This title corrupts JFK’s inauguration challenge, which goes on to exhort “ask what you can do for your country”. And that’s the question posed here – what are Australian businesses and employers doing for their industries and the economy in support of education and training of Australia’s labour force and those seeking to enter it? Where and how are they investing in skills and/or partnering with others such as Unis and TAFEs?
Explanation of approach
This is a complex topic, so it’s dealt with stylistically as an ‘imaginary interview’ between a ‘Global Analyst’ (GA) and ‘Australia’s Respondent’ (AR), by a Q&A interchange, plus where useful a more objective ‘Fact Check’ or ‘Observation’ is inserted. The conversation starts now.
Interview
GA – Good morning, my clients are a group of global investors seeking information specifically about Australian businesses and employers’ own investment in skills, including their investment with others in partnership, like with your world class tertiary institutions? [Not on R&D[1], I have some useful information]
AR – G’day – pleased to try to steer you to what is known, if I can.
GA – First some general questions and then specifics. Recent county competitiveness reports suggest underperformance by Australian businesses in investing in skills, especially digital, what can you tell me?
AR – There is evidence Australia’s performance is improving, but there are specific areas we can do better.
Fact Check: The IMB World Competitiveness Year Book[2] (2024) shows Australia improved its ranking from 17th to 13th (2023 to 2024) when compared across 67 nations, economic performance improving from 10th to 7th. Australia’s performance in workforce productivity (rank 48); employee training (based on the proposition ‘employee training is a high priority in companies’) (rank 40); and digital technologies (‘companies are good at using digital tools/technologies to improve performance’) (rank 37). The 2023 World Digital Competitiveness ranks 64 countries, Australia ranked 16 overall, but far lower in training and education (rank 28) and employee training (rank 47).
GA – My clients’ view is that smart investment by business in higher workplace skills drives firm productivity.
AR – Agreed, labour productivity drives economic growth and wages. Like many of our competitor nations, our productivity growth has much slowed.
Fact Check: Treasury statement: “In the decade to 2020…productivity growth was the slowest in 60‑years. Average productivity growth over…20 years to 2021–22 is around 1.2 per cent…consistent with other advanced economies.
GA – What’s you view about Australia’s performance on share of manufacturing and economic complexity?
AR – Don’t know. The ABS survey of business innovation is useful, it has some information on skills needs.
Fact Check: Australia has the least self-sufficient economy in the developed world, with the lowest share of manufacturing of any OECD country. Australia rates 93rd of 133 nations in Harvard Atlas of Economic Complexity measuring the diversity and knowledge intensity of a country’s export mix.
GA – There is ABS survey data, showing business investment in R&D has steeply fallen as a proportion of GDP, whilst the share of university research has significantly risen. This is different to most other nations, and it sparked my clients’ specific questions. How much do Australian businesses themselves invest in skills, training and development and has this also been falling, like R&D? On an annual basis, and spend per FTE?
AR – Great question! Look I think we gave up any systematic ABS surveys of businesses on such matters about 25 years back, it seems.
Fact Check: The last ABS survey ‘Employer Training Expenditure and Practices, Australia, 2001-02’ was released in 2003. The 2001-22 ABS survey (n=5,889 responding businesses) headlined a national estimate net direct expenditure on structured training during the 2001-02 financial year totalled $3,652.8 million. Net direct training expenditure averaged $458 per employee being 1.3% of total gross wages and salaries. It provided detail on expenditure by company size, industry type (including training by government), structured and unstructured training, by state, by use of external to business regulated providers, and apprentice and trainee related expenditures. It found that over half (59%) of all employers did not provide any structured training for their employees.
But I can point you to a recent one-off non-government estimate. It’s about $8 billion p.a. by medium and larger businesses on ‘learning and development’, or about $1,538 per employee.
Observation: The 2024 ‘Ready Set Upskill, Maximising the RoI of Skills and Training’ report (Deloitte/RMIT-Online) surveyed 416 Australian businesses (NB: all 100+ employees) and extrapolated results to estimate an ~$8 billion p.a. national expenditure by (100+) Aus. businesses on ‘learning and development’, at an industry weighted average of $1,538 per employee (in the ball park of global comparisons – average spending estimated as ~1,300 US$ p.a.).
GA – Puzzling this is not a priority for Australia, given businesses routinely highly rate skills shortages as a risk! You might want to have a close look at what the US, UK and EU are doing to continuously track and deeply understand why, how, and what business themselves are investing in skills and training.
Observation – The USA example is a 2023 Training Industry Report claimed to be in its 42nd year. It provides a comprehensive survey of US businesses (>100+ employers), covers ~17 industry sectors, provides longitudinal detail and purpose of training expenditure including outsourcing to contractors, yearly trends in hours of training and expenditure per learner per 3 categories of business size, training ranked by seniority of staff, training budgets and trends, types of training and delivery modes, and tracks training expenditure per employee.
The UK Employer Skills Survey is a large-scale and long running survey of businesses. In 2022 (n=72,918) headlines included: About 60% of employers had provided training for their staff in the last 12 months, a decrease from 66% in 2017. About 49% of all employers provided on-the-job training (down from 53% in 2017) and 39% provided off-the-job training (down from 48% in 2017); and 60% of all employees received training in 2022, compared to 62% in 2017. The average investment in training per employee was £1,780.
At a European level, there is deep data on inter-country comparisons on continuing vocational training in enterprises by enterprise types/numbers, employee participants, course costs, needed skills, training and barriers.
GA – As an aside, I looked for Australia’s data on OECD benchmarking in the ‘Survey of Adult Skills’, (PIACC), that gives good insight into adult skills in the labour force. Could not find it, can you help?
AR – Yeah, well we dropped out of that too over 10 years back! But have committed to re-joint PIACC in 2026.
But can I suggest that you look at the ABS ~triannual WRTAL survey. It is not a survey of businesses, but of people; their participation in formal study and non-formal learning, including work-related. It has some useful content that clearly implies businesses do support both formal and informal training both on job and where employees may be attending our institutions, like Unis or TAFEs. But no expenditure data though.
Fact Check – WRTAL is the Survey of Work-Related Training and Adult Learning. Last published in 2022, it surveyed adults (n=24,981, aged 15-74) assessing their level of participation in formal study and non-formal learning, including work-related learning. The headlines were: 42% of adults participated in learning in the last 12 months (7.8 million people); 21% were studying for a formal qualification; 23% did work-related training, with online training up from 19% in 2016-17 to 55% in 2020-21. Work-related training decreased from 27% in 2013 to 23% in 2020-21.
Around 4.4 million people (23%) undertook work-related training or courses (in the survey period) which did not form part of any qualification. Motivation was training to increase their skills for their job (91%), and to increase their job prospects (5%). People with existing high skills (Skill Level 1) were twice as likely to do work-related training than people with existing low skills (Skills Level 5). Comparing people at larger business (100 employees or more) with those at smaller businesses (20 people or less), the former were: more likely to do multiple courses (3 or more); and have their training paid by employer (93% vs 67%).
Work related training was conducted across most industry sectors, the lead-trainers being a mix of ‘internal expert staff’, consultants and external training providers (including educational institutions). Course duration was typically short and spread between <10 hours to >20 hours.
GA – Glad you raised your world class Unis and TAFEs, a topic my clients want deeper detail about with regards to how and what businesses and employers are investing, by partnering and contracting with such institutions for education, skills and training. Perhaps we can take this by sector, HE first then VET?
AR – Ok, but deep detail on this is tricky as it’s mostly at institutional level. For both HE and VET, there is no ready source of national data that describes and aggregates business’s investment in employees (time-off in lieu) or (part) payments of student’s fees/loans, for ‘off-site’ full quals, or short courses. Perhaps such details sit in each entity’s admin data, like tax returns or Business Activity Statements. Get-at-able data perhaps?
But can I highlight other points of connection between industry and HE institutions. The first is professional accreditation agreed between an institutional faculty and a profession body to ensure degrees meet industry professional standards. It’s a quality matter, but costly. You’ve read the HE Accord report?
Fact Check – The last national mapping of professional accreditation[3] was conducted in 2017. Some 100 different professional agencies exist in disciplines such as: medicine, dentistry, health, nursing, engineering, veterinary, teaching, accounting, law. The cost burden of evidencing and maintaining (re)registration falls mostly on Unis, this burden suggested to be hundreds of thousands of $s per institution, as well as some costs borne by professional agencies. But there is no reliable measure of costs. The HE Accord Rec. 6 recognised this but advised nothing else.
GA – Yes, I did read it and, also, that there are to be new ‘prac. payments’ addressing ‘placement poverty’ for nursing, care and teaching professions staring in July ’25. What’s this about?
AR – Right, accreditation can require significant work-based placements. It’s a cost (with complex legalities) that Australia has never sorted out where these imposts fall; it’s on students; it’s uncertain what admin and placement costs now fall on Unis; and what in-kind or direct costs employers pay. Outside of these three professions, the HE Accord made a ‘pigs may fly’ suggestion that ‘providers, governments, industry, business and unions’… ‘introduce financial support for unpaid work placements…(with)… funding by employers generally… for (all) other fields’. This would create a whole new HE ’learn-ee’ system (i.e. VET trainee-like).
GA – Your Unis have done well to really grow WILL placements! But aren’t they just a ‘bigger cousin’; where ‘prac. placements’ are ‘promised’ to students in Uni curriculum, rather than industry ‘mandated’?
AR – Right, and its guesswork, but likely the cost burden for these successes has dominantly fallen on Unis, although there would be some contributions (cash and in-kind) made by business and employer partners in support. Again, credible cost detail and current practice seems hard to come by.
Observation – The HE Accord pp.180 says WIL “needs to be expanded so more students can build connections to and experience work”. It anticipates a refreshed national WIL strategy between Universities Australia and all industry peak bodies. There are major initiatives to share best practice in WIL via ACEN, supportive regulatory guidance on what ‘quality’ WIL looks like, and extensive compilations of institutional/industry case studies demonstrating WIL.
GA – Perhaps we can turn to your VET sector and ask the same questions. What are businesses/employers investing in skills themselves, and at what costs, also by partnering and contracting with TAFEs and the like?
AR – The VET sector is in a better state than it was with the new National Skills Agreement, more public funding, some fee free places and integrating initiatives like TAFE Centres of Excellence. To your question.
The available evidence says that of those businesses that do invest in skills, many use ‘in-house’ formal training (but not accredited or quals driven), or they use non-structured training. They are not always that enamoured with TAFEs etc for different reasons, e.g. currency of skills being taught is one reason.
Fact Check – The 2023 Employer Use and Views of VET survey of businesses (n=~6300) found that some 54.4% of employers used unaccredited training[4], up 2.2% from 2021, with ~86.1% businesses satisfied as to outcomes. Some 81.2% of respondents used informal training[5], e.g. peer-to-mentor ‘on job’ learning, up from 73% in 2005. About ~56.8% of employers used accredited training[6] to meet their skills needs (i.e. working with a regulated provider), and that ~74% said they were satisfied this VET training met their skills needs (including ~73% for apprentices/trainees).
But there is no direct account of what kind of skills are learnt ‘in house’ e.g. technical, AI or ‘enabling’ skills, nor how much businesses invest. Surveys don’t collect this. TAFEs/private RTOs do earn fee-for-service revenue via enrolments in full or short courses (skill sets). These can be fully, or part funded by employers e.g. cohorts in mining or defence industries, or police cadets with their Diplomas paid by government. But it seems there is no available state or national aggregate of this. VET funding data is only about governments.
GA – Some bigger businesses have formal training divisions in their organisational structures – called I think enterprise training organisations. How are they contributing?
AR – They exist but seem to be a declining and an ever-smaller part of the national training landscape.
Fact Check – In 2022, there were 125 Enterprise RTOs (in a national total of 3,589 RTOs), down from 140 RTOs in 2018. These 125 providers accounted for ~52,000 VET program enrolments, about 3.2% of the national total of 1.61 million, far lower than the ~84,000 program enrolments of 2018.
GA – Is there some overriding feature as to why or why not Australian businesses invest in skills.
AR – Business entities in Australia have extremely different size, capacity and appetite, to self-invest in skills. Many smaller businesses look to governments to fund skilling. The biggest (e.g. banking and finance, large tech, multinationals, government. etc) have the competitive necessity, finances, and numbers of staff to self-invest in skills. IT skills can also spillover from large to small companies when people go to SMEs or start-ups.
Fact Check – At June ’23, ~2.5 million Australian businesses had between 0-19 employees (97.3%; with 61% self-employed, no employee), ~65 thousand had 20-199 staff (~2.5%) and ~4,900 had 200 employees or more (~0.2%).
GA – Yes – Businesses world-wide are grappling with fast changing big tech and the multifaceted opportunities and risks of AI. How are Australian businesses responding to this global phenomenon?
AR – Hmmm, change has never been so swift. The smarter and more tech savvy businesses are, the faster and more nimbly they adopt and adapt to the AI tsunamis and reap productivity benefits. Australians are normally fast tech adopters. Anecdotes from business are mostly positive – but some may be asleep at the AI wheel, not even knowing what it looks like, or could do for them! We are still grappling, like the rest of the world, on getting a fix on occupations most vulnerable to AI impacts, and more importantly, its opportunities.
Observation – A 2024 report (Deloitte/RMIT-Online)expressed concern that a significant number of 416 surveyed medium-to-large businesses were planning to reduce their training expenditure, with training cuts estimated to cost Australian businesses ~$2 billion in 2024; that businesses were not sharply prioritising budgets to address their skills gaps; that they don’t measure RoI, miss out the productivity value of improved skills, so lagging international peers.
Projects/surveys are ongoing by the Future Skills Organisation to further explore perceptions and adoption of AI in finance, tech and business workplaces, including its utilisation, barriers to adoption, and AI training.
GA – What about government policy, initiatives designed for business, e.g. like the UK Apprenticeship Levy.
Fact Check – The UK Apprenticeship Levy is paid at a rate of 0.5% of an employer’s annual pay bill, but only by those with a payroll > £3 million p.a. Only 2% of employers pay the levy. The ‘pool’ of funds created is available for apprentice support by levy payers, but also the (other 98%) non-levied businesses who pay only 5% of the cost of apprenticeship training with the balance paid by Government. The policy has elicited widespread critique.
AR – We don’t have a UK-like levy. We’re awaiting outcome of a strategic review of our own apprentice incentive scheme, wanting to improve attraction, retention and completion of apprentices/trainees. Employers contribute (subsidised) wages and, also, typically (part) pay students’ ‘off-site’ training costs.
Observation – Past records of apprentice/trainee commencements and completions show oscillation – especially so in traineeships – correlated to availability and quantum of subsidy incentives. Total employers’ costs are uncertain.
GA – Australia had a Training Guarantee (TG) Levy, did it not?
AR – Yes, but no longer. Australia had a Training Guarantee Act and Levy 1990-94 (legally abolished in 1996).
Fact Check – The TG levy required all employers to spend a minimum % of payroll per year (1.5% in 1992) above a payroll threshold (~$200,000[7]) or risk a ‘shortfall payment to the ATO paid to a special Training Guarantee Fund. The scheme was of mixed effectiveness. It lifted business consciousness in planning, purpose, methods and quality of staff training, especially in mid-size companies (20-99 employees), contributing to a 60% increase in average expenditure per employee, and 30% in average hours of training. It was cost-effective for government, generating between $20 and $100 of new industry investment in training per Cwlth $ expended. However, it did not lift quantum of training in industries with limited training culture e.g. retail, transport, hospitality, food processing and personal service industries, all areas of employment growth. It excluded by design businesses below the threshold.
GA – So Australia is leery of ‘hypothecation’ schemes, such as the TG Levy or the UK Apprenticeship Levy?
AR – Yes, but we’ve had other policies adopted that ‘levy’ skilled migrants’ entry and international students ‘at the border’ – the government ‘clips the ticket’! The first example was the Skilling Australians Fund in 2017/18 that was expected to raise $1.5 billion over 4 years. Outcomes were unclear, it’s no longer policy.
Fact Check – 2017/18 Budget“The Skilling Australians Fund. The Government will provide $261.2 million in 2017–18 for this Fund, with additional funding of up to $390.0 million per year being provided from the levy to be applied to the temporary and permanent skilled migration programs. These budget measures are expected to provide…$1.5 billion over four years. The Fund, together with matching funding from the states and territories, will support up to 300,000 more apprentices, trainees and higher-level skilled workers over the next four years”
The other is a related but different policy and is very recent. A non-refundable levy on international student visa applications has been more than doubled to $1,600 (student numbers are also planned to be capped). This will provide uncertain revenues which, it is said, will “help to fund important reforms recommended by the HE Accord, including making HECS fairer, ‘paid prac’ and expanding FEE-Free Uni Ready courses”.
This is risky, as it makes more perilous the dependency of unis on international student revenues for not only funding its research, but also activities like ‘placements’ and WIL!
GA – Innovative from government! What else? Anything targeting SMEs?
AR – The then government in its 2022/23 Budget announced a “technology investment boost, and, a skills and training boost for small businesses”. This example was akin to the R&D Tax incentive. The training boost incentive allowed businesses with an aggregate annual turnover of less than $50 million an additional 20% tax deduction for external training courses delivered to employees by registered training providers.
GA – Interesting, linking businesses with RTOs! What’s the outcome?
AR – Both schemes appear to have lasted only 2 years, the current government seemingly discontinued them on 30 June ‘24. There seems no public evidence yet of any ‘boosting’ outcomes or success.
GA – Excuse my directness but Australia’s statistical asset base on these questions, and the stability of its policy settings seem – well pretty patchy, even poor. And Skills and Training is now in the Outer Ministery!
AR – Australia has exceptional statistical assets as evidenced in the ABS Directory of Statisical Sources including business longitudinal data (BLADE). But I am much challenged by your comments.
It’s wrong to say businesses chase public training subsidies, some may do so if opportune. Businesses do want governments to maximise funding/loans for relevant training and skills, with the quid pro quo they provide jobs and pay tax. Some argue the job of Unis/TAFEs is to get students ‘job ready’, then employers will ‘train them’. The caustic view is that businesses squeal about skills shortages, plan poorly, demand governments invest more in skills, leading to greater reliance (and growing controversy) on migrant labour.
The available evidence is that Australian businesses invest significant resources in skills and training, mostly in bigger employers, but details are scant. Any Government-designed skills initiative must avoid subsidising what good businesses already do. Partnering with education institutions seems limited. Our evidence base is lacking compared with other nations. Jobs and Skills Australia are creating great tools and dashboards, but its business surveys only track recruitment experiences and vacancies, not the issues we’ve discussed.
Learners highly rate job experience and wages, even over full-time formal study (and HELP debt). A mix of work and training is the norm. This may benefit student study choices and completions, and also increase use of ‘just-in-time just-as-needed’ short courses, aligned to work needs. So far, more attention must be given to measuring ‘on job and work-related’ learning – lifelong. Also employers will scrutinise an employees self-proclaimed ‘got-on-job’ skills in their ‘skills passport’. If found wanting, the passports’ value will be sullied.
How did we get to this? Our default approach to deal with the skills crisis (besides lifting participation and migration) is dominated by; exhaustive micro diagnostics of ‘current’ skills gaps and demand; ever more detailed workforce planning; proposing system adjustments (e.g. HE Accord); and urging sharper funding for ‘priority’ skills, these delivered by a ‘long-lagging’ training supply. Fine – but this overwhelming effort has caused us to pay insufficient attention to the criticality of business’s own role in training; their self-investment in skills and partnering in training. Without adding business burden, we need smarter ways to find this out.
GA – Makes you think! In the early Middle Ages, and even further back, unis and colleges didn’t exist. Master craftsmen taught their apprentices, agrarian villagers and hunter-gatherer tribes passed on their knowledge, learning and skills – and all of it through ‘on job, work integrated learning’. Thanks so much.
[1] NB: This analysis excludes business/higher education (HE) research relationships which are modestly documented in various data collections that incl. industry R&D investment (e.g. CRCs, Linkage grants, PhDs in Industry etc).
[2] Ranking based on international data and executive surveys
[3] Professional accreditation was defined as either legal or professional association requirements for the accreditation of courses in HE by a professional association to enable graduates to practice or registered to practice in Australia (and) where a professional association seeks to influence the design or delivery of HE courses without strict or enforceable impacts on the ability of graduates to practice.
[4] Unaccredited training refers to training that does not lead to a nationally recognised qualification. The training activity must have a specified content or predetermined plan designed to develop employment-related skills and competencies
[5] Informal training refers to training that is unstructured, does not lead to any form of qualification, has no set plan, tends to occur on-the-job.
[6] Refers to a program of study that leads to a nationally recognised a vocational qualification and credential.
[7] For 1993-94 it was $226,000, equivalent to ~8-10 employees.
