While giving in-principle support for charging employers a levy for temporary and permanent skilled visas, Labor Senators strongly oppose the lack of guaranteed and stable funding for the associated Skilling Australians Fund; and note with concern the government’s failure to address immediate skills issues and the underlying flaws in the VET system as identified by witnesses and submissions to the inquiry.
Labour Market Testing
Labor Senators believe in the importance of strict Labour Market Testing (LMT) including rigorous evidence and requirements to ensure local workers get the first opportunity to apply for a job before looking overseas for workers.
New Subsections 140GBA(5), (6) and (6A) of the Migration Amendment (Skilling Australians Fund) Bill 2017 allow the Minister to determine, by legislative instrument, the manner in which LMT for a nominated position must be conducted.
This may include the language to be used for any advertising, the method of advertising, the time at which the advertisement must occur prior to nomination, and the duration of advertising to be determined by legislative instrument.
Labor Senators support these measures; however the bill provides no defined parameters and relies on the Immigration Minister to determine the manner in which LMT is undertaken by legislative instrument.
Stakeholders expressed their concern about the parameters of LMT in the Migration Amendment (Skilling Australians Fund) Bill 2017.
The Australian Council of Trade Unions (ACTU) submitted that the proposed amendments give the Minister discretion over LMT requirements stating:
…the extent to which, if at all, such a system will establish a rigorous LMT process will of course depend on the content of any legislative instrument/s that the Minister chooses to issue or indeed whether the Minister elects to issue such instruments at all. The Government’s record on the LMT issue gives no cause for confidence that the LMT process under these amendments would retain any real integrity or provide any real protection or priority for Australian job seekers.
The ACTU stated at the Senate inquiry’s public hearing:
These changes leave the labour market testing processes virtually entirely in the hands of the minister. He or she may elect not to issue any legislative instrument at all dealing with the manner in which labour market testing is to be conducted.
In its submission, the ACTU also highlighted that 'poor labour market testing standards' has 'facilitated the wide-spread use of 457 visas and the real harm done to many temporary visa workers through exploitation and wage theft.'
Labor Senators strongly support the rights of migrant workers to have access to union membership, protection under the law, and to be free from exploitation.
The Australian Manufacturing Workers' Union (AMWU) spoke at the public hearing about the need for stricter LMT:
…the ease with which temporary worker visas can be achieved is driving perhaps higher demand. We think that calls for greater regulation, tighter regulation, in respect of labour market testing.
The ACTU also asked the committee to consider LMT very closely saying:
…we suspect that the government is not serious about a proper labour market testing regime at all. We are not satisfied that the changes in the bill will tighten labour market testing, and we urge this committee to look very closely at that aspect.
Labor Senators share the concerns raised during the inquiry that LMT provisions in the bill as currently drafted are broad and lack specific requirements about what the Minister only may include a legislative instrument.
The Skilling Australians Fund
Labor is committed to building a strong and fit-for-purpose vocational education and training (VET) system.
Labor Senators believe the Skilling Australians Fund is fundamentally flawed and the associated policy does not deal adequately with the existing skill formation and VET system challenges currently facing Australia.
Labor Senators oppose the design of the Skilling Australians Fund and believe that skill policy formation and implementation should never be dictated by the number of skilled visa applications being made.
Labor Senators are of the view that if the government continues to ignore the underlying flaws in the VET system, including the degradation of the TAFE system and continues to cut funds for skill development, access to decent work and to quality skills development for Australians will diminish further to the detriment of national skill development, the productive performance of industry and our capacity to compete internationally.
Australia is currently facing a number of significant employment and social challenges:
Underemployment is close to record highs and unemployment remains a serious challenge for many groups, including large numbers of young people, and in many locations around Australia.
Industries that once employed large numbers of Australians are in decline, while service industries will increasingly become major employers in local communities – particularly health, aged care and disability support.
Globalisation, digital disruption, the transition to knowledge intensive industries, increasing demands on families juggling work and care, and a greater frequency of career transitions all pose significant challenges.
According to forecasts by the Department of Employment, nearly half of all new jobs over the next five years will require vocational qualifications. To maintain jobs growth and avoid increasing inequality it will be essential to have a fit-for-purpose VET system operating to meet the necessity of having a skilled and productive workforce.
Labor Senators note that there is a strong and growing view from stakeholders and experts that there are serious flaws in the VET system limiting our national productive capacity.
The Productivity Commission’s Shifting the Dial: Five Year Productivity Review reported that ‘the VET system is a mess’ and that:
Despite its important but complex role, the VET sector has been beset with a raft of problems leading to a sector characterised by rapidly rising student debt, high student non-completion rates, poor labour market outcomes for some students, unscrupulous and fraudulent behaviour on the part of some training providers. These outcomes report a range of problems in the VET sector.
The most recent Organisation for Economic Cooperation and Development (OECD) report on skills and global value chains shows Australia is poorly positioned in terms of skills characteristics to capitalise on opportunities in global value chains, and would struggle to meet the requirements of the technologically advanced sectors.
The Business Council of Australia (BCA) is calling for ‘systemic and transformational change’ across education, but in higher education and VET in particular. The ACTU maintains that ‘a significant wholesale reform of the VET sector is necessary to ensure the VET system can reliably deliver quality training for the jobs of the future.’
The government has been incapable of properly assessing and developing the policies and systems that would reverse the decline and effectively deal with the concerns raised by stakeholders.
The Skilling Australians Fund fails to meet the challenges in vocational education and training
Stakeholders submitting to the inquiry echoed Labor Senators’ concerns that the Skilling Australians Fund will not deal with the range of critical issues facing the skill formation system.
TAFE Directors Australia (TDA) submitted the following:
…TDA wishes to raise the broader concern that the Skilling Australians Fund risks focussing on apprenticeships and traineeships at the expense of responding to other important priorities facing the Australian economy. The priorities include mitigating the impact of automation, artificial intelligence and other disruptive technologies on the levels and types of skill workers, and ultimately ensuring that all Australians are active participants in the labour market, which is so central to sustaining the nation’s GDP, and ensuring our ongoing international competitiveness.
The ACTU submission included the following statement:
It is our opinion that the VET funding model outlined in this proposal fundamentally fails to address the real weaknesses in our current VET system. A relatively small, unstable funding source is not an effective remedy for a system in which few of the current issues can be considered to be caused by lack of funding.
The Australian Chamber of Commerce and Industry (ACCI) submitted that the government’s failure to guarantee funding for the Skilling Australians Fund shows a lack of commitment to the skills system:
…the approach taken by the Federal Government has sent a strong negative signal about their commitment to vocational training, which has now been defined as luke-warm at best.
Labor Senators recognise the critical role played by public TAFEs in delivering skills development and skills in the national interest, and note the alarming fact that the government makes no mention of TAFE in its Skilling Australians Fund policy and has no plan, vision, or intention to reverse the decline in public provision.
Between 2013 and 2016 there has been a 30 per cent drop in government-funded Australian Qualifications Framework training at TAFE. Over the period there have been significant job losses, campus closures and course fee increases. The inquiry heard that at least 70–75 per cent of apprenticeships are currently delivered by TAFEs. The capacity of TAFEs to continue to provide quality support and education to apprentices and trainees, as well as performing their other crucial roles in Australian communities, is at risk while their resourcing levels continue to drop.
In light of rorting and gouging by for-profit training providers operating in the VET system, the ACTU expressed concern that the fund may further enable exploitation of students by unscrupulous for-profit providers unless there are specific safeguards put in place. Failure to do so would undermine the quality and reputation of the apprenticeship system.
TDA is concerned that the project-nature of the model, ‘may result in a piecemeal approach to reforms needed in the sector’, as well as possibly leading to unnecessary red tape across the levels of government and providers. Mr Craig Robertson, Chief Executive Officer of TDA stated:
Our other area of concern is that it will also be individual projects with a high degree of accountability attached to it. So we do worry there will not be systemic reform flowing from this measure, and we do run the risk of a whole pile of hodgepodge projects.
Mr Robertson also commented:
…it will be project based, which will mean it will be on and off. So, TAFEs will be looking at that quite cautiously, saying, 'I could invest, make it a success and then the money's gone. What do I do next?' We would be supporting, under the principle of Commonwealth-state arrangements, that it should be more, broader systemic money that is sustained over at least four or five years. That doesn't mean that the TAFEs or states and territories want to shy away from performance and outcomes. Let's just make it a bit easier for them to be able to do that.
Labor Senators note that the majority of students in the VET system are outside of the apprenticeship and traineeship system. The Skilling Australians Fund focus on apprenticeships and traineeships fails to address some of the most urgent and critical skill requirements in our labour market.
This omission fails to deal with the complex skill development needs in some of the fastest growing areas of our labour market.
TDA submitted that the government is failing to address the need to fund non
The ACTU also expressed concerns that a concentration on apprenticeships and traineeships ignores the critical need for skill development in growing industries, and in particular in the disability and aged care workforces where apprenticeships and traineeships are not the norm.
In addition, some stakeholders raised doubts about the capacity of the government to ensure that ‘matched’ funding being sought from the states and territories was additional and did not displace current contributions being made to VET by the states and territories. If substitution of funding rather than additional funding were to eventuate, the Skilling Australians Fund would not result in an overall growth in government funding to VET.
Labor Senators note that funding displacement would also have the effect of reducing state and territory funding for the non-apprentice and non-trainee areas of the VET system.
Stakeholders united in their opposition to an insecure and fluctuating fund
Stakeholders were united in their opposition to a Skilling Australians Fund based an insecure and fluctuating revenue source.
Labor Senators are gravely concerned that the revenue raised by the government’s proposed visa scheme will not be sufficient to meet the Skilling Australians Fund budgeted expenditure or the emerging skill acquisition demands of a modern economy.
Labor Senators note that a review of the preceding and now concluded funding arrangement with the states, the National Partnership Agreement on Skills Reform, identified that funding stability was an important matter to ensure future agreements:
Any future reform of the VET sector should be supported with public funding that is allocated across the system in a way that provides market stability, with reasonable long term certainty in the quantum of funding, and takes into account all related funding channels.
It is apparent that from 2018-19 the Skilling Australians Fund will be solely reliant on the revenue raised by the levies prescribed under the bills. The 2017-18 Budget Paper No. 3 states: 'From 2018-19, amounts available to the States form the Skilling Australians Fund will be determined by the revenue paid into the Fund.'
This was confirmed by the Department of Education and Training in a response to a question placed on notice during the 2017-18 Senate Estimates:
The amount available to the Skilling Australians Fund will be equal to revenue collected through the Skilling Australians Fund Contribution (less Department of Immigration and Border Protection expenses.)
ACCI informed the committee that they had been unsuccessful in their pursuit of a commitment to a guaranteed level of funding from the government, including in their discussions with Assistant Minister, the Hon Karen Andrews MP:
We’ve not had any assurances from that office or any other part of the government that indicates there’d be funding certainty. They maintain the announcement that was made.
BCA submitted that the Skilling Australians Fund represents a ‘significant cut in government funding’ and expressed concern at the lack of certainty that the revenue raised will meet the budgeted estimates:
The government estimates that the training levy will generate revenue of $1.2 billion over the forward estimates and expected expenditure from the Skilling Australians Fund over the forward estimates is $1.47 billion. However it is unclear whether there is sufficient demand in the identified visa categories to generate this level of revenue.
Mr Craig Robertson, the Executive Director of TDA, expressed his members’ concerns about 'the decline in direct investment from the federal government', commenting that 'whilst it is welcome, it only touches the sides of the problem.'
The ACTU in its submission questioned the credibility and adequacy of the budgeted figures, especially in light of the government’s failure to provide any modelling to explain their calculations.
Given that the temporary visa program is demand-driven, the Department of Home Affairs and Treasury evidence to the inquiry was that there was no way to precisely forecast the revenue that would be raised for the Skilling Australians Fund via the levies proposed in the bills. As such, fluctuation in revenue was inevitable and the budgeted projections were subject to visa demand.
The Department of Education and Training was unable to guarantee that the level of resourcing in the Skilling Australians Fund would be secure and stable. From the following exchange it is clear that the level of funding in the Skilling Australians Fund is not guaranteed:
Senator CAMERON: The budget papers said: 'Employers who nominate workers for the new Temporary Skill Shortage visa, and certain permanent skilled visas, will contribute by paying a levy to a new Skilling Australians Fund. This Fund, the Skilling Australians Fund will ensure an ongoing source of revenue to support Australian skills development and the take-up of apprenticeships and traineeships.'
Is that a guarantee of funding?
Mr Palmer: It's a guaranteed source [emphasis added] of funding.
Senator CAMERON: What's the difference?
Mr Palmer: The level of funding may change due to the number of visas that are issued and the number of levy fees that are paid from time to time.
The reliance on visa levies and the consequential fluctuation in funding for skills was identified as problematic by stakeholders that submitted to the inquiry, citing the detrimental effect unstable funding would have on the orderly production and reproduction of skills.
The ACTU outlined that the instability of the fund would limit the capacity for long term planning for governments, providers and employers which is critical in apprenticeship-based skill formation.
The Law Council of Australia, while welcoming funding of training opportunities for permanent residents, expressed concern at the insecurity of the fund:
The Law Council is concerned that, should the number of skilled migrants decrease due to the Levy, so too would funding. If less funding for training and vocational education is provided to Australian and permanent residents, the demand for overseas labour may increase. There the Law Council suggests that the Levy should not provide the only source of revenue for the Fund.
The Victorian TAFE Association believed that funding of skills should be based on skill needs and requirements and not of migration levels:
The levels of funding provided should first and foremost be driven not by the amount raised by migration charges but by the level required to train and educate Australians that maximises their contribution to Australia’s economic success, future productivity and growth.
This view was echoed by the Electrical Trades Union of Australia during their appearance at the inquiry:
…due to inevitable fluctuations in what's received via the levy, there can be no certainty for the people actually delivering the training about what's going to come down the pipe in one or two years’ time. It's just not an appropriate basis on which to underpin a system. It's absurd.
Mr Ben Bardon, the Executive Officer of the National Australian Apprenticeships Association (NAAA) also stated his members’ concerns regarding insecure and insufficient funding:
…it's an untested funding mechanism for VET, dependent on skilled migration levels, and, because of that, it could reduce the numbers of skilled migrants and result in a shortfall in funding arrangements. So we're concerned that there may be some instability in the level of payments of levies into the fund.
We also have a broader concern that $1.4 billion is not enough over the forward estimates to halt the decline in VET funding nationally and that the total quantum needs urgent attention as part of this discussion but also as part of a wider discussion about how we increase funding for VET. Our view is that the fund needs to be constructed so that it has the effect of increasing overall funding for VET over the forward estimates and acts as a point of stability for future funding arrangements.
ACCI expressed concern that the lack of certainty in funding would both constrain policy action but was also limiting the government’s ability to settle agreements with the states and territories:
This mechanism is constricting policy decisions about the levy, and the nexus has to be removed.
Although not directly related to these Bills, the nexus is also creating issues in relation to finalising the apprenticeship arrangements. Given there is no guarantee that the SAF will receive the amount of monies that are projected to be raised through the migration programme use, this has created uncertainty in the negotiations with the states/territories.
Labor Senators note that education funding expert Professor Peter Noonan, professorial fellow at the Mitchell Institute for Health and Education Policy, has independently observed the inherent contradictions in the Skilling Australians Fund design, and has echoed ACCI’s concerns that the Fund design is posing a barrier to settling agreements with the state and territory governments:
Revenue for the fund will be highest when skilled migration is highest, and lowest when employment of locally skilled workers is highest. That means the revenue stream for the fund will be counter-cyclical to the purpose for which is was established: in increase the proportion of locally trained workers and to lessen reliance on temporary skilled migration visas. Unless the Commonwealth guarantees funding levels and continues to make up any shortfall in the revenue, it will be difficult, if not impossible, for the Commonwealth to enter meaningful, bilateral agreements with the states through the fund.
To address the issue of unstable and insecure funding many submitters recommended that the government guarantee a level of funding. ACCI submitted that:
The full $1.5 billion over four years should be allocated to an apprenticeship partnership agreement with the difference between what is projected to be raised by a (lower) training levy and the $375 million per annum be allocated in all years in the budget forward estimates, thus providing a guaranteed amount to deliver certainty in the partnership agreement.
The National Apprentice Employment Network (NAEN), representing group training employers submitted that:
The government should guarantee a minimum contribution to this fund in the absence of funding provided by these bills. The VET sector should never be in a position where the best it can do to ensure sustainable funding for apprentices, going forward is to encourage increased skilled migrant employment. That would counter the primary purpose of the fund.
Unions were unified in their view that that the fund needed to be guaranteed to deliver skill development policy, as well as highlighting the importance of employers investing in the skills for their workforce.
The budget of the fund needs to be guaranteed, consistent and decoupled from how much money is actually brought in by the levy. There needs to be a guarantee of funding to ensure there is adequate training and, obviously, the levy can be used to defray. We should not have a system where there is funding for training of Australian workers contingent upon the importation of temporary workers.
The government should be guaranteeing the amount that it is prepared to subsidise the production of skilled workers, but we also say that there should be extracted from the consumers of skilled workers a contribution as well. That's employers, and we don't think they contribute anywhere near enough to producing the workforce that they profit from.
Apprenticeships and traineeships
Labor Senators restate their fundamental commitment to quality apprenticeships and traineeships.
Since the government took office there are has been a significant decline in the number of apprentices and trainees in the labour market, with a 20 per cent decline in trade apprenticeships alone.
Quality apprenticeships and traineeships are characterised by:
an employment relationship;
a structured balance of on and off the job training;
acquisition of deep, transferrable and relevant technical skills; and
a contract of employment and a contract for training.
The national benefits of high performing apprenticeship systems are substantial.
Better than any other training model, skills gained in a quality apprenticeship closely match the needs of employers and the labour market. The supported learning gained on the job is mutually reinforced by high standard of on the job instruction. Direct involvement in the production process makes transitions to workplaces smoother, enabling apprentices to gain occupational mastery sooner, and allows them to earn wages while they do it.
Countries that have good apprenticeships systems outdo other countries in terms of low youth unemployment and having good quality skilled and semi-skilled jobs.
Independent studies confirm that employers receive excellent returns on their investment in apprenticeships – reaping the benefits during the training period.
Firms who employ apprentices report:
service and product improvements;
better staff retention; and
the introduction of new ideas and innovation.
Given these undeniable benefits, the decline in the apprentice training rate since the government took office, is all the more troubling.
Skilling Australians Fund apprentice and trainee targets
The government has been unclear about how the target of 300 000 more apprentices and trainees will be met over the four years of the Skilling Australians Fund. It remains unclear whether the target is intended to add more apprentices and trainees to current stocks or whether they will replace existing stocks of employees and/or apprentices.
As such it is unclear how the performance of the Fund will be measured and what status the targets are having in decisions relating to projects.
Risks to apprentice and trainee quality
Labour Senators are concerned about the potential for the Skilling Australians Fund to incentivise lower quality apprenticeships and traineeships. This would severely undermine the value and reputation of apprenticeships and traineeships
The committee sought witnesses’ views on the implications of achieving the targeted of 300 000 apprentices and trainees set by the government. Concerns were expressed by stakeholders about reaching the targets as additional quality apprenticeships, within the guidelines set by the government.
Ms Lauren Tiltman, National Executive Officer for NAEN explained:
Could we achieve 300 000 under the true focus of apprenticeship and traineeship and employment, which from our perspective is about getting entry-level people into employment, supporting them through their employment and building a skill set so they are now able to achieve ongoing employment that they otherwise might not have been able to get? I don't know that we would get 300 000 that fit in that specific cohort.
Mr Craig Robertson from TDA outlined the difficulties state and territory governments may face in achieving the targets:
Some states and territories, I understand from dialogue I've had with them, are saying that it's very hard to grow apprenticeship numbers to the rate that the federal government would be expecting. After all, employers need to take on apprentices, and so they're the rate- limiting factor in this equation.
Labor Senators strongly support the expansion of quality apprenticeships and traineeships into areas of the labour market that would benefit from them. However, sacrificing the integrity of quality skill formation in the pursuit of numerical targets is unacceptable and counter-productive.
Witnesses referred to discussions between that state and federal governments about Skilling Australian Fund projects that might fund what was variously referred to in the hearing as 'new styles of traineeships', an 'apprentice-like experience' and 'training that shares similar characteristics to an apprenticeship'.
The Department of Education and Training confirmed that discussions about funding an alternative approach to apprenticeships and traineeships were taking place in relation to potential Skilling Australians Fund projects:
The language is about including training that shares similar characteristics to an apprenticeship, provided that training is at Certificate III or IV level. It's also important that it has to be agreed on between the Commonwealth and the states in the specific example. As Dr Banerjee indicated, aged care has been one that's been raised by a number of states. Disability services has been another that's been raised constantly by the states.
Drawing on their knowledge of institutionally-based learning being used instead of genuine apprenticeship NAEN expressed strong concerns that supporting 'apprentice-like experiences' might lead to poor skills and employment outcomes:
There have also been some discussions around the weakening of those guidelines to include things such as apprentice-like employment [sic], and we have seen programs such as the builders program in South Australia and other institutional based trade training programs that fundamentally, through our experience with employers, do not necessarily result in employment capabilities of the individuals participating in them.
TDA also expressed concerns with watering down apprenticeship and traineeships standards, highlighting the problems associated with ensuring quality training and development takes place outside of structured apprenticeships and traineeships:
What you will find over the last three to four years is that, within VET qualifications, there has been an increasing requirement, in order for you to get that qualification, for you to have some work based experience. Our concern out of that is that, whilst it's good to have work based experience, if it's non-supervised you actually don't know what that quality of training is. So that's another reason why I think we should be revitalising the role of providers in actually guiding and supporting employers to be able to take on these students.
The AMWU spoke strongly in opposition to diluting the standards for quality apprenticeships in light of the government’s support and funding of institutional learning, supplemented with unpaid work experience, as an alternative form of apprenticeship:
We don't support the separation of theory and practice. An apprenticeship with employment is the best way to produce the skilled worker that you need. That's the point of this. The point is to produce the skilled worker. And, if you're not producing the skilled worker, at the end of the day there's no point in doing it. Apprenticeship has been around for 600 years. It has worked well for 600 years. The more we tinker with the fundamentals, which are formal learning, engagement in employment in a workplace, with proper mentors that are there all the time—that's how you learn your trade; you learn it at the feet of a tradesperson, backed up by the support of a decent training provider, a TAFE, to provide you with the things that you need to know to integrate your learning experience into the workplace. We are constantly, in our view, looking for opportunities to make trade training cheaper, not better, and they generally involve some measure of unpaid work experience to support institutional training delivery in the absence of employment, and that is a retrograde step that Australia will pay dearly for.
NAEN also expressed concern that a return of government support for existing worker traineeships, including under the Skilling Australians Fund, would not lead to 'job creation or employment outcome':
You highlighted previous experiences where, at the lower end, the burger-flipper was put into a traineeship. There was also, I guess, an exploitation by industry at the higher end in relation to the diploma and the frontline management and other areas—what we call existing worker traineeships as well. So I guess the definition of apprenticeship and traineeship, as it currently stands, on the outer edges is a bit grey for people taking on an employee. If you've got an office manager and you want to put them through a diploma of management, it used to be quite commonplace to put them under a training contract, which means they officially became a trainee. Their wages didn't change, but in 2012 you would receive a government incentive for doing that, which would offset the cost of training, and at many state policy levels you would also receive a discount in your workers compensation levy or an exemption from the workers compensation levy and also from payroll tax. It was a very attractive proposal, but it didn't result in a new job creation or employment outcome, which is where our focus lies, I guess, in terms of the apprenticeship and traineeship sector.
That the government institute stringent Labour Market Testing requirements in any legislative instrument made by the Minister to ensure suitably qualified local workers have the opportunity to apply for an advertised position first.
That the government guarantee adequate, additional funding if the income from employer levies do not meet the needs of industry and vocational education sector to provide high-quality training to apprentices and trainees.
That the government, in its ongoing negotiations with the states and territories, develop a range of reasonable, effective and robust accountability and transparency measures including those that will ensure the integrity of any apprenticeships and traineeships that are supported by the Skilling Australians Fund.
That the government take urgent steps to support quality skill formation in areas of the labour market where apprenticeships and traineeships are currently not the standard mechanism for training and development, with specific focus on aged care, disability care and child care.
That the government take steps to undertake effective consultation with industry, unions, training providers and stakeholders on policy development so Australia has the capacity to develop the skills required for industry and workers to access global value chains and increase skilled employment within Australia.
That the government undertake specific engagement with states and territories and other stakeholders to ensure that the TAFE sector has the capacity to deliver quality training to any additional apprentices and trainees arising from the implementation of the Skilling Australians Fund.
Senator Gavin Marshall
Senator the Hon Doug Cameron