Privatised VET, Coalition’s wage schemes no fix for Australia’s skills chasm

by | Oct 14, 2020 | Government

Year 12 leavers will be competing with people who are already on Jobseeker and who will no doubt get priority with employers eager for the $200 subsidy per worker. What a terrible message to send to youth, writes Bruce Mackenzie, that they first have to go on unemployment benefits before they are likely to be offered a job.
It’s good to know we lead the world in something beyond the export of coal and gas. But it is not something we should be proud of. As a country we have one of the largest imbalances in skill level in the workforce, an imbalance that is condemning large swathes of the population to insecure, low-skilled work for long periods of time.

Australia ranks 6th out of 35 nations for the most university graduates (41% of the population) according to an OECD labour force survey of 25 to 64-year olds. For our proportion of low skilled workers, we sit bang in the middle, at the OECD average of 24%.

But for intermediate skills, we languish in 29th place out of the 35 nations surveyed, with only 35% of our workforce with such skills. Compare this with powerhouses such as Germany, with 58% of its population trained at an intermediate level and just 26% holding university degrees. Similarly, Sweden’s intermediate skills workforce sits at 52% and Switzerland’s at 50%.

Yet Australia’s growth industries are expected to be in areas requiring intermediate skills such as health care, social assistance, construction, education and training, and scientific and technical services. Intermediate jobs include site supervisors, lab technicians, nurses and childcare workers, to name just a few. These jobs are not gender specific and not age-related.

To fill the demand for an intermediate skilled workforce over the years, Australia has long relied on migration.

Here are some other facts about employment in Australia. Young people with medium and high-level qualifications (university graduates) work increasingly in low-paid employment. The increase since 2006 was larger than the OECD average. We have one of the highest shares of employees working in short, part-time jobs among OECD countries (13%). And 25% of Australian workers (one in four) are employed casually.

So it’s unfortunate that the government’s recent budget announcements of yet more wage subsidy schemes – the apprenticeship wage subsidy scheme and the $4 billion Jobmaker Hiring Credit scheme – will only exacerbate this situation.

A major social issue

Jobmaker is being promoted as a solution to the astronomical rate of youth unemployment, which was disastrous even before the pandemic and has only worsened in recent months. In December 2019, the unemployment rate among those aged 15 to 24 was 11.5%, more than double the rate of the adult working population (5.1%.). Youth unemployment is a major social issue for most OECD countries.

Jobmaker is an employer subsidy scheme: it offers $200 a week to those who hire someone between 16 and 29 and $100 a week to hire someone between 30 and 35, provided the person has been on Jobseeker, youth allowance or parenting payment for a least one of the previous months. The employee has to work at least 20 hours per week if the employer is to attract the subsidy.

But the last thing Australia needs is a focus on subsidising low-skilled work, which is effectively what the Jobmaker scheme will do. There is no evidence anywhere in the world that supports the proposition that employer incentives lead to an increase in skilled employment.

The subsidised jobs are likely to be found in low-skilled areas, such as jobs in fast food outlets, supermarkets and retail. The lack of incentive, or need, for these employers to encourage or facilitate upskilling means that these insecure, low-paying jobs are no stepping stone to a better career or further qualifications. They may be jobs for life.

Then there’s the apprenticeship wage subsidy scheme (“Boosting apprenticeship commencements”). Governments target apprenticeships because they are popular with the public. Yet the drop-out rates are high, at about 40-50% for traditional apprentices, mainly because of employer-related issues.

Traineeships are also called apprenticeships. While traineeships in areas such as retail, hospitality and so on achieve better completion rates than traditional apprenticeships, the continuing employment rates are terrible – especially after the government subsidy cuts out.

JobMaker: sloganeering won’t fix a VET system gouged by profiteers

Another difficulty with apprenticeships, unlike other educational programs, is that participation is conditional on the person first obtaining employment.

In recent years, students completing year 12 but not going on to university have chosen low-skilled employment rather than continue their education through Vocational Education and Training. Such jobs at least gave them some disposable income and enabled them to stay engaged with the community. However, such jobs are going to be ever harder to find now. There are already 13 jobseekers for every job vacancy.

Terrible message to youth

People leaving Year 12 will be competing with people who are already on Jobseeker and who will no doubt get priority with employers eager for the $200 subsidy per worker. What a terrible message to send to youth – that they first have to go on unemployment benefits before they are likely to be offered a job.

The overwhelming focus on university education, in the hope that this would lead to more demand and productivity improvements, has also not transpired. In fact, even before the huge investment in expanding access to university places, productivity was declining even though the number of graduates was going up.

But there is another way. With 2.5 million people currently unemployed or underemployed, Australia desperately needs a strategy that enables people to re-engage with education while simultaneously offering an income. A crucial aspect of Australia’s long-term economic recovery and growth will be filling the chasm in the labour market at the intermediate skill level – a chasm caused by a decade of irresponsible and ultimately damaging fascination with privatising VET.

The best defence against the ramifications of the pandemic and of increasing automation on people who are unemployed is to invest in broad-based education and to provide students with financial assistance while studying.

The concept of a stipend while studying is similar to the strategy developed by the Commonwealth and state governments in the ‘60s and ‘70s in the form of scholarships and studentships. These encouraged unprecedented gender and socio-economic diversity in our tertiary institutions. Along with an expansion of tertiary places, the strategy underpinned the nation’s economic growth for decades.

A diploma of professional studies

The Mackenzie Research Institute has developed a position paper that proposes the development of a “Diploma of Professional Studies” that supports studies in high-growth industries. The diploma targets young people who may have missed out on developing their full educational potential because of disruptions caused by the pandemic. However, it would be of equal value to adults who are unsure of their academic capability.

The diploma would include a focus on core skills in literacy, numeracy and digital competency as well as assessable work integrated learning. A broad curriculum is vital because narrow qualifications are inappropriate for a world in a state of flux. lt is also impossible to confidently predict what will be the employment opportunities in the future, and core skills provide some insurance against uncertainty. Last year, the OECD estimated that 14% of existing jobs could disappear over the next 15 to 20 years, with 32% likely to change radically.

Further details of the proposal can be found here.

Providing opportunities for the forgotten groups who are likely to fall by the wayside as a result of the pandemic would also increase Australia’s productivity base. Some of the $4 billion being spent on the JobMaker Hiring Credit would go a long way to assist the strategy.


Bruce Mackenzie

Bruce Mackenzie

Bruce Mackenzie was the chief executive of Holmesglen TAFE, one of the nation’s biggest providers of vocational training, for 31 years. He is now the chief researcher at Mackenzie Research Institute, which was named in his honour. He continues to be one of the country’s strongest advocates for the TAFE system.


  1. Avatar

    all true – I suspect the only interest to most right-leaners in government is ‘lower taxes’ – to put more money in the pockets of their already-rich mates

    which means lower spending on any public services (roads, hospitals, schools?) that might actually help anyone else

    ‘Money-makers are tiresome company, as they have no standard but cash value.’ – Plato, The Republic, about 380BC

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      If only the right-leaners realised that investing in these kids now, would mean less taxes later on in life when these low-skilled jobs are automated and have no specialised skills to use so they end up depending on Centrelink for income…

  2. Avatar

    Let’s also not forget some of the questionable internship arrangements where businesses can run off a consistent cycle of interns that should supposedly just be “grateful for the experience”.

    The funny but not-funny situation youths face of “you need experience to get experience” is too frequently seen at all skill levels or degree of qualification.

    Mount up the tuition fee debt for extra study just to try and make yourself more competitive/appealing to employers and the pressure to take any job steadily increases.

    It is entirely unsurprising that the statistics echo the conditions youths face where more of the highly qualified graduates are being forced to accept low paying jobs. Seems pretty clear why productivity also shrank despite our strong ranking for university graduates.

    As the article discussed, those without the skills/qualifications in the first place fighting against literally everyone else thrown into the JobSeeker lottery will be hit even harder – all for what is now likely to be a temporary role with zero progression towards what they really want to achieve in life.

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      It’s not just ‘Interns’ that are fuel for fodder for these lacklustre business types and their constant subsidies from the LNP/BCA/IPA cohort.

      The following article from TGA highlights more rorts for this ‘business’ class. IMHO they are not businesses, they are rent seekers in addition to the rest, and I worked for more than my fair share of them during many years in no man’s land between 50 – 65 and running the gauntlet of JSA’s.

      From what I have read today, the insolvencies are beginning to pile up and it’s only two seeks since Jobkeeper ceased, mainly they appear to be mum and dad ‘zombie’ businesses that are going to the wall.

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        I love it when their own stats and reports completely refute their claims of success and achievement. Never gets old!

        Also not surprised businesses with a large casualised workforce are already tweaking hours or replacing older staff with the younger just to claim the handouts. Classic move allowing one reprehensible inequality to be replaced with another…

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        I reckon that I could write a book about that, in fact I already have the title! (Someone somewhere promised to help me write that book.)

        I encountered this reprehensible behaviour in 2012 when I went to work for an American International Freight Forwarder in Tullamarine! There had already been a revolving door of people thru the position, all the staff were under 35’s.

        There were no records so to speak of and I spent the first two months going thru lots of dead end stuff, in addition to researching stuff that had been given to me. The LAX office was so surprised that the 2IC rang me directly wanting to know what the hell I was doing! In short:

        1.Business development of existing customer accounts and securing new accounts to achieve sales targets

        2.Identify and secure new accounts and manage new accounts until bedded into the company’s operations framework.

        3.Maintain high level of Sales achievement, with daily follow-ups for identified new business – Account & Relationship development.

        4.Conduct canvassing cold-calls as a sales tool to grow business utilising SEO searches for effective sales leads and prospects.

        5.Initiate and coordinate development of action plans to penetrate new markets.

        6.Management and maintenance of Contacts/database as it relates to Sales ensuring integrity and accuracy of all sales related data.

        Achievement: Secured New Business opportunity for FMCG Exporter @ $30 million. This was the biggest account that this company would ever hope to acquire.

        The CEO, thinking that he had been a clever fellow, decided to terminate me at the 4th month, enlisted the help of Legal Aid Victoria due to unfair dismissal and let it go, was fighting for $2K. The best bit, the CEO was a foolish man, failed to seal the deal and tried with 3 bites of the cherry.

        In that period of time, it gave me the opportunity to dig myself out of a very deep hole, however I still had another 5 years until I reached 65.

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    I have been fortunate to be in the ‘Intermediate category’ from the late 1960s onwards but have transitioned into FIVE major/different job categories in that period due to changes of residential locations, recessions and family commitments. I have ADAPTED according to the circumstances of the times so it is NOT a new concept! But my major skills were as a technical assistant/draftsperson/survey assistant/engineering associate and cartographer which is exactly within the ‘diploma’ level now needed. I was able to apply my skills indirectly at a much more recent mature-age, when employed as a work, health and safety officer (having also gained administrative skills along the way). So I consider that I was a ‘pioneer’ due to the fact that I was one of very few females in the technical industry also.
    The BIG difference in that era was that TAFE fees were subsidised by the Govt in the 1970s and employers allowed some time off to attend classes (although most were held in the evenings).

  4. Avatar

    Interesting article, and there are several issues in Australia related to attitudes towards education, work and innovation by ‘stakeholders’ and ‘commissioners’, including investment in life long learning, both in and out of workplaces

    Our political classes still cater to VET trades and HE STEM as real employment pathways yet ambivalent about services which dominate the economy and employment. Like the US this seems to stem from industrialist supported libertarian economic ideology which has antipathy towards empowered people, and service industries (not dominated by white males).

    Practically, one is not sure what guidance youth are receiving from schools, family and friends to highlight skills and jobs of the future etc.; both agriculture then manufacturing* have declined in importance for employment due to automation (in fact most manufacturers are immersed in services ex. production lines) vs. health care, electro technology etc..

    It would be interesting to focus more upon those industries and/or sectors (public and/or private) which have been at the cutting edge of future growth and employment. Australia has many best practice examples but are overshadowed in political media by demands for traditional legacy industries e.g. mining, Oil/LNG, construction, real estate, automotive, agriculture etc., some of which may not be round in a decade or more….

    The best practice from the top for input on required essential skills and pathways could be internationally successful Atlassian, Canva, CSL, Cochlear, SHL, telecomms, green technology, EVs etc. then more importantly, drilling down to SME land/or local evel.

  5. Avatar

    High migration serves a number of Liberal Party purposes.

    Avoids business training unskilled people to do skilled work.
    Provides a permanent pool of unemployed to keep downward pressure on wages.
    Keeps upward pressure on house prices.

    As with all things Liberal, the only lose is us.

  6. Avatar

    Which Tafe is teaching you to change a clutch on a shovelhead? Sign me up.

  7. Avatar

    Interesting, I can’t tweet this article….???

  8. Avatar

    The number of qualified people as well as the quality of training provided by RTOs is a serious concern around multiple industries. With the current government we will unfortunately only see a change when business raises concerns. And with the infrastructure being built now due to liberals recession and RTOs 10 minute tickets, we are unfortunately likely to see a rise in workplace fatalities in high risk industries.

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