Long, Michael --- "Reaping the benefits" [2008] MonashBusRw 64; (2008) 4(3) Monash Business Review 50

Reaping the benefits

Michael Long

Michael Long analyses costs, benefits and returns for students with VET qualifications.

Concerns over skills shortages and skills gaps are widespread in Australia because these shortages may pose a threat to continued economic growth. The vocational education and training (VET) sector is a major source of skills broadening and skills deepening in the labour force. In this context, the extent to which people have a financial incentive to enrol for VET qualifications and the extent to which higher fees (coupled with HECS-like loans) could be introduced to fund further expansion of the VET sector are pressing issues.

This paper examines the costs, benefits and returns from VET qualifications for the students who enrol and their variation across level of qualification, mode of study, sex, age and level of previous schooling.

It discusses aspects of the net benefits that accrue to students who enrol in VET courses. The net benefits from enrolment provide:

• The incentive for students to enrol; and

• A possible justification for students to contribute to the costs of their study.

The paper concludes, with some reservations, that returns to higher level VET qualifications are generally high and provide scope for increases in fees (with the availability of income-contingent deferred loans) without necessarily removing the incentive to enrol.

In 2007 1.67 million Australians enrolled in public vocational education and training (VET)—about 1 in every 9 persons aged 15 to 64. Additionally an unknown but apparently large number of Australians enrolled in full-fee VET courses with private providers. In 2004 expenditure on VET (including employer expenditure) was $5.2 billion—about 0.7 per cent of GDP and considerably more if the income foregone by students while studying is included. Fewer students enrol at university (0.8 million in 2007) and expenditure on higher education is similar to that on VET. In 2007, 31 per cent of Australians aged 15 to 64 had VET-level qualifications as their highest non-school qualification compared with only 21 per cent who had university level qualifications.

It is not just the size of the VET sector that makes it important – its economic contribution to the welfare of individuals and the nation is substantial. Improvements in education levels contribute to economic prosperity by improving labour productivity (by having more skilled workers and workers with more skills). Relatively small increases in educational attainment may produce relatively large increases in GDP and economic growth.

A review of Australian estimates suggested that an additional year’s education for the workforce would increase the level of GDP per person by 6 per cent (which over 40 years would result in an increase in GDP of 0.15 per cent each year) and increase the rate of growth of GDP per person by 0.3 per cent per year – a combined effect of an increase of 0.45 per cent per year in GDP growth per person.

To view this academic paper in full, see www.mbr.monash.edu.au

Cite this article as

Long, Michael. 'Reaping the benefits'. Monash Business Review. 2008.; Monash University ePress: Victoria, Australia. http://www.epress.monash.edu.au/. : 50–50. DOI:10.2104/mbr08064

About the author

Michael Long

Michael Long is a Senior Research Fellow in the Monash University-ACER centre for the Economics of Education and Training (CEET).