids or workers can get the answers to the questions I listed before

−          has a single funding model that is sector-neutral and is made up of an income contingent loan and a subsidy

−          has a shared governance model between the Commonwealth and the States that stops the ongoing arguments about which level of government does what

−          and as a starting point of governance we’re proposing a costing exercise because we spend 20 billion dollars each year, but we don’t know what it really costs to deliver this system and that drives a lot of the problems between the two levels of government

−          all of these collectively then build the foundation to create a culture of lifelong learning to enable workers to upskill and reskill throughout their lives.

The funding model is central to our vision, as we all know that funding drives behaviour.

We learned from the introduction of case-mix funding in health that a funding model can create real change in a way that programs could never achieve.

At the centre of our funding model would be a lifelong skills account that undergraduates and workers could use to complete a qualification or pick up a couple of subjects or modules so they can upskill or reskill.

The account would put VET and higher education on a level playing field by allowing learners to use the account in either sector.

Now that doesn’t mean the subsidy and loan amounts would be the same.

Obviously, some courses cost more than others, and a level playing field is not about paying the same dollar amount.

A level playing field is about removing distortions between VET and higher education.

Distortions like a loan fee for one sector and not the other.

Distortions like learners receiving a higher subsidy percentage simply because the course is a higher education course.

So, in our account, the subsidy would have to reflect a formula that took into account the cost of learning, as well as some sort of ratio of public and private benefit.

And that formula would apply across both sectors.

And this is where our costing exercise comes in.

I know universities were concerned about the enormity of a costing exercise, and the difficulties in getting a robust formula.

And yes, this will be a big piece of work, and yes it will be complex, and there will be no perfect solution.

But it’s got to be better than the current situation.

At the moment, all public providers, in VET or higher education, cross-subsidise.

Universities cross-subsidise research, and TAFEs cross-subsidise trades.

But this isn’t transparent.

And it’s not transparent because we don’t know the costs.

Reform in Australia always gets bogged down in discussions about money.

And the problem with pouring more money into bad structures and systems is we never see the value of those systems.

Transparency of costs helps governments see value, but if they can’t see value they become very cynical when the sector says the answer to the problem is more money.

And they respond with efficiency targets, or failing to index funding.

When the sector says we can’t afford the change, governments point to balance sheets and funding growth rates, and providers can’t combat what the government is saying by pointing to the real cost of delivery.

But if we take health as an example, transparency has helped.

I don’t think we’ve seen an efficiency dividend imposed on health providers since the introduction of case-mix funding.

So we have an opportunity here, and the question is do you want to continue fighting efficiency dividends, or do you want to fix the problems?

I also know that focusing on delivery funding and excluding research funding worried universities.

But what was our alternative? We called out that it was outside the scope of the Lifelong Skills Account and stated that the Commonwealth had responsibility for it.

If our funding model gets up, in one way or another research funding will have to be amended, but that’s a subsequent step and a piece of work in and of itself.

The Business Council firmly believes universities needed to be appropriately funded for research.

But appropriate funding is not hidden cross-subsidisation.

Finally, the lifelong skills account is about giving the consumer – the learner and the employer – some power to drive providers to deliver what they need, rather than continuing an endless review of subjects and Training Packages.

And it’s also about freeing up providers to move beyond qualifications for those people who are in the workforce and need micro-credentials.

The lifelong skills account is the key to turning lifelong learning into a reality.

We had overwhelming interest in Future-Proof from the media, governments and oppositions, and the general public.

While I got positive feedback from some universities we also received quite strange feedback from others.

Comments along the lines of not liking what we proposed, but not proposing an alternative.

Or asking why we didn’t consult with the sector before we released our consultation paper and hired Nous Group to run independent consultations.

But what was really interesting, was the response I got from the general public.

I received letters and emails from parents, workers and people who had worked in the sector saying the country was crying out for a reform like this.

I had a lot of requests to talk about it in the more commercial media, including quite a lot of talk-back radio.

People would call the office or stop me in the street to tell me about their kids and how they had made the wrong choices.

People really care about this and want to see change.

And that’s why I was so disheartened by the response from some in the university sector that the Business Council had no right to venture into this debate, nor expertise in policy.

That as a representative of business we should focus on collaboration with universities.

But ‘collaboration’ when it was unpicked really meant giving universities more money including for research, creating placements in companies for students, and paying universities to upskill workers.

First and foremost, the business community employs 5 out of 6 working Australians.

That alone gives us the right to be in the space.

Second, if you think universities aren’t about educating the future workforce, then I suggest you get out of professional education.

Stop training all those doctors, architects, engineers, accountants, teachers, nurses, and the endless list of professions you train.

Third, the Business Council has been doing substantial public policy work for 30 years.

And I can’t see that changing anytime soon.

The education sector and the business community share an interest in a well-educated and competitive Australia.

Collaboration between business and the education sector is essential in helping Australians transition to new ways of learning and working.

And of course, the business community can do better, and of course we should do more.

But limiting our role to funding and job placements is not collaboration.

Now, the reaction I’ve just described was not shared by all Vice-Chancellors or universities.

I had VCs call me personally to say they supported the need for reform, and were happy to finally have the business community talking about the issues.

We also got some really engaged submissions that resulted in us changing parts of our proposals.

And I want to be clear about what I mean by support and engagement.

It doesn’t mean agreeing with everything we say.

That never happens in public policy.

Support means having an open dialogue about the problems and seeing if we agree on them.

Support means having respectful intellectual engagement about the ideas and possible solutions.

So thank you to those universities who engaged in that way.

Our host university today the University of New South Wales, the University of Western Australia, Bond University, Sydney University, and UTS, to name a few.

The Business Council should be a natural ally for universities, and our focus on post-secondary education should be embraced.

In my Press Club speech, I was very clear about the Business Council’s views on universities.

I said, ‘we have a network of successful, world-class universities with a wonderful research capability that does our nation proud.’

I think that’s a pretty resounding endorsement, and it remains the view of the Business Council.

We know our universities are vital to both our economic and social progress, and we support them.

We know our universities are internationally renowned and leaders in research.

We are not trying to take away from any of that and we are certainly not trying to attack university funding.

But the most depressing theme that emerged from the consultations was the idea that universities were fine and VET was a disaster.

And while universities supported reform of VET, that support appeared conditional on universities continuing in an isolated existence.

The view that came across was we’re fine, leave us alone, and focus on improving the VET sector, but make sure there is no impact on us.

I consider it immoral to make yourself better off at someone else’s expense.

And while demand-driven funding has had some drawbacks for universities, it has made universities better off, and the VET sector has suffered.

These two sectors impact on each other. They need to work as one system to ensure both can thrive.

I simply do not understand the hostility to this idea of one system, particularly when we’re very clear both sectors should continue with their current purpose.

I understand anxiety, but not the hostility.

What we are trying to do is build an internationally envied post-secondary education sector in this country.

And that means restoring the status and funding of VET, so both sectors get the recognition they deserve.

On a personal note, the importance of the education I received at this very institution cannot be overstated.

I was the first person in my extended family to go to university.

I had absolutely no idea what to expect.

It changed my life. It gave me a quest for knowledge.

It gave me an inquiring mind. It gave me the capacity for critical thinking and analysis.

It gave me a global perspective which, for a young person from a Housing Commission estate who had never travelled, was nothing short of profound.

But the most important thing I gained from my time at university, was confidence and self-belief.

It is that self-confidence that allows me to stand up here tonight and call on the university community to wipe the slate clean and begin to work with us.

Because the simple fact is the problems we identified 12 months have not gone away.

In fact, from the university perspective, as well as the VET sector, it’s gotten worse.

And things aren’t going to get better for universities without change.

Your business model is going to be under threat.

It will be threatened by the consumer and it will be threatened by employers.

I heard an ad on the radio the other day for the University of New England advertising for bespoke courses.

It was directly targeting people who don’t want to study a whole degree and just pick up units that suit them.

Consumers will demand more choice and less restrictions, and if you don’t give it to them, they will go and do an online course that will let them.

And big employers will simply go around you and get providers to design what they want for when they want.

Your business model is at risk and you can’t pretend it isn’t.

Change has to happen.

And fighting between universities and the business community just gives governments an easy ride to say there’s no burning platform for change.

When the experts in a sector divide, as the business community and universities are currently doing, we hand over the perfect justification to do nothing.

It’s a recipe for endless arguments and inertia.

But we believe there is a burning platform for change and we’re not giving up.

The final point I want to make about our agenda is that it is ambitious, and we don’t apologise for that.

But we were also very clear that we needed to learn from the mistakes of the past decade.

Reform is difficult, and reform is complex, and both the VET and higher education sectors have been through enough bad reform.

But difficulty and complexity are not a justification for doing nothing.

Complexity can be reduced by breaking reform into bite-sized pieces.

And complexity can be reduced by good planning and sound implementation.

We’ve suggested an implementation plan of five phases over 10 years.

We can start by:

−          filling the gaps in market information

−          piloting new funding models

−          rethinking how careers advice is delivered in schools

−          opening up funding to micro-credentials to encourage lifelong learning.

If we don’t have the political willpower for reform, these issues will become another big problem with human consequences.

And the real victims will be the most vulnerable – workers in transition, people with low literacy, and disadvantaged young people.

And a country where our most vulnerable become the victims is not a country I want to live in.

The Business Council’s vision is for a country where every Australian has the opportunity to fulfil their potential, and our post-secondary education and skills system is the key to that opportunity.

It was my opportunity and it changed my life.

And I will continue to fight to make sure that opportunity is available to all Australians.

I just hope we can all fight together. 


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