A well-skilled future.

What is a Well-Skilled Future?

Skills are expensive to deliver and expensive to acquire. Not only do they require the time and money of students; they also demand effort, persistence, a willingness to be taught and exposure to unfamiliar tasks and ideas. Because acquiring skills is difficult and expensive, it is important to have an idea of how much is enough. A well-skilled future is one that has the 'right' amount of skills. What might this be?

Most of the prosperous nations of today owe their prosperity in large part to the productivity of their workforces. This productivity has two fundamental sources. One is the amount and quality of equipment with which people work. The other is the level and suitability of the skills that workers possess. These skills add directly to productivity. But they also make it profitable for firms to invest in advanced and complex technologies and equipment. Such capital does not add to productivity on its own. It must be used by workers who are capable of operating it to good effect and of maintaining and developing it. Frequently, this requires high levels of skill among the workforce. One aspect, then, of a well-skilled future is that firms are confident of investing in advanced equipment, technology and management systems, knowing that they will be able to find the quality workforce that will get the most out of their investments.

The second important aspect of a well-skilled future focuses on the potential productive capacities of the people of working age. Every person has the potential to offer more to the economy than just their raw labour power. They do this by learning work skills--through the formal education system, and informally on the job. Because people vary a great deal in their interests and in their potential capabilities, the skills development system must be diverse and comprehensive in order for the latent productive talents of the workforce to be realised. In a well-skilled future, each person would have real choices about how much effort to put into their own skills enhancement and in the types of skills they acquired. A range of skill development opportunities would be open to people in country areas as well as in the cities; to older people as well as the young; to those with bad schooling experiences as well as those who flourished at school; to migrants as well as the native born; to sole mothers and married mothers; to those with impairments as well as the fully fit. People would have multiple opportunities to enhance and alter their skill sets. They would have effective opportunities to recover from past educational decisions and actions that they come to regret.

An important way in which skills increase national prosperity is by increasing people's participation in paid work. More skilled people receive higher wages and have more job choices. These higher wages and greater choices increase the incentive to take paid work, hence increasing the participation rate. In this way, skills enhancement for the low skilled improves both national productivity and individual financial independence and sufficiency. In a well-skilled future, everyone who seriously wants to develop extra skills in order to be able to find a job is able to do so.

Vocational skills are vital for prosperity. Significantly, they are also vital for equity. Prosperity that is derived from the development of skills--especially vocational skills--is widely shared among the population. The benefits go to all those who increase their skills, regardless of whether they start from a low or a high skill base. Overall, wages are distributed across the population more evenly than are the returns to capital (profits). And the wage gains from having vocational skills are focussed more on the lower wage groups than are the gains from university education. Vocational skills promote productivity in an egalitarian way. The VET system provides opportunities for many who do not prosper elsewhere in the educational system, or who are not gaining significant skills from their jobs. In 2005, 30 per cent of school leavers and 23 per cent of those aged 20-24 were not engaged fulltime in some combination of study and/or work. This lack of engagement will slow down the development of work skills in these key learning ages. A well-skilled future that shares the gains in prosperity widely among the workforce and population thus must give vocational education a solid and central place. Today, about one third of the workforce have vocational qualifications as their highest qualification, 18 per cent have university qualifications and half have no post-school qualifications.

The skills of the population contribute to productivity and equity only if they approximately match, in quantity, type and level, what employers need. Shortages of skills make it harder for firms to produce the quality and quantity of product for which they have buyers. Like shortages of any other essential input, this reduces total production. Surpluses of skills present a different problem. They are not noticed by employers, except possibly in the form of a large pool of high quality applicants for jobs and low quit rates. But they are economically inefficient and personally harmful. Where individuals and the taxpayer (and possibly employers) have expended time and money in the development of a skill, such as that of auto mechanic, the investment is wasted if people so trained cannot get jobs that use that skill. While there will never be an exact match between the skills that people have and the skills that employers want, a well-skilled future would avoid the emergence of either a large unmet demand for skills or a large excess supply.