We need to build a better system or risk losing productivity

Our new skills guru says our success in employment means we can’t be lazy about skills.

Professor Peter Dawkins. Picture: Aaron Francis/The Australian

Australia will need a very efficient migration system if it is to compete with countries such as Canada and the UK for skilled labour, says the nation’s newly appointed skills guru, Professor Peter Dawkins.

He says Australia’s success in achieving close to full employment combined with a reduction in migrants during Covid-19 had caused the country’s skills system to “crack”, leaving us with shortages that could ultimately threaten national productivity.

Dawkins, one of Australia’s most renowned labour market economists and educationalists, was announced this week as interim director of the federal government’s new body, Jobs and Skills Australia, which will be fully established next year. He says our employment success is now testing our skills system – but it’s not all bad.

“A lot of people say skill shortages are a terrible thing,” Dawkins says. “But there is a positive spin too, which is the reason is, we’re close to full employment, and actually it’s a good thing that we’re testing the skill system. We have to absolutely make sure we’ve got the education and training system really humming to make sure it’s producing the skills we need.

“We can’t afford to be lazy about the skills system, we need to make it operate very effectively, and we need to make sure we’ve got a very good way of matching the skills we’re producing with the jobs that are available. So that means a whole lot of system enhancement.”

Dawkins is confident there will be a sufficiently large pool of labour available for skills training, with immigrants part of the supply.

“Once we’ve got migration flowing, once we’ve got international students flowing, there are still people who will want to come to Australia,” he says.

“Having said that, because a number of other countries that have close to full employment and skill shortages want them too ... it is true that as well as having a very efficient labour market and a very efficient skills system, we need a very efficient migration system. If you’ve got a very complex migration system with all sorts of rules and complications and bureaucracy and lags, and other countries come up with a migration system that’s more streamlined and got kind of incentives in it, then ... so it puts a sharp focus on our migration system too.”

JSA, which replaces the National Skills Commission, will feed analysis and ideas into the current federal review of immigration.

“People are saying the whole migration system needs to be simplified,” Dawkins says. “(That) there need to be less categories of migrants. That’s one of the hypotheses, a simplified system. And then there’s another hypothesis that we need to have a simpler way of using our information about skill needs. It’s certainly something we’re going to look at.”

Dawkins has had a long career in policy formulation, including as head of the Melbourne Institute of Applied Economics and Social Research from 1996 to 2005. From 2011 to 2020, he was vice-chancellor at the dual-sector Victoria University where he implemented a radical block teaching method and advocated strongly to “break down the divide between higher ed and VET (vocational education and training)”.

He notes the persistent issue of skills shortages in trades and says: “Why is it that we persistently have a shortage of certain trades? It could be the way the system is organised, it could be to do with the incentives associated for the trainees and the employers. But there is another interesting angle. I was reading one of the Jobs and Skills Australia reports this morning, in which they were talking about this very issue.

“It turns out in the trades where there tends to be more persistent shortages, they tend to have a gender bias and so it’s particularly those male-dominated trades where the proportion of women is very low. I think it’s also true that there are issues in female-dominated ones as well. It’s an interesting hypothesis that one of the potential solutions to fixing the trades issues is less gender bias and more diversity in the trades.”

There’s also an issue with status: “In Australia, we tend to have a two-class view where higher education is seen as superior to technical professions. The status issue also goes to the status of the VET system relative to higher education.

“We need to raise the status of these occupations like trades and also see very strong career paths into master trades, or high-level trades, advanced trades, and on into engineering and so on, and then pathways from VET to higher education and vice versa, and joint qualifications between VET and higher ed that raise the status of these kinds of roles.”

Attitudes to VET are changing but “that idea of the two-class thing is reinforced by some policy settings. We have an Australian Qualifications Framework which tends to say higher education qualifications are the high ones and the vocational education qualifications are the low ones.”

Dawkins says a review by the late Professor Peter Noonan had advised the sectors to think about knowledge, skills and capability being produced in both sectors and all qualifications having blend of the three dimensions.

“VET has traditionally been very much on the skills end (and) narrow-based competency assessment, and higher ed has been very much on the knowledge end,” Dawkins says. “Now what higher ed needs to do – it’s on this path, but it needs to go further – is think about the capabilities it is developing, which really you can think of as another word for skills. Things like problem solving, teamwork, all that sort of stuff should be developed and nurtured in the higher education system (which) needs to be more open to both championing those capabilities and assessing them. VET needs to be less tied up with narrow-based competencies and move into broader capabilities.

“Now, you’ll still have different blends, and VET will always be more on the practical end and higher ed more on the theoretical end, but there’ll be shades of grey and ... then you’ve got a more fluid (system). It’s not a hierarchy then.”

Dawkins says that while the market system should work to increase wages where there are labour shortages and thus encourage people into those areas, “in some labour markets, the wage mechanism is affected by the fact it’s not necessarily a free market” because of government funding. Governments wanted more care workers, for example, but raising wages increased the tax bill.

“But there’s no doubt that wages adjusting is one of the ways the skill system should work,” he says “And where it doesn’t, you need to think about, does there need to be some policy intervention to help this? But it could also be that the pipeline isn’t working well or that the system isn’t producing the right people.”

Dawkins says near full employment has brought long-term unemployed people into work but they often need skilling up on the job: “That’s one of the things that I have become quite passionate about – the education and training system working closely with employers, not just on preparing people for the labour market but to think about upskilling and rescaling people in jobs.”

The risk to Australia if the skills shortage persists is “lower productivity than you would otherwise get” and thus the JSA agenda is to get the right skills into the right jobs, he says.

Dawkins says the former body, the National Skills Commission, primarily analysed market trends and skill needs which fed into the skilled migration list and training needs in VET.

“But out of the (recent) Jobs and Skills Summit came a lot of big issues that need an expanded capability, and the idea of the new organisation, rather than being essentially an analytical organisation providing information, should also engage with the key clients ... to make sure they’re focusing on the right issues.

“It’s getting business, unions, higher education, vocational education into a dialogue about these issues, which the previous organisation wasn’t required to do.”

Also important: higher education is now explicitly mentioned in the legislation establishing the JSA, he says.

Dawkins will be interim director while the government consults on JSA’s final model and carries out a selection process for the top job.