Philip Bullock Chair, Skills Australia 20 October 2011

Group Training Australia 2011 Conference

“Looking Ahead”

The Key Drivers of Industry Change:

a personal perspective

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An opportunity to be grasped

• Requirement for qualifications are at an all time high • For example from 2010-15 we will require approx 2.3 million additional qualifications at Cert III and above for: – New jobs – Retirements • – Up-skilling For GTOs there are also some challenges

Do we have the strategy, energy, enthusiasm & confidence to grasp these opportunities?

Today I will discuss

• The challenge of change, from a personal and enterprise perspective.

• Some views on the opportunities ahead driven by skill and workforce development needs • Key drivers for the future - scenario development – phase II of

Australian Workforce Futures

• Skills Australia and the migration to the new

National Workforce and Productivity Agency

– what does this mean?

• Where to from here?

Lessons from the past:

“The rate of change is not going to slow down anytime soon. If anything, competition in most industries will probably speed up even more in the next few decades." — John P. Kotter, Leading Change Change is exhilarating when you are the architect, but threatening when it is done to you” - Linda Nicholls, Using Skills Productively Conference, September 2010 "The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic." — Peter Drucker "There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things." — Niccolo Machiavelli, The Prince (1532)

Personal experiences

Early 1991:

IBM Australia/New Zealand retrenched over 30% of workforce

April 1993:

Lou Gerstner joins IBM

October 2001:

IBM acquires PWC Consulting

Personal experiences: key reflections

Focus on the clients How can this become a valued relationship?

Be persistent, patient and persevere Do I have the passion, energy & determination?

What differentiates us? Get independent help Who are the competitors?

Success

Some thoughts on the workforce development environment…

Why all the fuss about skills?

•

Skill shortages

- as the economy shifts to recovery and growth, concerns are raised again about constraints due to skills shortages •

Productivity

- the positive growth in productivity earlier this decade has flattened, and turned negative •

Participation

- Australia ranks only 10 th out of 34 OECD countries on workforce participation •

Population -

Ageing of the Baby Boomers, Migration and International trends •

Underemployment

- there are 1.4 million Australians unemployed or underemployed •

Foundation Skills

- currently 50% of the population has lower language, literacy and numeracy levels than they need for their jobs 8

What is Skills Australia?

“Skills Australia will provide the Government with recommendations on current and future skills needs (and) inform Australia’s workforce development needs¹ …”

• • • • Expert independent Board with expertise in industry, economics, education and academia; Provides independent advice to the government on current, emerging and future skills needs and workforce development needs Remit expanded in March 2009 to look at full scope of labour market and give advice on HE & VET 2011 Budget announcements extended role as National Workforce and Productivity Agency. Responsible for National Workforce Development Fund- started early 1 October 2011

Back row (L to R): Keith Spence, Ged Kearney, Dr Michael Keating AC, Prof. Gerald Burke.

Front row: Heather Ridout, Philip Bullock (Chair), Marie Persson.

New Interim agency members:

Peter Anderson ACCI Paul Howes – AWU

Source:

1. Julia Gillard, Second Reading Speech – Skills Australia Bill 2008 (14 Feb 2008) 9

What advice has Skills Australia provided?

• • • • • • •

Foundations for the Future

– June 2009

Australian Workforce Futures

: a national workforce development strategy – March 2010 Advice to Department of Immigration on Skilled Occupation List for General Skilled Migration program – February 2011

Skills for prosperity : a road map for vocational education and training –

May 2011

Energy efficiency in commercial and residential buildings: Jobs and skills implications

– May 2011

2011 interim report on resources sector skill needs

– July 2011 Scenario development

Workforce Futures

- phase II of

Australian

What are Australian Workforce Futures key findings?

• Forecasting for all occupations is both impossible and impractical. Our focus should be on

‘specialised occupations’

which we can and should plan for. The 80/20 rule applies • The current capacity of our

tertiary education system will need to increase by 3% per annum

, to deliver the qualifications and skills Australia needs •

Workforce participation needs to rise from 65% to 69%

to provide the workers and skills we need plus improve social inclusion. Women (aged 25-34); men (aged 25-64); older Australians (55-64) •

Numeracy and literacy are a major barrier

to increased participation and a national plan with targets and funding is needed • Enterprises need to

make better use of

the

skills

of their employees

Possible Futures: workforce growth to 2025

Projected total employment growth rates 1

Number of people in Australian workforce in 2025 (based on three scenarios) Open Doors: 15.3 mill Low Trust Globalisation: 13.7 mill Flags: 12.5 mill Current: 11.3 mill

1. Access Economics Pty Ltd for Skills Australia,

Economic modelling of skills demand

(Oct 2009) 12

How many qualifications do we need?

However, skilled migration plays a significant role in supplementing the supply of qualifications, and if it remains at current levels, these deficits may be made up through Australia’s skilled migrant intake.

THE THREE SCENARIOS

OPEN DOORS LOW-TRUST Demand 828,000 Demand By 2025 Supply 659,000 Supply BALANCE -169,000 BALANCE 620,000 Supply FLAGS Demand 770,000 Demand By 2015 Supply 533,000 Supply BALANCE -237,000 BALANCE 646,000 Demand 524,000 Supply 540,000 506,000 -122,000 BALANCE -34,000 645,000 Demand 500,000 556,000 -25,000 BALANCE +56,000 1. Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009) 13

Qualifications and skills demand

4,5 M 4,0 M 3,5 M 3,0 M 2,5 M 2,0 M 1,5 M 1,0 M 0,5 M 0,0 M

Additional qualifications required by those employed

Replacement/Retirement Skills deepening Employment growth 2015 2020 2025 1. Access Economics Pty Ltd for Skills Australia,

Economic modelling of skills demand

(Oct 2009) 2,0 M 1,5 M 1,0 M 0,5 M 0,0 M 2,5 M

Numbers to be trained at Cert III and higher due to

Replacement/Retirement Skills deepening Employment growth 2015 2020 2025 Modelling by Access Economics finds that between 2010 – 2015 we need an additional 2.3 million people with qualifications at the Certificate III to meet a high growth scenario.

Process for the development of

Australian Workforce Futures

Workforce and education trends Analysis historic data Planning for an uncertain future 3 Scenarios (Shell Group) Modelling and projections Access Economics Workforce Futures - Overview and background papers Consultation with industry, providers, states/territories and peak bodies Where are we headed?

Where do we want to be?

How do we get there?

Australian Workforce Development Strategy

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Planning for next

Workforce Futures – 2012

Key factors driving demand and supply of skills...

social, demographic and cultural trends sustainability - water, energy, population economic & financial trends & globalisation governance and public policy labour force, industrial & workplace trends science, technology & innovation 16

What are the scenarios Skills Australia is developing?

•

Very high terms of trade

•

The boom comes to an end The Long Boom The Cycle Lives On

•

Risky world Multiple Shocks: Ring of Fire Shock: Low Terms of Trade

•

Resources prices fall

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VET: a multi-faceted, inclusive, geographically diverse engine of this nation

• Not just about trades and traineeships (approx 20%) • Catering for all ages - 56% of VET students are 25+ • Over 40% from areas of ‘extreme’ or ‘high’ socio-economic disadvantage • 40% of Year 11 & 12 doing some form of VET in Schools • 5000 RTOs in almost every town and suburb • Over one-third of all workers depend upon VET as their highest qualification 18

VET has some challenges

• Our completion rates overall are only about 30% • Completions of apprenticeships are about 50% • Quality has been inconsistent • Vocational education in schools is of variable quality • Funding is often tied to enrolments not outcome • Industry at times feels the system is inflexible • The system is complex

Skills for Prosperity

sets out an integrated set of recommendations to address these issues

• A demand-based system of individual learner and enterprise responsive funding • Co-funded by those who benefit the most with the greatest subsidy going to the most disadvantaged •

But dependent on:

Better regulation and quality assurance of providers able to receive public funds including, for example, external validation of RTO assessments • More transparent information about individual provider performance 20

Skills for Prosperity:

An integrated package of reforms

PRINCIPLES A unique & respected role Learners & enterprises at the forefront Focus on excellence Fast moving & adaptive Greater transparency Sustained investment Stronger connections REFORMS & RECOMMENDATIONS Building Australian prosperity – a renewed vision for VET Enabling skills use & productivity; supporting communities Aspiring to excellence Rec.

1-11 12-15 Diversity and relevance Delivering outcomes; understanding VET’s contribution Securing prosperity Better pathways; a simpler system 16, 17 18, 19 22, 23 20, 21, 24-26

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• • • • •

Skills for prosperity:

Learners and enterprises at the forefront

Introduction of individual and enterprise demand-based funding An entitlement for individuals to a public subsidy: – For vocational courses up to and including Certificate III, and for all foundation courses, a full public subsidy – For Certificate IV and above, a partial public subsidy and co-funding between individuals and governments and supported through an income contingent loan Provision for governments to exclude, cap or introduce incentives primarily using our Specialised Occupations List (SpOL) Establish a new “Enterprise Skills Investment Fund” to allocate funds to enterprises, managed by an independent, industry-led advisory body (based upon Critical Skills Investment Fund and Enterprise-Based Productivity Places Program) Open up Commonwealth Funded places for degrees in skill shortage areas, to non-university providers 22

Skills for prosperity:

Aspiring to excellence, greater transparency and outcomes focused

• • • • • The national VET regulator, be resourced adequately to sustain a world-class VET sector (self-funding over time) Mandatory external validation of providers assessments, to help ensure consistent quality of qualifications Within two years all teachers should hold a Certificate IV in Training and Education A shift to outcomes-based funding model which: – Rewards completions and high-level qualification completions by low SES National Regulator must be operational for two years prior to implementation of funding reforms

Building upon current Skills Australia role

“The new National Workforce and Productivity Agency will advise on how best to meet the continuing demand for skilled workers and support industries and workers affected by structural adjustments”.

Senator Evans, 21 September 2011

July 2012 2011-2012 Passage of legislation October 2011 2008 Interim Board appointed

Skills Australia Act 2008

– Skills Australia created National Workforce & Productivity Agency National Workforce and Productivity Agency

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A new partnership with industry

“Skills Connect is the consolidation of a number of skills programs to allow the Government to target the pressures emerging in the economy and ensure employers and workers are better able to access training support”.

Senator Evans – Address to the National Press Club - 21 September 2011

Skills Connect will provide access to:

• $50 million - National Workforce Development Fund • $29 million - Accelerated Apprenticeship Program • $15 million - Apprenticeship Mentoring Program • $15 million - Workplace English Language & Literacy Program

VISION Vision Australian social and economic prosperity is underpinned by skilled individuals, innovative and productive enterprises and inclusive communities

The VET sector has unique capabilities as the ‘adaptive layer’ of the Australian education system. More than any other education sector, it connects learning with the labour market, the workplace and community development, as well as with individual learner and employer aspirations. It is pivotal as a lever in realising social and economic opportunity. Skills for Prosperity p.2

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Where to from here?

• • • • • Opportunity for core business remains strong: • Low market share / solid economic growth • Solid base of experience, capabilities and case studies VET environment is changing (Victoria, South Australia, Queensland, New South Wales, Western Australia et al.) Do I and the Board have the skills and desire to change if required?

Do I have a formal review process – scenarios – sensitivity analysis – clients – competitors – stakeholders – expert help?

Can we enhance the policy environment to help drive growth?

“Change is exhilarating when you are the architect, but threatening when it is done to you” - Linda Nicholls, Using Skills Productively Conference, September 2010

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Thank you

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