Letter from Australia: The law of diminishing returns

Let’s just get this straight. When people enrol in post-secondary education, they could reasonably expect there will be benefits, both financial and personal, to be derived from that experience.

So it is nothing short of shocking to discover that students who opt for vocational training (VET) are largely no better off than people who just finish year 12. And if you are a woman who goes to VET instead of university you are likely to find yourself worse off.

That is one of the major findings of a new study into the income premium stemming from post-secondary education commissioned by KPMG and undertaken by National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra.

These findings are not entirely new and confirm a previous study in 2016 from Melbourne University. But if there was ever any doubt that there is something horribly wrong with our lopsided post-secondary education system then surely this is the proof that should shock policymakers into action.

Vocations aren’t what they used to be

The report – is tertiary education worth it? – shows that in 2016, men with a vocational qualification earned on average $1569 a week or $72,644 a year. That compares to women who earned just $944 a week or $49,088 a year. Just to put things in perspective, according to the Australian Bureau of Statistics the average wage in 2018 is $82,436.

One can assume from this, since we are talking averages, that some individuals do well from their income – we’d be pretty safe to speculate that they would be males who undertake a trade apprenticeship.

It’s actually gut wrenching to think of the accumulated hundreds of thousands of training hours that have been spent by young women looking to consolidate a career for themselves only to find they would have been better off working as unskilled labour.

Psychedelic policies

It’s no secret that over the past decade or more, the VET sector in general, and the public TAFE system in particular, has been subject to a psychedelic (and at times psychotic) array of free market policies and funding experiments (mostly cuts) by both state and federal governments that have hit the sector like a series of shock waves.

The appalling returns to women with a VET qualification is despite a recent AiGroup report that found there had been a dramatic leap in the percentage of employers who say they are facing skills shortages of the last two years – increasing from 49% in 2016 to 75% in 2018. As AiGroup CEO Innes Willox pointed out: “It is clear we need new approaches to education, training and reskilling.” We sure do.

While the VET sector has been failing to meet the needs of the economy, universities have made a killing out of the demand driven system, partly drawing hundreds of thousands of students away from the VET sector and into degree programs.

The National Centre for Vocational Education Research tells us that in 2016, around 20% of recent school leavers were enrolled in a vocational course, while 44.4%were enrolled in university. The report also notes that in 2016, over 40% of recent school leavers were not currently enrolled in further study, with more than a third of them unemployed.

University blues

Another study shows that just 2% of 16 year old girls consider undertaking an apprenticeship while 11% of males actively consider it. At the same time, 55% of women and 46% of men consider university.

Understandably, then, it is completely rational decision making that sees more women than men enrol.

But (there’s always a but), the NATSEM report shows, even though females have outnumbered men as university students for nigh on three decades, they still earn less than their male peers who undertook a trade apprenticeship. While female graduate earned on average $1428 a week, male VET graduates earned $1569.

Broken down into hourly rate, which the report notes neutralises for the fact men are more likely to be in the workforce, female university graduates earned $40.90 an hour compared to males’ $50.60 an hour. Female VET graduates earned just $29.60 an hour compared to their male counterparts at $36.20.

Evidence of long-term systemic sexism in the workforce, clearly evident in this report, was also confirmed again this week with the release of the Workplace Gender Equality Agency’s annual snapshot of unequal pay. This year, despite a 1.1% improvement in the gender pay gap, a full-time working woman would still be earning $25,000 than her male equivalent.

But when we look at the benefits from investing in education, women have a negative (-2.3%) premium compared to those who finished their education at the end of school.

Calls for a radical overhaul of the post-secondary system are growing louder and more insistent, despite an ugly counterattack by the Universities Australia.

The Victorian government took a step in the right direction in its May budget when it announced TAFE courses in 30 key areas would be free.

But it’s going to take more than that. There are sporadic calls for the federal government to finally take over the funding of vocational education, but the idea has never gained traction due to squabbling among the states.

One thing is for certain, our economy cannot afford to fund a vocational system that is not fit for purpose. We need to stop thinking that post-secondary education is binary – higher and vocational – but a unified system that works for school leavers and life-long learners alike.

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