Skills crisis: Getting more bang out of our trade education buck

By Simon Collins

Industry training is being reformed, but experts are unsure if the changes will be enough our trade education buck.

When a small, family-owned Auckland locksmith business advertised for an apprentice last month the response was overwhelming. Photo / Thinkstock
When a small, family-owned Auckland locksmith business advertised for an apprentice last month the response was overwhelming. Photo / Thinkstock

When a small, family-owned Auckland locksmith business advertised for an apprentice last month the response was overwhelming.

"Massive, unbelievably huge - like 150 applications and they are still pouring in," said Melinda Ferguson, who co-owns the Newmarket business, City Locksmiths, with her husband David.

"We were surprised. There are a lot of people looking for a job, especially one that gives training. There were a lot of older people."

Apprenticeships like theirs have become much scarcer since the global financial crisis hit four years ago, forcing many businesses to lay off experienced staff, never mind taking on trainees.

Concerned by low completion rates, the Government has also pushed industry training organisations (ITOs) into culling trainees who were not making progress.

Between them, the recession and the cull have slashed trainee numbers by nearly 50,000, from 133,303 in 2008 to 83,413 by the end of last year.

The result is both a desperate shortage of training opportunities for the almost 300,000 people who are now officially jobless, and a looming, equally desperate shortage of trained workers to do the skilled work that will be needed as the rebuild of Christchurch gets under way and the rest of the economy recovers.

"Once the boom starts, the qualified people need to have been in training for four years, and with the numbers we have that just plain hasn't happened," says Building and Construction ITO head Ruma Karaitiana.

"The reality is that when we hit, I would say, the end of next year, employers will start to get desperate for skilled staff, and we won't be able to respond because we haven't had them long enough. The rest will have to come from immigration and people returning to our New Zealand industry."

In many fields there are shortages already. A survey by Competenz last year found that 40 per cent of engineering businesses and 27 per cent of food manufacturers reported skill shortages.

Competenz chief executive John Blakey estimates that a fifth of those who complete apprenticeships in those industries head straight to Australia.

"We train an awful lot of skilled tradesmen for the Australian economy," he says.

"They can get $20 an hour more in Australia. A qualified mechanical engineer in New Zealand earns a good hourly rate of about $40, compared with A$60 ($76) in Australia."

A sad history

Trades skill shortages can be traced back to four changes a generation ago.

First, says Stuart Middleton of Manukau Institute of Technology, we abandoned separate technical high schools in the 1980s and failed to replace them with clear vocational pathways for the majority of students who were not heading to university.

"Secondary school programmes increasingly drifted to a one-size-fits-all approach," he says.

Careers advice may have also become too focused on white-collar options. An Education Ministry survey of employers this year found a view that students received poor advice.

"Some employers felt that advisers at schools have a bias against trades and were not recommending trades to academically able students," the ministry said.

Secondly, we broke up and sold off big state enterprises such as the Post Office, the Electricity Department, Railways, the Forest Service and the Ministry of Works. Dr Middleton says state agencies employed 80 per cent of our apprentices and Mr Blakey notes that they were recruited regardless of economic cycles, effectively training people for private industry.

"We dismantled that system without enough thought about how it might be replaced," he says.

He says fragmentation has continued into this century as state enterprises successors, such as Telecom and the power companies, contract out most of their trades work.

"The one-man-in-a-van contractors are tied down to such an extent that there isn't any room for an apprentice," he says.

Thirdly, the state stopped paying directly for block courses for apprentices when training was transferred to industry training organisations in 1992. The change was meant to make sure that training was geared to industry needs, but it fatally weakened a crucial link between practical on-job training and off-job support with the trainees' paper-work.

A Competenz report last year said the new system effectively created competition for trainees between ITOs and polytechnics. ITOs could buy off-job support from the polytechs, but the polytechs charged out their services at a rate based on their public funding per student, which was roughly three times what ITOs got paid per trainee.

"The cost differential has meant that ITOs have reduced or removed off-job training, as they cannot afford to pay for it," Competenz said.

And fourth, the abolition of national wage awards and deunionisation in the 1990s may have helped to weaken relative pay rates for trades compared with business managers and professionals.

Ian Stronach of the Motor Trade Association says it is hard to attract apprentices when a skilled motor mechanic in a provincial town might earn only $22 an hour.

"If you multiply that by 40 hours, maintaining a reasonable standard of living is not easy," he says. "People might not think about that when they pay for their vehicle to be repaired."

Official review

Tertiary Education Minister Steven Joyce, who took office just as the world financial crisis hit in late 2008, focused first on getting better value for money out of an industry training budget that had quadrupled from just over $50 million in 1999-2000 to a little over $200 million in 2008-09.

He found that only 29 per cent of those who started training in 2003 had gained a qualification within five years.

More than half of the trainees on ITO books in 2008 achieved no training credits that year at all.

The system was changed last year to stop paying for trainees who achieved no credits in the previous year, and was changed again this year to pay ITOs partly on the basis of credits and qualifications achieved. The number of trainees completing the programmes they enrol in each year has doubled from 35 per cent to 69 per cent.

The Education Ministry proposes compensating ITOs for the income they have lost through these changes by raising the public subsidy for each trainee, and paying an even higher rate for apprentices who have a higher level of theory learning. Mr Joyce will announce final decisions, including the subsidy levels, early next year.

Although initially the higher subsidy will be funded within the existing budget because of falling trainee numbers, Mr Joyce says funding will be transferred back from polytechnics to fund more industry trainees when the economy recovers.

The higher subsidy will help ITOs pay for off-job training support if they choose to, although that decision will be left to them.

The Government has also moved to restore clear "vocational pathways" in schools towards careers in trades, and Mr Joyce's Ministry of Business, Innovation and Employment will publish an annual Occupational Outlook report from next year to tell students, parents and training providers "where the skills gaps will be and what students need to do to seize those opportunities".

German alternative

Some ITOs wonder whether the reforms so far will be enough to solve our shortage of trade skills and look to Germany's famous "dual system" as an alternative - so-called because apprentices split their time between on-job training for three or four days a week and off-job learning at vocational schools for about 12 hours a week.

The German system covers a much wider range of occupations than most other countries and absorbs a much bigger proportion of school-leavers - 65 per cent in 2009.

A background paper by our Education Ministry last year noted that the system kept German youth unemployment down to only 1.3 times the adult rate, compared with New Zealand's youth unemployment of more than four times the adult rate.

Mr Karaitiana, who looked at the German system in 2009, says a high school student is allocated a careers adviser "and you have that person until you are 25".

"You are expected to achieve a level of training equivalent in New Zealand to a trade qualification and a management diploma as well.

"As a result of that, society values trades differently. A doctor would not be surprised to find that the builder working on his home is paid at the same sort of level."

- NZ Herald

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