Making the grade

Kevin Rudd has made education, training and increased “economic participation” key priorities, and Julia Gillard has been given a new super-ministry that reflects this.

Education and training are what Americans call “motherhood and apple pie” issues. There is no political risk involved in arguing for more school children to complete year 12, more students to attend university, or more jobless people to receive training. Who could possibly object? We all believe in the value of education, and it is difficult to argue against more money being spent on training when thousands of unskilled workers are jobless while employers are complaining of skilled labour shortages.

Yet motherhood and apple pie issues can be dangerous. When everyone agrees that something is a “good thing”, scepticism gets drowned out, and before you know it, billions of dollars have been squandered on feel-good policies that achieve little. So before Julia Gillard gets settled into her new portfolio, we should reflect on what might realistically be achieved by increased education and training spending.

It is true that Australia is facing a growing skills shortage - a shortfall of quarter of a million skilled workers by 2016 is forecast. Training jobless people might help fill this void, but making better use of people who already have skills will probably be more effective. Enticing skilled workers away from early retirement is one possibility. Getting more women back into the labour force after having children is another. Increasing skilled immigration is a third.

However, increasing education and training is not just about solving the skills shortage. It is also about getting people off welfare and into work. Although unemployment has fallen to 30-year lows, there are still two million working-age people on welfare benefits, and many could be working if we could find them suitable jobs.

The trouble is, many of them are unskilled and unqualified, and demand for their labour has been falling as a result of technological change and competition from abroad. Our economy has been booming over the last 15 years, but three-quarters of new jobs have been for graduates, and unskilled people have been dropping out of the labour force. In 1981, three-quarters of unskilled men had full-time jobs; today it is fewer than 60 per cent.

Looking at our skills shortage and our surplus of unskilled labour, many commentators see education and training as a magic bullet that could solve both problems simultaneously. The Labor Party is not alone thinking this. The Business Council wants more government training for unskilled jobless people, and Australian Industry Group wants 90 per cent of youngsters to stay in education or training to year 12.

These groups support their demands by pointing out that on average, qualified people enjoy higher levels of employment and earnings than unqualified workers. They assume these same advantages would accrue to currently unskilled people if they too became qualified. But this does not follow. What is true for the average case is not true for the marginal case.

Take schooling. Three-quarters of students currently stay to year 12, and most of them benefit from higher earnings and better job prospects as a result. But this doesn’t mean the remaining quarter would enjoy these same outcomes if they too stayed on, for the more we extend schooling, the deeper we delve down the ability pool.

The Australian Council for Educational Research finds that, far from benefiting from more education, low ability students lose from it. They increase their unemployment risk by three percentage points and reduce their earnings by 5 per cent by staying at school for two additional years. They are better off leaving after year 10 and getting a job.

It is a similar story with government training. Basic literacy and numeracy training can pay dividends, and courses that refresh the skills of women returning to the labour force after having children are useful. But vocational skills training aimed at unskilled, jobless adults rarely achieves much, and courses for the young unemployed achieve even less.

It may be an unpalatable truth for a new, optimistic Labor government to swallow, but not everybody has the ability to benefit from more education and training. Some people are not cut out for year 12 schoolwork, or a university degree, or a technically-skilled job. Unless we are willing to dumb down standards, not everyone can get qualified.

Anything Rudd and Gillard can do to improve the quality of education should be welcomed, but they should resist the temptation to throw money at training schemes that won’t work, higher school retention rates or increased university numbers. If they really want to help lower ability people get jobs, the answer lies in policies to encourage employers to take on more unskilled workers. That, however, might involve sacrificing some sacred Labor IR cows.