High Use Training Packages – Comments on the comparison data

As a lot of you are probably aware NCVER released some interesting data earlier this month on what they classify as High Use Training Packages, which allows for comparison of the data relating to these packages.  The data is quite interesting particularly when you start to look at it more closely, so today I thought I might look at some of the more interesting points in the data and offer some commentary on it all.

The first thing that jumps out of data is that Early Childhood and the TAE are very big business, with around 125,000 enrollments in Early childhood and 45,000 in the TAE.  To be fair a not insignificant number of the Child care enrollments are dual enrollments, with the student enrolled in both the Certificate III and the Diploma at the same time. Even with that though I think we can safely still suggest that Child care enrollments are nearly double the next nearest competitor which is the TAE.   I do have to admit that I was a little surprised by the sheer number of enrollments in the Certificate IV TAE at around 45,000 it sits right next to Certificate II in hospitality and Certificate I in construction, in terms of enrollments.  The question I want to ask here is if 45,000 people enrolled in the TAE, where are they?  Perhaps this will become clearer though as we move through the data.

If we slice the data in other ways we also find other interesting snippets.  On average across all qualifications and packages females account for about 44% of participants, yet when we look at Aged Care, individual support, Nursing and Child care we see that the participation figure for women jumps to more than 80%, with 94% of all childcare enrollments being female.  At the other end of the scale in carpentry, building and construction and electrotechnology we see the situation reversed with less that 5% of enrollments in those qualifications being female.  Certificate II in kitchen operations and hospitality were the two most popular courses for participants who were still at school, while construction and plant operations were the most popular with indigenous students.

If we look at labour force status there are some statistics which are really obvious, such as the fact that in electrotechnology and carpentry less that 5% of students were not currently employed, which given that these are the two qualifications with  the highest % of students undertaking the qualification through an apprenticeship is hardly surprising.  Labour force status also answers the question about the 45,000 TAE enrollments. 89% of these enrollments were from people who were already employed.  Interestingly 82% of all enrollments in Certificate II in kitchen operations were for people who were not currently employed.

Now while there are some really interesting pieces of data through out the rest of the report, I want to jump over now to the outcomes measures, because this will provide us with an interesting story particularly when we combine it with some of the other data we have seen.  It seems that while a high proportion of those students who undertake kitchen operations qualification ar eno employed when they commence, quite a low percentage of these students namely only 31% actually gained employment after completing the qualification, which is way bellow the national average across all qualifications of 47%.  This figure is terrifying because 74% of the people who undertook this qualification did so for employment related reasons, that is they wanted to get a job.  It seems therefore that if you are unemployed, a certificate II in kitchen operations may not be the best option if gaining employment is what you want to achieve. It also makes me wonder who are the people who are giving these students advice, because it would seem to be very poor quality advice to give someone looking for work that they should enroll in a kitchen operations qualification. This becomes worse when you realise that 60% of students enrolled in this qualification were students who were still at school, in fact it was far and away the most popular choice of enrollment for school students with almost 20,000 enrollments.  But wait there is more, 89% of these enrollments were government funded positions.

WHAT AN ABSOLUTE WASTE OF MONEY!

So schools are delivering a government funded qualification to their students, who just as an aside they are supposed to be preparing for entering the workforce, when it is glaringly clear that the qualification they are delivering is a worthless piece of paper to the vast majority of students undertaking it and does nothing to assist the potential workforce participation outcomes of the students.  To be fair though the school only get $2240 per student (QLD) for the delivery of the qualification, which means that we only spent about $30 million on an utterly worthless qualification.  And people wonder why I think VET in Schools is a travesty.

Enough of that though.  If people who are unemployed do want to undertake a course that will more than likely get them a job, then it is unsurprisingly clear the direction they should be heading in.  Carpentry, Electrotechnology, TAE, Aged Care and Individual support qualifications, followed by Nursing, Childcare and Cookery saw 60+% of students who weren’t employed before training employed after completing their courses.  Makes you think that perhaps we might be better serving our school students by enrolling them in CHC qualifications.

So there a few of the highlights from the data, however there is a lot more in this data set than meet the eye at first glance, particularly when you look at it in terms a range of other workforce data which hopefully I will have the opportunity to talk to you about over the next few weeks.

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Let’s talk about the system before we talk about funding.

There has been a number of articles and papers popping up recently which have discussed the need to reform post secondary training and education funding in Australia.  Now while certainly I would agree that this is an issue which we need to look at, and one which requires careful consideration, I can’t help but wonder if it isn’t a little bit of the tail wagging the dog.  Bear with me while I explain.

There is always a lot of discussion about how VET in this country is funded, who should get what, should it be more competitive or less, what should be funded, the list is endless and so is the opinion and verbosity about it.  Firstly don’t get me wrong, I think that discussions around how we fund post secondary education and in particular VET in this country are vital to our ability to be able to deliver high quality educational outcomes and ensure equality of access to education in this country.  However all of this talk of funding obfuscates the real problem that underlies the entire sector and that is the question of what is the purpose of the sector and what we need to do to ensure that we have a system that best addresses that purpose.  I would hazard to guess that if we took the approach of making sure the system and purpose of the sector were aligned that we would need to spend much less time thinking about the who, what, and how of funding as hopefully the answer to these questions would be apparent as a result of how the system worked.

For quite a long time I have held the position that when we look at the VET sector, its purpose is fairly clear and that is that the purpose of Vocational education and training is to designed to deliver workplace-specific skills and knowledge to assist participants to improve their workforce participation options.  Now over the years people have suggested that this concept is to narrow and that the purpose is to increase the overall levels of education with in the country, so that we have in general a smarter better educated populous, because education and learning are ends in themselves and not simply means.  While I have some sympathy with the position and generally that education and learning are important in and of themselves, this is not and should not be the central purpose of vocational education in this country.  It is certainly not the purpose for which the vast majority of students use it for.

it is clear from years worth of data collected by NCVER and other places that more than 80% of all participants in VET are seeking to convert their participation in the sector and subsequent qualifications to improve their workforce participation levels, either through getting a job or by improving or changing the job role that they currently have.  If the vast majority of participants in the sector are seeking workforce participation improvements and the sector is, pretty much by the definition of the words themselves (Vocational, Education, Training), about delivering workplace skills, then it seems clear, at least to me, that the main purpose of the sector should be what I outlined above ‘to deliver workplace-specific skills and knowledge to assist participants to improve their workforce participation.’

Given the purpose which I have put forward this gives us a fairly solid foundation from which to commence building a system to deliver on that purpose.  I don’t propose to do all of that here and now, but I will point out a few things which instantly seem to pop out.  The first is that there must be a connection between the knowledge and skills being learnt by the participant and the role they want to utilise them in.  No point in teaching someone underwater macrame if they want to an airline pilot or teaching a prospective printer how to work a Gutenberg Press. This means that there must be an intimate connection between industry, content, delivery and assessment.  It also needs that the system needs to be agile enough to cope with rapid changes in the skills and knowledge base of particular industries.

It also means that the system must ensure the validity, particularly in terms of competency, of any qualification issued.  Participants must be able to convert their qualifications into workforce outcomes and the only way that can effectively happen is if there is robust confidence in the competency outcomes of the qualification.  If as an employer I cannot guarantee that a person a particular qualification or  a qualification from a particular provider, then I am less likely to allow the conversion of that qualification into a workforce outcome, which in turn undermines the entire system.  In fact if workforce outcomes are the primary purpose of a VET system then the ability to convert qualifications into those outcomes is the lynch pin.

As i said I am not going to try and develop and entire basis for a system here, but as i said earlier, while discussions about funding are vital, we need to ensure that we have a system that supports the purpose of what the sector is trying to do first.

Private Equity, investment and consolidation in Vocational Education

A couple of days ago now the AFR posted an article about private equity and the Australian for profit education market, including Vocational education, in which they suggested ‘The Australian education sector is set to be the subject of a wave of consolidation led by private-equity looking to tap into its high-margins and predictable cashflow. Global strategic-advice company, EY-Parthenon, is gearing up to target the $25 billion for-profit education industry.’  The trouble is that I can’t help but think I have heard this all before.

During the middle and running through to the what was clearly inevitable end of now infamous VET Fee Help era, private equity firms, based on amazing high EBITDA margins, the lure of cashflow backed by government contracts, and an almost complete and utter misunderstanding of the VET industry in Australia, rush into the market and snatched up, partnered with or poured money into some of the biggest players in the educational market at the time all of which failed to produce the results which were way overhyped by ambitious CEOs, Managing Directors and founders looking to provide cashflow for expansion in a market which everyone, except it appears, the so call professional private equity gurus knew was a bubble soon to burst.

Now less than two years since the bubble well and truly started to burst and the demise of the vast majority of private equity backed providers, we see yet again a private equity strategy company selling the idea of investment in the Australian education business.  Admittedly EY-Parthenon and their Varun Jain and not limiting themselves to the VET market this time with their eyes on a more broad vista including early education, schools, VET and Universities. The problem for me is in statements such as such as the one where Mr Jain suggests that the fact that funding comes largely from the public sector, student fees and philanthropy is not something that he is concerned about, shows a think a deep misunderstanding of the volatility of the publicly post secondary education market in this country.  Post secondary education and particularly vocational education in this country has always been very much at the whim of the political winds and lean of whoever is currently in government.  I mean money always flows towards TAFE which of course could have more to do with gravity or perhaps more correctly inertia than anything else.  Then of course the spray which escapes from the main trickle is what is left for the non-public sector and exactly how much of a spray that is depends on some many thing that are out of the control of the operators of non-public RTOs.

So some of you are probably thinking now, why is he banging on about this.  It is simply because I am a little worried by this talking up of private equity again.  Not because I think that all education should be publicly delivered, the educational market should be as diverse as possible to allow for innovation and choice.  Nor do I care about private equity firms losing millions of dollars when the businesses they have invested in (without proper consideration most of the time in my opinion) fail.  Although I do care deeply about the effect that this has on both students and our sector workforce.  The concept of industry consolidation doesn’t present an issue for me either, as I do think the entire sector, public, private and not for profit, could do with a shake up and consolidation.

What worries me is that we have seen this before and we have seen the effects of it.  We have seen investors with little or no understanding of the education market in Australia and even less understanding of how to run an educational business, take substantial stakes in providers and because of their lack of knowledge and understanding drive their investment vehicles into practices and operations where their ability to deliver quality training and meet compliance needs are stretched to breaking point and beyond.  Roll ups, complex corporate structures, a focus on warm bodies rather than quality, all the things that force governments to enact changes to funding programs and harms the public’s view of the industry as a whole.

If you are a private equity firm (like EY-Parthenon ) please for a start do some real research, talk to people who are actually involved in the industry not just the usual crop of pundits, lobbyists, ex politicians looking a board seat and the like, because I can tell you that they knew like the rest of us about the issues around Vet Fee Help and market in general when the last crop of equity firms rushed in, they just didn’t bother to say anything.  Secondly if you are going to invest, again put people on your boards and in senior management roles who understand the market in this country and really understand the issues around training and assessment in our regulatory environment.  If you don’t then you are throwing good money after bad and damaging the industry in way you could not possibly understand.

 

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