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I was the first person in my family to go to university. The first to finish high school. I remember how important my father thought it was that I finish school, and how proud he was when I got my law degree. He had dreamed of me becoming a barrister. You can imagine then how disappointed he was when I became a politician. I remember him saying – well if politics doesn’t work out you will always have something to fall back on.
The point of this story is skills count. Qualifications are important. That’s what my dad thought, and he was right. The more skills you have, the more likely you are to have a job and the more likely you are to earn. The more skills the economy has, the stronger and more competitive it invariably will be.
That’s why what the Federal Government did last year was so important. The economic stimulus didn’t just protect jobs. It protected skills. It has created another dilemma though. Because the stimulus worked, the challenges of recovery will hit Australia earlier than other countries. One of those is interest rates going back to normal levels. Another is skills shortages.
That’s what I want to talk about today – the skills challenge ahead. What the workforce of the future is going to look like and how we build the skills we are going to need.
The first point is; the workforce is changing. The jobs of the future are going to require more skills and the proportion of low and unskilled jobs will fall. I was in Washington in January and spoke to a few think tanks and employer groups. They told me three out of every four new jobs created in the US in the next decade will require post secondary school. Monash University has done the same research here, and reached the same conclusion.
You can see early evidence of that in this slide.
This is employment growth by occupation in the last five years. It shows a growth in the employment of professionals and managers, as well as a drop in machinery operators and technicians.
And this is what DEEWR (my Department) projects is going to happen over the next five years.
This is it broken down by industry.
You can see we are expecting an enormous surge in health care. That’s not unexpected; the population is getting older. The number of people 65 to 84 is expected to more than double in the next 40 years. And the number of people 85 is expected to more than quadruple.
The effect of this will be increased demand for health and aged care services; and an increased demand for skills. Not just doctors and nurses, but a range of new roles right across the economy.
The resources sector is comparatively smaller, but the demand for skills will be just as intense. There is currently about 15,000 workers across the Pilbara, producing about a quarter of Australia’s total exports. This workforce is expected to double in the next five years, off the back of projects like Gorgon.
Across the country more than 70 resource projects are at or near final investment decision. The workforce implications are huge.
But at the same time as there is enormous growth in these sectors (and inevitably skills shortages) in other parts of the economy there will be job losses, and in some places high levels of unemployment that are difficult to budge.
Let me give you the example of my electorate in Western Sydney. About 20 per cent of the people who live there work in manufacturing, and unemployment is double the national average. Teenage full time unemployment is 44.4 per cent.
I ran a Jobs Expo in Bankstown a few weeks ago and 6,500 people turned up. More than 500 went home that night with a job. I asked employers at the expo why unemployment there is so high. They all told me the same thing; a lot of people looking for a job lack basic literacy and numeracy skills. This is what entrenches unemployment and social disadvantage in places like Blaxland.
Over the past six months I’ve been on the road with Bill Kelty and Lindsay Fox – working in 20 areas across the country hit hardest by the global recession.
We have gone as far north as Cairns where unemployment is around 12 per cent – the highest in the country. As far south as Burnie [Tasmania] where there have been layoffs at the paper mill and other companies. The northern suburbs of Adelaide and the South-West suburbs of Perth.
These places are all very different, but they have one thing in common – in every single one high school completion rates are lower than the national average. That’s the common thread, and that is why what we are doing in education is so important.
In some parts of the country skills shortages are going to re-emerge. In other parts entrenched levels of unemployment will be difficult to budge. Education will help address both.
The Education Revolution
We’ve already taken some major steps in education. At one end of the system we are ensuring that every four year old has access to early childhood education by 2013. At the other end we have been undertaking major reforms in universities, flowing from the Bradley Review into higher education.
One example of this is our decision to uncap the number of Commonwealth supported undergraduate places. The data I have seen indicates that university enrolments have already increased by about 45,000 this year.
Universities will also get extra funds if they attract more students from low income families. At the moment someone who comes from a high income family is three times more likely to go to university than someone from a low income family. We have to fix this.
In schools we have; doubled the funding over the next 5 years; introduced national testing and the MySchool website; next year we will roll out a national curriculum for the first time ever; and we are allocating extra money to the schools that need help the most.
Let me give you an example. Last month Julia Gillard launched the Smarter Schools program. It funds extra classroom teachers so primary school classes can break into smaller groups and practice reading, writing and maths. It is also funding extra assistance for kids who fall behind and extra pay for our best teachers to come and work in places like my electorate.
In Blaxland it means $80 million for 42 schools. To put that in perspective that’s almost 10 per cent of the entire funding for NSW. That is good public policy in action – putting money and resources where they are needed most. It will help a lot of young people.
But this is just the start. There is still a lot more to do to meet the sort of challenges I am talking about. That’s why the Deputy Prime Minister made clear a few weeks ago that vocational education will be the next stage of our education reform agenda.
Our Reform Agenda
I want to concentrate today on five areas: the transition we make between school and work; apprenticeships; the resource sector; mature aged workers; and literacy and numeracy.
1. School to Work Transition
We are determined to increase the proportion of people who complete year 12 (or it’s equivalent) to 90 per cent by 2015. At the moment only 76 per cent of young people stay at school until year 12. This is the foundation we have to lay first – if we are going to build a workforce where the vast majority of workers have post secondary skills. It is particularly important in those 20 unemployment hot spots I talked about before.
Getting to 90 per cent won’t be easy. More people finishing school means schools themselves have got to change. They will need to meet the needs of a different group of students. The Trade Training Centres we are building in high schools over the next 10 years will give us the capacity to improve vocational training in schools and improve school based apprenticeships.
We also have an opportunity to help those young people who leave school and fall through the cracks. At the moment about 60,000 students every year don’t make the transition from school to further study or employment.
Apart from literacy and numeracy skills, a lot of employers tell me they have problems finding workers ready to work – with the practical soft skills they need. If more students are spending more time at school, here is an opportunity to fix this.
The number of trade apprenticeships started last year plummeted. Off the back of the global recession employers stopped hiring.
The same thing happened in the early 1990s. In 1991 the number of traditional trade apprentices who started fell by 35 per cent. It took another 13 years before we recruited the same number of apprentices again. It is one of the reasons why there were skills shortages before the Global Recession.
That’s why last year we tripled the bonus employers got over summer for employing a teenage apprentice. We called it Apprentice Kickstart, and it was based on ideas employers put to me and Bill and Lindsay in the town hall meetings we held last year. It worked.
Over the summer we hit our target and recruited 21,000 new teenage apprentices. This is back to the number of teenage apprentices we recruited before the global recession – and we did it in 1 year not 13.
Along side this we are implementing the recommendations of the Australian Apprentices Taskforce agreed by COAG in December last year. They are designed to; make it easier for apprentices to access, defer and re-enter training and help out-of-trade apprentices complete their training. We’re also embedding green skills into the training so that all new apprentices get sustainability skills from this year.
But there is still a lot more work to do here. I think we need to make the apprenticeship system more agile and make sure it meets the changing needs of business and the changing life and work experiences of potential apprentices.
When I was at school most apprentices went straight from school and into a trade. In 1995 about 54 per cent of apprentices in-training were aged between 15 and 19. Only seven per cent were over 25. That’s not the case any more. Apprentices are older.
About 40 per cent are over 25. They have different lifestyles and different expectations. This trend is set to continue. 15 years ago, 65 per cent of people who started an apprenticeship completed it. This has now dropped to around 50 per cent. There is enormous lost opportunity here. It costs business money, costs the apprentices’ time and costs us skills we desperately need.
There are a number of things we can do. Today I am going to mention one. Pre-apprenticeships give the apprentice and the employer the chance to see if they make a good match – and if the trade is the right fit. We know that apprentices who do a pre-apprenticeship are a lot more likely to complete their apprenticeship. That’s why we are looking at ways to better integrate pre-apprenticeships into existing apprenticeship programs.
3. The Resource Sector
I mentioned the challenges here earlier. The way we build this workforce will determine how much labour we need to import from overseas. You might have seen the Deputy Prime Minister in Karratha in the Sydney morning Herald this morning. She was up there talking about increasing labour mobility. This is one of the things that we are looking at.
We have also established a National Resources Sector Employment Taskforce and it has just released a discussion paper. It shows the scale of what we are talking about. It says that over the next five years the sector will add $92 billion to real GDP and create around 136 000 direct and indirect jobs. The taskforce will report by the middle of this year, setting out an employment plan for the resource sector for the next five years.
4. Mature Aged Workers
We also have to do more to improve participation rates – particularly among mature aged workers. The participation rate is expected to fall over the coming decades. The Intergenerational report tells us that the ageing of the population means there will be fewer workers paying taxes to support those of us over 65. At the moment there are five people of working age for every person over 65. By the middle of the century this is expected to drop to 2.7. The consequences for the economy and the budget are significant.
That’s why Skills Australia has recently recommended that we need to implement policies to increase our participation rate from 65 to 69 per cent by 2025. Another mighty task.
There are a number of levers that government can pull. School retention rates is one of them. Data shows a clear link between participation in the workforce and post-secondary qualifications; 88 percent of people with a post-secondary qualification are in the workforce, compared to only 71 per cent of those who don’t have post-secondary qualifications. Child care rebates, paid parental leave and the increase in the qualifying age for the aged pension will also help participation rates.
Extra training and assistance to encourage mature aged workers to stay in the workforce is also important. For example, training to switch from being on the tools to being a workplace assessor or teaching the same trade to young apprentices in a TAFE.
The participation rate for Australian men aged 26-56 is currently in the bottom third of the OECD. In the past 40 years the participation rate for men 35-56 has dropped considerably, from 96 per cent to 89 per cent. Most of this is men who left school early and have no further qualifications.
The workforce has always been changing. The drop in the number of manufacturing jobs hit this sector of the workforce hard. My dad was one of them. He lost his job in the 1990s after 25 years working at the same manufacturing company. He was lucky though – he got another job in a few weeks. But many didn’t. All of this is an important reminder of the importance of education.
5. Literacy and numeracy
Believe it or not, more than six million Australians don’t have the basic literacy or numeracy skills needed in the workplace. According to Skills Australia 40 per cent of Australian workers don’t have the basic literacy and numeracy skills needed in a modern workforce. Of the unemployed – this figure is 60 per cent. The same report says that if we lift our literacy score by one per cent, that will boost labour productivity by 2.5 per cent. So there is a lot to gain.
It can’t all be solved at school. Skills Australia has called for a National Adult Literacy and Numeracy Strategy. It’s part of a bigger Workforce Development Strategy they have just put to government. We are working through it now.
The point I want to make today is this: I think the most pressing workforce challenge that confronts us today is our capacity to build the skills we need for the future.
My father’s pre-occupation with education 20 years ago is even more important today than it was then. The jobs of the future will depend upon it. None of this will be easy. But I think it is a challenge that brings with it great opportunity. It will require the concentration and resources of government, industry, the unions and the broader education sector.
But if we get this right we can build an even stronger economy and a fairer Australia.