Keynote: Labour market analysis and skills needs over the recovery phase

TRANSCRIPT 10 July 2020

Adam Boyton, interim National Skills Commissioner

I’d like to begin by acknowledging the traditional owners of the lands upon which we meet today. I would also like to pay my respects to elders past present and emerging.

For those of you that I have not yet met my name is Adam Boyton and I am the Interim National Skills Commissioner.

While it would have been great to speak and meet with you all in person, it is amazing that we have technology available today that enables us to come together like this virtually. I’m very pleased to have the opportunity to speak about the work of the National Skills Commission, how we can help make Australia’s VET system stronger and also support Australia’s economic recovery from COVID-19.

The concept of a National Skills Commission was first raised by Steven Joyce in his March 2019 review of Australia’s vocational education training system. As part of the 2019/20 Federal budget the National Skills Commission was announced as part of a broader package - Delivering Skills for Today and Tomorrow - aimed at strengthening and simplifying the vocational education and training sector.

To make sure that the National Skills Commission delivers what the sector needs, we undertook an extensive co-design with over 500 people from all parts of the skills and labour market sector. That co-design process extended from the major capitals to the regions. I attended workshops in Sydney, Karratha and Darwin. The sentiment was clear – the sector wants a strong, independent voice for not just the vocational education and training system, but for the whole labour market. To provide robust analysis on Australia’s current skills needs and those we are likely to need in the future.

To give effect to that the Government has introduced into the Parliament the National Skills Commissioner Bill. This Bill establishes the role of the National Skills Commissioner as an independent statutory office holder to provide advice and analysis on:

  • Australia’s current, emerging, and future workforce needs;
  • the development of efficient prices for VET courses;
  • the public and private return on government investment in VET qualifications;
  • the performance of Australia’s system for providing VET;
  • issues affecting the state of the Australian and international labour markets;
  • and opportunities to improve access, skills development and choice for regional, rural and remote Australia in relation to VET.

Today I want to speak with you about the role the National Skills Commission will play in helping to simplify and strengthen our VET system. I also want to address the impact COVID-19 has had on the labour market; and the work the National Skills Commission already has underway to fulfil our remit.

Turning first to the labour market. The latest available Australian Bureau of Statistics (ABS) Labour Force Survey figures show employment contracted further in May 2020, by 227,700, following a decline of 607,400 in April –the largest monthly decline on record. The working age (persons aged 15-64) employment to population ratio fell by 1.3 percentage points in May 2020, to 69.8 per cent, the lowest rate recorded since July 2003.

Since March 2020, prior to the shutdown of non-essential services and the introduction of trading restrictions, the working age employment to population ratio has fallen by 4.7 percentage points. The unemployment rate rose by 0.7 percentage points in May, to 7.1 per cent in May, the highest rate recorded since October 2001 and well above the 5.2 per cent recorded in March 2020.

The significant decline in employment in May did not translate into a similar increase in unemployment because a large number of people left the labour force (142,000), pushing the participation rate down, by 0.7 percentage points, to 62.9 per cent, the lowest rate recorded since January 2001.

The ABS has advised that if the 623,600 people who left the labour force over the last two months had actually moved into unemployment, the unemployment rate would have risen to 11.3 per cent in May 2020.

Clearly the impact on the labour market has been enormous. That said, there are some early – and albeit tentative – signs of stabilisation.

For example, while the amount of hours worked did fall in May, the decline was relatively small (after a large drop in April). It is quite plausible that hours worked across the economy could well rise in June.

Similarly, the National Skills Commission’s survey of employers is showing an increase in the number of employers looking to hire. And various measures of job vacancies have started to show an uptick – albeit from very low levels – over recent weeks. However it is still very early days.

The dramatic change in the nature of the labour market has also meant a significant change in some of the National Skills Commission’s work. At the start of the year the unemployment rate was low and labour market research in the skills space was heavily focused on identifying skills shortages.

The data I have just run through underscores just how quickly that changed. And looking ahead, it could be a while before our labour market returns to the conditions we saw at the start of the year. To support economic recovery we need to understand what’s happening in the labour market, the structural shifts that have and will occur, and what skilling and re-training support our workforce needs to prosper.

Already we have seen – using the ABS’s Weekly Payroll Wages and Jobs in Australia that the labour market underwent significant structural shifts in a very short period because of COVID-19 and related restrictions. As an example, the share of employee jobs accounted for by the Health Care and Social Assistance industry increased (up by 0.4 percentage point) between March 14 and May 30, followed by Financial and Insurance Services; Professional, Scientific and Technical Services; and Manufacturing. These were all up by 0.3 percentage points.

By contrast, the share of employee jobs accounted for by the Accommodation and Food Services industry fell (down by 1.7 percentage points) between March 14 and May 30. This was followed by Arts and Recreation Services (down by 0.3 percentage points) and Administrative and Support Services (down by 0.2 percentage points).

Could I just stop here for a moment and acknowledge the work of the ABS in so rapidly bringing together so many new data sources during over the past few months – data sources such as the Weekly Payroll Wages and Jobs publication. 

As the economy recovers and businesses start hiring again, we need to make sure that they can find people with the right skills. We don’t want a mismatch between what businesses want and the skills people have being a handbrake on the recovery.

This is where the National Skills Commission can support the recovery. Our aim is to develop robust intelligence on Australia’s labour market, our workforce, and current and emerging skills needs. We will use both traditional and new data sources and techniques. Big data and machine learning approaches, as well as more traditional economic and skills analysis. Ultimately the Commission will publish an annual report, setting out the skills needs of Australia. Of course, there is a huge challenge and task in front of us. A challenge and task that needs to be tackled right now.

One way we are already doing this is by surveying employers about jobs in demand and future staffing expectations. We are also publishing the results of these surveys, including in a ‘Jobs in Demand’ dashboard. Each week we are updating jobs in demand at a local level on ‘Jobs Hub’, linking job seekers to vacancies as well as showing skills in demand. 

We are also undertaking CGE modelling work to examine the likely state of the labour market over the next year or so. This work is designed to provide a rich and nuanced picture of the impact of COVID-19 across regions, occupations and demographic groups.

Over the rest of 2020 the National Skills Commission will look to release reports that outline the likely skills needs of the economy as we continue to recover from COVID-19.

To recap, the labour market has experienced major disruption and while signs of recovery are emerging, uncertainty remains around when demand will pick up and what jobs will be most in demand. Matching workers to jobs in this uncertain and evolving environment will require the ability to quickly identify skills needs and retrain people for jobs that are in demand.

More than ever, the focus on skilling and re-skilling displaced workers will be essential to the recovery of the jobs market and our economy. Improved efforts on job matching and connecting job seekers with job opportunities through an increased focus on skills transferability and mid-career change will help get people back into jobs. Identifying training options that can link to a variety of jobs provides a degree of insurance against uncertainty during such periods of rapid labour market change.

New machine learning techniques, such as those used by the Jobs and Education Data Infrastructure (JEDI) project make this sort of analysis possible. These techniques can also identify additional training needed to open up new employment options for people seeking new jobs, and to identify pathways to new employment opportunities that take advantage of a job seeker’s existing skills.

JEDI is a flagship project that will deliver world-leading intelligence on skills needs. By harnessing the best and widest range of labour market, skills and education data available, JEDI can identify what skills from a person’s current or previous employment can transfer to different jobs that use similar skills. It also identifies skill gaps between the different jobs recommended before showing VET courses available to fill the gap. Using data science, JEDI is pioneering a new approach to skills-based labour market analysis that is helping:

  • people planning their career and exploring study options;
  • businesses looking at their workforce plan;
  • training providers designing courses.

JEDI also provides a single comprehensive source of up-to-date information enabling the NSC to provide relevant, timely and accessible information to better understand the needs of a changing economy. While JEDI can help us understand the needs of a changing economy, a stronger and simpler VET system will help us meet those needs.

So I wanted to speak briefly about the role of the NSC in helping to make our vocational education and training system stronger. The starting point is we have a good VET system. But there is room for improvement.

As highlighted in the Prime Minister’s recent press club address, the system can be complex, and unresponsive – especially for those who need it the most, students. There are over 1,400 courses and almost 17,000 units of competency, many leading to the same career path. Imagine how overwhelming it is for students to navigate all of these options –often without visibility of the employment outcomes for different qualifications. And with a range of different prices. As you all know, currently VET prices and subsidies vary considerably around Australia, with students paying different prices (fees) for the same course.

The Explanatory Memorandum for the National Skills Commissioner Bill notes that; The Commissioner would develop and maintain a set of efficient prices for VET courses; The Commissioner would examine the cost drivers for courses, the different public and private returns for courses, and develop a list of efficient prices for courses.

Core to this will be consideration of quality – efficient price does not necessarily mean lowest price, rather it means the price that needs to be paid to secure training that delivers students with the skills employers need and sets students up for a valuable career. I want to focus on that last point. An efficient price is not the lowest price. It’s the price that provides the quality outcome we are after.

Ultimately all of this work is about improving confidence in the system – particularly from the perspective of students. Which brings me to the on-going partnership between the NSC and the National Careers Institute.

Our data and analysis can help reassure students they are making the right decisions for their career. Enabling Students so they can find information about courses, and future career prospects with ease – enabling them to make better, informed decisions about their future.

The NSC has come into being at a critical and pivotal time. The real value of the NSC comes from the interlinkage of all these elements. Linking price and quality. Thinking about the outcomes of the VET system with reference to the labour market. Thinking holistically about skill needs, training, quality, pricing and outcomes. And making sure we communicating that effectively to students, providers; and testing our thinking and analysis with a wide range of stakeholders.

Late last year when stakeholders were invited to co-design the NSC there was an overwhelming call for an independent national body to revitalise the skills sector, to provide new leadership on skills and workforce development to meet the needs of Australia’s economy. None of us could have anticipated just how radically different the economic landscape would be just six months later. While much of the discussion then focussed on skills gaps, we are now instead needing to think about managing skills surpluses and retraining options for unemployed workers as we deal with our first recession in nearly 30 years.

This is, of course, only the start of the NSC’s journey. As the NSC moves forward and we harness the power of data, and introduce new and innovative ways to analyse it – we need you there on the journey with us. The insights from those directly connected with the VET sector –  whether they be training providers, students, industry groups or businesses – provides great value to the work of the NSC.

All of the NSC’s work has economic benefits. Our work has the potential to lift employment, lift productivity and get people into real and meaningful jobs.

But equality of opportunity is the promise of education and training. And I’d like to play a role in ensuring the VET system can really deliver that equality of opportunity to every student that goes through it. I look forward to continuing to work together to build a NSC that becomes an enduring, critical part of Australia’s economic infrastructure – throughout the recovery period and into the future.

Thank you.