7 August 2002 Hon Steve Maharey

Speech Notes

Industry training: looking ahead

Address to the Industry Training Federation national conference. St. James Theatre, Wellington.

INTRODUCTION

Thank you for the invitation to join you again at your Annual Conference.

Clearly the organisers demonstrated considerable prescience with the timing of the Conference this year.

This is a time for reflecting on progress with the realisation of the project that Labour brought to government in 1999, and it is a time to scope the challenges of continuing with that project over the term of the incoming government.

We come to a second term of the fifth Labour led government with a strong track record of achievement in tertiary education and training - to paraphrase John Prescott, we come with a sense that much has been achieved, and that much remains to be done.

And in this area of public policy we come to government with partnerships that have been developed and that have matured considerably over our first term in office - partnerships that have been fundamental to achieving the progress that has made since 1999 and that will provide a foundation for policy development, implementation, and review over the next three years.

The partnership with the Industry Training Federation has been of signal importance. This organisation enjoys the respect and the confidence of the government. And lest there be any suggestion that this reflects an overly agreeable or acquiescent stand on the part of the Federation, let me emphasise that the Federation is respected because it is an independent voice for Industry Training Organisations in this country.

And the Federation is respected because the quality of its advocacy allows it to be an important player within the extended vocational education and training policy community.

We do not always agree with the Federation; but where there have been points of disagreement - and they have been few and far between - we have agreed to disagree, and the relationship has been enhanced, not diminished by the process.

Much of the credit for the quality of the advocacy, representation, and participation is down to the quality of your governance, and the quality of those tasked with the Executive leadership of the Federation, and I want to return to this later.

It is that time when Ministers are preparing to receive briefing papers from departments and agencies.

It is also a time when Ministers will look to peak organisations like your own for assessment and comment on what has been achieved in retrospect, and what remains to be achieved in prospect. Today I want to renew that dialogue with you.

PROGRESS TO DATE

In the first term of the government I believe that we have seen industry training mature into a coherent industry training strategy.

There are record numbers of New Zealanders in training.

Additionally, 70% of trainees are registered in programmes unrelated to any previous apprenticeship-type training.

The trend continued last year which saw a series of outstanding achievements in the vocational education and training sector, including:

- An increase in the number of trainees during 2001, from 62,857 to 66,225 as at 31 December 2001;

- A total of 9,498 National Certificates completed in 2001, an increase of 52% from 2000;

- A 27% increase in NQF credits achieved by trainees on the previous year;

- A significant proportion of Level 3 and 4 National Certificates being achieved by trainees with no or few previous qualifications.

Industry training has been particularly successful at extending the benefits of tertiary learning to a wider range of New Zealanders than ever before. For example, Maori and Pacific peoples account for more than a quarter of those participating and their numbers have nearly doubled over the past five years.

Government has done its bit - and I am pleased that we have been able to lift our investment in industry training. This year’s Budget focused heavily on the expansion of the tertiary education and skills training sector. As well as the extra $41 million that has gone to double Modern Apprenticeship numbers, the Government also increased the Industry Training Fund by $14 over the next four years. This takes the Government’s total investment in the Fund to $90 million - a rise from $60 million in 1999.

It is gratifying to see that the Government’s response to widespread skill shortages, the flagship Modern Apprenticeships initiative, has been received so well by both employers and young people.

In fact, I am thrilled to be able to announce here today that numbers of Modern Apprentices have exceeded our target. As of June 30, 2002, we had 3,254 Modern Apprentices involved in structured workplace training in New Zealand. This is a 23% increase in uptake on the last quarter - and ahead of our target of 3,000 Modern Apprentices by the middle of this year.

What’s more, the commitment and enthusiasm with which employers and young New Zealanders have embraced the Modern Apprenticeships challenge leaves me in little doubt that we are well on the way to achieving our next milestone - doubling the number of Modern Apprentices to 6,000 by December 2003.

Over half of the Modern Apprentices (1,972) were aged 18 or younger when they started their training. So it’s good to see that one of our key aims for Modern Apprenticeships - of getting young people back into industry training - is being so well achieved.

Figures for the second quarter also show a 20% increase in the number of young Maori taking up Modern Apprenticeships. This brings the total number of Maori Modern Apprentices to 536.

The other good news I can announce today is the major increase in Industry Training figures which, as of 30th June, show that 78,240 New Zealanders were involved in structured workplace learning. This figure is 18% up on the same time last year - and a 14% increase on the number of industry trainees at the last quarter.

Returning to our last Budget, new initiatives, such as the Gateway programme which provides structured work-based learning opportunities in the senior secondary school, received an additional $7.2 million over the next four years. The aim is to strengthen the linkages between schools and business and pave the way for students into workplace training. Already we are seeing Gateway participants make the transition to Modern Apprentices and to other learning pathways. The potential for Gateway is simply enormous.

In short vocational education and training is making a contribution to economic efficiency, and to social equity and cohesion - the cornerstones of a progressive society.

FUTURE DIRECTIONS: THE TERTIARY EDUCATION STRATEGY

Where do we go from here?

One simple answer to this question is, “read the Manifesto’. Officials have remarked that the first term of the fifth Labour led Government was remarkable for the fact that the government was very much manifesto led. That will be the case for the second term, and our vocational education and training policies are detailed and costed.

The policy is aimed at increasing participation in workplace training - and enhancing the skills of all New Zealanders.

By 2005, for example, the Government aims to improve the capability and performance of the industry training sector to lead towards the achievement of 150,000 training agreements and by 2007, the government aims to have 250,000 people participating in industry training.

That includes ensuring all young people under the age of 19 should either be participating in employment or education and training. That’s why the Government aims to fully implement an Education and Training Leaving Age strategy by 2007.

As part that Education and Training Leaving Age Strategy

- Modern Apprenticeships will be increased to 6,000 by the end of December 2003 - and to 7,500 by June 2006.

- the Gateway programme will be extended into all decile 1-5 state schools by 2007. This will give Gateway opportunities for some 12,000 senior secondary school students.

- more Maori will be encouraged to participate in trade training initiatives, with the objective of having 300 more Maori trainees a year.

- post-training support services for all trainees in the Youth Training Programme will be purchased by 2007.

In addition the Government is committed to working with our social partners and with ITOs and training providers to significantly increase participation in industry training, the quality and relevance of that training and involvement by both employers and employees in small to medium-sized businesses.

We will also consult widely in scoping options for the establishment of a National Centre for Vocational Education Research. Let me say as an aside that, while I have an open mind on this issue, there would appear to be some prospect for a degree of Australasian cooperation in the establishment of a Centre of this kind.

A second answer to the question, “where do we go from here?” is “look to the Tertiary Education Strategy’.

This is the Government’s five-year blueprint to revitalise the entire tertiary education and training sector to make it more connected not only to the other players in its sector - academic, vocational and community education and training - but also to create stronger linkages to the nation and its educational, economic and social needs.

The strategy aims to make tertiary education dynamic, outward looking, relevant and accessible to all New Zealanders, particularly Maori and Pacific peoples. ITOs are well placed to be key participants.

Under the Tertiary Education Strategy, ITOs will have the opportunity to build on this solid base to become leading influences in a more connected tertiary education sector.

I am envisioning a key role for Industry Training Organisations as part of the new Tertiary Education Strategy. Looking at the six key strategies for tertiary education I see ITOs:

- Engaging in ongoing review and improvement of systems, relationships and linkages to Strengthen System Capability and Quality.

- Looking for opportunities to involve Maori at all levels of industry training and Contribute to the Achievement of Maori Development Aspirations. There are many excellent examples, of which the Seafood and the Forestry Industries are probably the best known, where industry and Maori have worked together for the advantage of Maori, the industry, and the economy.

- Continuing to engage with initiatives to Raise Foundation Skills so that all people can Participate in our Knowledge Society. ITOs participating in the projects funded by the Skill New Zealand Workplace Literacy Fund during 2001/02 have identified immediate benefits such as improved health and safety compliance and the potential benefits from unlocking the skills development potential of individual workers.

- Being key players in the identification and addressing of skill needs to ensure that we Develop the Skills New Zealanders Need for our Knowledge Society.

- Continuing to develop capability to Educate for Pacific Peoples’ Development and Success.

- Engaging with the dialogue to Strengthen Research, Knowledge Creation and Uptake for our Knowledge Society.

The Tertiary Education Commission (TEC) is the new body that will oversee and implement these reforms. It will be up and running by the end of the year, once the Tertiary Reform Bill is passed, and will play a key role in shaping the future for the tertiary system and industry training - and in further shaping workplace training as a quality training pathway.

One area in which the Federation has made a very positive contribution has been in the work on charters and profiles. These steering instruments will ensure that, consistent with the Tertiary Education Strategy, we get a public spend that meets the three tests of effectiveness, efficiency, and appropriateness.

Clearly one issue on which you will need to engage with the Tertiary Education Commission is how best to ensure that your purchasing decisions are aligned with the Commission’s - particularly, in the case of the latter, purchasing category 22 EFTS.

The Government’s decisions arising out of the 2001 Industry Training Review - a number of which are reflected in the amendments to the Industry Training Act included with the Tertiary Education Reform Bill - will position ITOs as providing strategic leadership in proactively identifying and responding to skill needs in industries, in promoting training to employers and employees, and in developing strategic partnerships with other education organisations.

ITOs will continue to have a delegated purchasing authority utilising the Industry Training Fund. And as such you will purchase from providers that will have negotiated charters and profiles with the Commission. At the very least we will need to ensure that there are protocols in place to ensure that there is a free flow of information between ITOs and the Commission such that your purchasing decisions inform the TECs, and vice versa.

You will be concerned to ensure that you maximise the return to your industries through your purchasing role. And the Commission will be concerned to ensure that in the context of the sum total of public funding, the Tertiary Education Strategy provides a meaningful set of bottom-lines against which to assess the quality of the public investment.

INVESTMENT IN TRAINING

Let me now turn to the issue of investment in vocational education and training.

Since the 1980s governments have increasingly become involved in training and have:

- Invested in the technical resource to ensure that high quality theoretical and off-job training experiences are available as a complement or added value to on-job training. There have been economy of scale reasons but the main driver has been an expectation that there would be returns to the economy arising from highly skilled individuals contributing to higher productivity in firms and industry;

- Invested in training as a means of addressing inequity, experienced by individuals and communities arising from market failures associated with changing economic and social circumstances;

- Encouraged enterprises to raise the level of discretionary investment in their workforce and business capacity.

I want to focus my remarks today on what can be done to encourage enterprises and industry to lift the level of investment in training.

You will be aware that the incoming government has set itself, and by implication all those present today, some challenging “stretch’ targets in terms of participation in vocational education and training. That will require a continuation of the levels of public investment that we have seen in the last three budgets, but it will also require a significant increase in the level of industry’s co-payment or investment.

What we need to do is to establish exactly what the return on investment in training is, and we need to communicate that more effectively to industry and enterprise.

RETURN ON INVESTMENT IN TRAINING

When we speak about returns on investment (ROIs) in training we are generally referring to both the financial and non-financial gains that are derived by individuals, private organisations or government bodies making the investment.

Investment in training, like any investment decision, is not made unless there is an expectation of a return. These returns or benefits include:

- increased productivity and profits

- successful introduction of new technology or other changes

- higher level of value-added activities as a result of higher skill levels reduced downtime from breakdowns in plant and machinery

- lower absenteeism

- fewer labour grievances

- higher retention rates and

- significantly reduced injury rates.

Other returns that are sought from a training investment include:

- greater flexibility amongst employees who can perform a range of tasks

- reduced overhead costs such as more efficient use of existing facilities, lower consumable costs and reduced human resource expenses, and

- a greater ability to innovate in terms of adopting new technology and introducing better forms of work organisation.

There are, of course, also benefits that are more intangible - those that cannot always be easily measured and may have an indirect relationship to the investment that has been made. These “intrinsic benefits’ or rewards include increased staff morale and increased self-esteem among individuals. We have all seen evidence of these benefits, and I firmly believe that they are inter-generational - the child that takes pride in a parents achievement in gaining a nationally recognised qualification is more likely to set his or her horizons higher.

The existence of a training culture and the attendant respect for knowledge and skill, and the learning process itself, contributes to the building of infrastructure and the capacity of communities and industries to create and develop qualified workers, and engaged citizens.

MEASURING RETURN ON INVESTMENT IN TRAINING

Like any other major investment, companies want to know how training and skill development are paying off for the organisation. Some measure a number of key performance indicators (KPIs) to gauge the return on their training investment, while others conduct return on investment studies (ROI), most often on job-related or technical courses, for these are seen as most closely related to the skills required in the workplace.

Measurement in this area is fraught. Some of you will have attempted to measure returns and may have a model suited to your needs and I encourage you to keep working on this. Maybe it is because this measurement activity crosses several discipline areas, such as accountancy, economics, human resources and training, that it has proved so difficult to develop. This problem is not confined to New Zealand.

There are numerous difficulties in measuring the returns to education and training for firms.

As a result, there have been few empirical studies completed on the returns of investment in training in New Zealand.

It is heartening to note, however, that a number of domestic organisations are involved in assessment training and investment review. But there seems to be little collaboration or sharing of information. We need to encourage individual organisations to better harness and document their research and case studies, with a view towards amalgamating valuable learning that can be used by the entire sector. I want the Tertiary Education Commission to take the lead in providing a clearing house for this information.

RESEARCH ON RETURN ON INVESTMENT IN TRAINING

I do wonder whether our difficulties have an extra handicap associated with the lack of investment that has been made in research in vocational education and training in New Zealand. In Australia, the United Kingdom and the United States, there is a growing body of research. I know some of you will be familiar with these studies.

You may also have noted that most international research indicates these countries are only taking the first steps in building a knowledge base and methodology to measure returns.

One of the leading proponents of this early work is Australia, which has been quite active in the area of vocational education and training research. A number of case studies and pilots looking at returns to investment in training have recently been published.

We are lucky enough to have at this conference Professor Richard Blandy, who has been involved in several of the groundbreaking pilot studies.

The findings that have interested me, notwithstanding then caveats that researchers have placed on their findings, include the following :

- Evidence which overwhelmingly showed that the profitability of firms is directly related to the quantity and quality of training provided by them;

- Employers’ views that on-job learning is generally superior to formal classroom training because real knowledge is learned in the workplace, while the latter too often focused on obtaining paper qualifications;

- That an investment in vocational educational training provides a solid basis for the acquisition of critical foundation skills, including communication, team-working and leadership skills, not just task-oriented motor skills.

You’ll no doubt hear more of the Australian experience from Professor Blandy during the conference, which will be valuable in providing some context to the return on investment in training dialogue in New Zealand.

On this side of the Tasman, I strongly believe we need to accumulate a greater body of evidence, which is collected on a more regular basis, of the impact of investment in training, particularly in specialist areas like the effect of various types of training.

More research and rigorous analysis will better inform the policy process and dovetail into the valuable work already being done by industry training organisations.

THE FUTURE PATHWAY FOR ENSURING A POSITIVE RETURN ON INVESTMENT IN TRAINING IN NEW ZEALAND

The Government is committed to ensuring that there is a positive return on investments in training, whether public or private, and whether by individuals or firms.

Under the Government’s Tertiary Education Strategy, by 2007 the quality and focus of tertiary education research and the strength of the relationships between the tertiary system and other sectors, will be seen in the faster uptake of new knowledge and the widespread recognition that the ongoing growth of New Zealand’s knowledge economy depends on our ability to develop and apply new ideas and technologies to create high-value exports.

This strategy is designed to make the sector much more streamlined, strategic and productive in both its approach and its deliverables.

In particular, I see this leading to a faster and more effective dissemination of relevant knowledge.

One of the projects already underway that will be of interest to you is the skills forecasting action plan. Earlier this year, I announced a Government investment of $11.6 million for such an action plan, aimed at improving the information available on skill needs in the economy.

This plan will also provide a greater degree of clarity around skill shortages and will enable policy to be more closely aligned to the regional and national needs of the nation.

Currently, skill and labour shortages have been emerging in some regions and sectors of the economy. Poor information about where skill shortages are likely to emerge means it is difficult for the Government, employers, workers and school leavers to position themselves to make the smart training decisions a knowledge society requires.

By using this skills forecasting tool, we will be able to inform industry, educational institutions and potential and current employees so that they can make quality decisions about the needs of tomorrow’s labour market. From an investment perspective, this should mean purchasing and provision decisions that result in a return on every public investment in training.

Likewise, a pilot graduate employment outcomes survey will track students’ progress from tertiary study into the labour market and will help to illustrate the possible value and links between qualifications and employment. It will also provide students and intending students with information about likely employment prospects and earnings that follow any particular course of study.

The Tertiary Education Reform Bill includes amendments to empower the TEC to conduct applied policy and programme research.

I will be looking to the Tertiary Education Commission to develop a research plan for the tertiary sector. I would expect that vocational educational training will be a significant focus of this plan, with a particular focus on returns on investment to enterprises. This information would make a valuable contribution to future policy development for the sector and will provide information on which firms (and individuals) will be able to make those investment decisions.

Further areas for research related to returns on investment in training already planned or underway include:

A pilot research study being undertaken by Skill New Zealand of small business’s engagement with industry training. This will identify barriers and incentives to training activity, involvement with the industry training strategy and attitudes to training investment. I expect it will enable us to develop targeted strategies that will unlock the training potential of this sector.

And from within the sector, suggestions have been made on undertaking research on:

- A pilot study on collecting information about methodological approaches to measuring enterprise training activity and returns on investment, similar to that being undertaken in Australia. I note, however, that if this approach is pursued, it will be important to ensure no or low compliance costs for enterprises, ease of use and access by enterprise. We could possibly consider several pilot studies, in partnership with ITOs, to test the value and practicalities of this. This would assist ITOs’ engagement with the workforce development strategy.

- Models for enhancing collaboration between the tertiary education sector and industry.

- Comparative effectiveness of teaching and learning processes.

I encourage you to come back to me with your own suggestions, and to open up conversations within your sector, within the extended policy community, and with other members of the official family of government advisors.

CONCLUSION

Industry Training is an integral part of the Government’s vision to transform New Zealand into a knowledge society. A highly skilled workforce capable of continuous learning and able to adapt to change, will be an essential foundation for the economic and social well-being of all New Zealanders and their communities.

Our progress to date reflects the existence of strong and equal partnerships within the vocational education and training sector.

I very much hope that the quality of these partnerships will infuse the tertiary education sector more widely, and in particular the procedural arrangements that are used to drive the implementation of the Tertiary Education Strategy.

This sector will have a number of voices - and I emphasise the word “voices’ as distinct from “representatives’ - on the Tertiary Education Commission.

One of these is John Blakey, and I want to pay a tribute to John’s leadership as Chair of the Federation. It was an easy decision to appoint John - he is someone who brings excellent governance skills, and, notwithstanding his intimate knowledge of vocational education and training, he also brings a well rounded knowledge of the depth and breadth of the post compulsory education and training sector as a whole.

I welcome Marilyn Brady publicly to the position of chair of the Federation, and I look forward to working with Marilyn and the other members of the incoming Executive.

I also want to take this opportunity to thank Paul Williams for his contribution. Paul has been the face of the Federation - a face that has popped up in some interesting places in the last couple of months. He is indeed a most telegenic individual.

Seriously Paul’s representations and advocacy of behalf of the Federation have meant that opportunity has found a ready companion in Paul’s capacity. It was so much easier to advocate a more inclusive approach to your participation in the public policy process in the knowledge that Paul would lead the process for you.

Given Paul’s plans it is perhaps appropriate to use an Australian analogy - if contributing to public policy development is analogous to kicking goals in the last moments of a test match, Paul has done a John Eales type task.

We wish you all the best, and we look forward to working with Darel Hall.

And we look forward to working with all of you - much has indeed been done, but there is much more to do yet.

Ends

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