VET should never be the same – comment by CEO Craig Robertson

The virus reveals the fault lines in the economy in the same way earthquakes show the weak spots of buildings, roads and bridges. This was the advice last week from Adam Triggs[1], of the ANU’s Crawford School of Public Policy, about rebuilding the economy after COVID-19.

According to Triggs, the cracks in the economy unearthed by the virus is the high proportion of casual workers, too easily laid off, our poor safety net, euphemistically called Newstart and the high levels of debt in households giving them little leeway to weather financial storms. In concert, these three led to the unsettling scenes a fortnight ago of queues outside Centrelink offices.

About 2.6 million Australians are casual workers with no paid leave. While the high proportion is often justified as the flex the labour market needs that also suits casuals’ random lifestyles, most of these workers want more work. In economic costs, less secure income leads to less consumption, the magic ingredient which keeps the economy ticking over. As Triggs puts it, the uncertainty results in ‘less spending, less labour mobility and fewer people taking the risk of starting a business or going for a new job’.

The low Newstart payment has been easy to justify as the incentive for the unemployed to look for work. However, where the option facing many is insecure temporary work, the price of the switch – temporary low paid work with a costly transition to get back on Newstart if it ends – keeps the rational job seeker in the scheme. There is plenty of evidence from the economics community that a boost to Newstart passes directly into economic activity as recipients are unlikely to hoard the extra payment.

A weak balance sheet drains confidence to deal with difficult times. For households in Australia there is little in the coffers to see out even a temporary loss of income. Total household debt in Australia exceeds 200 per cent of GDP as is the case with Denmark, the Netherlands, Norway and Switzerland followed closely by Korea, Canada and Ireland.

This crisis also reveals cracks in VET. For a good while in VET the overarching philosophy guiding its policy has been human capital – higher level skills hold value in the labour market and can be exchanged for secure jobs and high wages. An individual with a diversified portfolio of skills can readily switch to other paying jobs when opportunities in one area close off. For the individual, human capital is the motivation for investing in skills and knowledge to navigate the complex world of work.

Human capital can also be seen in power terms – skills are simply input goods which can be commodified and stripped to the barest necessity for just in time production.

Whatever one’s view of the philosophy underpinning VET, it’s time to contemplate its suitability for the times. If human capital are the skills for exchange in the labour market, why are VET qualifications aligned to occupations which by logic have too many (qualifications), consigning graduates in some dystopian sort of way to poor paying and insecure jobs. If skills are simply stripped-back factors of production, then let’s make that clear to individuals (and perhaps let’s not dress it up as vocational education).

Following the GFC, most countries went into long-term debt which the taxpayer has been repaying since through austerity measures.

Out of this crisis we must focus on the citizen. We must build up their skills and knowledge balance sheet, so they have ample capital, or capability in education parlance, to get a good job and have the confidence to risk the move to a better job or start a business.

This takes investment on the part of government. It pays off though and it’s likely to be one of the key ways to rebuild economic activity. Let’s be clear, Australia’s growth was in trouble before the virus hit.  Triggs summarised it neatly in December 2019:

Compared to the first half of the decade, retail spending growth over the past five years is down 30 per cent, quarterly wage growth is down 40 per cent and consumption growth is down 15 per cent. The rate at which the economy creates new businesses has fallen from 14 to 11 per cent. Investment now contracts each quarter by an average of 0.4 per cent and productivity growth has flatlined. GDP growth remains around global financial crisis levels.[2]

Generous investment in capability – deep knowledge and transferable skills – is about the only way for a fair way out from this crisis.