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Education and Employment Legislation Committee
25/07/2017

LILLY, Ms Megan, Head, Workforce Development, Australian Industry Group

Evidence was taken via teleconference—

CHAIR: Welcome. Information on parliamentary privilege and the protection of witnesses has been provided to you. I now invite you to make an opening statement. At the conclusion of your remarks, I will invite the committee to put questions.

Ms Lilly : Thank you very much for inviting me to the Senate committee and also to make a comment. I am sure Australian Industry Group is familiar to many of you. Nonetheless, I think it is important to state that Australian Industry Group is an employer association and it represents businesses across significant parts of the economy—in particular, manufacturing, construction, ICT, labour hire, electrical, printing and many more. We have many direct members; we also have a significant number of affiliations and indirect members, and represent 60,000 businesses in that capacity. We have a footprint in nearly every state and territory of Australia; we might not have the office, but we have a presence and we have members.

One of our core functions is to represent our members on key policy issues. We do that energetically and very seriously across a number of areas that would be familiar to you—economics, tax, energy and industrial relations, and also education and training, which is the focus of today. We are very clear in our view that the University sector is an incredibly important part of the Australian community and the Australian economy. As employers, we do look to have a well-run, well-funded university system that is accessible and flexible. We look for it to be leading and connecting, and we absolutely and utterly see it as being critical to the economy. That does not mean it is a set piece; reform and change are part of the landscape on all occasions. We are very happy to participate in a conversation about how to get the best from our university sector, but we are very clear on how important it is to the Australian economy.

CHAIR: Thank you. I would like to understand in greater detail your perspective on the workplace subsidy arrangements and what implications that can have for wider workforce issues and skill development going forward.

Ms Lilly : You are referring to the work experience and industry units via a subsidy that were announced in the week prior to the federal budget?

CHAIR: Yes.

Ms Lilly : As an employer group, we have been working with Universities Australia and governments more broadly about the importance of building a much stronger and closer relationship between formal study and matters related to employment or opportunities around that. For students, particularly during their bachelor program—whether they are work experience, work integrated learning or internships; there are a number of different ways that can occur—I think we are broad in our appreciation that lots of different models can and should thrive. They all have slightly different purposes and connect in different ways; and companies connect differently to universities and universities respond differently to companies. I think that flexibility and variability and capacity for localisation is very important. But we see it as a significant step forward that there is a subsidy available to support this now. That, in effect, is an overt and explicit recognition of the importance of building that relationship and the power it brings to the individual in embedding their learning and employability when they actually graduate.

There is some concern among employers about the broader policy position. Under 70 per cent of graduates are in full-time employment five or six months after they graduate. So the question is: where are the other 30 per cent? We know that they are doing various things but they are not in full-time employment. The other perhaps more concerning statistic—and this is work done by the Foundation for Young Australians—is how long it takes young people these days to find their first full-time job that is related to their area of study. That disjuncture that occurs is concerning, and leaving it to sort itself out does not solve that relevance gap. But I think strategies such as work experience in industry units and work integrated learning have the capacity to do something quite powerful in that place.

CHAIR: Do you have any commentary on the recent criticisms around internships more generally, including university internships?

Ms Lilly : There has been a lot of commentary around internships for a long period of time, including internationally. You get a lot of different responses according to which history and which context someone brings to that conversation. At Ai Group, our general position is we are very much in favour of internships but we believe they should be paid and that they should be structured and contribute to the overall body of learning and experience of the individual. One of the problems we have is a definition of what an internship is or, if not a definitional problem, an understanding of what that definition is meant to be. If you actually talk to people, variably the way they will use the word 'internship' is quite diverse.

CHAIR: How would you like to see that defined?

Ms Lilly : It is a stint with an employer that has a structure around it, it has credit back to the overarching qualification, there is some form of payment attached to it and preferably some form of assessment attached to it. So it is very meaningful and structured. Another way of testing it is it is something someone can put on their CV and it would have gravitas.

CHAIR: What about from the employer's perspective. How can having undergrads in their workplace benefit them?

Ms Lilly : A lot of employers do it. I could comfortably assume they do it because it does benefit them. They need to build a pipeline of future workers and they understand that. Recruitment in a general sense can be incredibly difficult to find the right people at that time. Employers undertake a number of strategies to do that and internships is absolutely one of them. Successful interns often become full-time employees post graduation. So there is a stream that carries through—obviously not for everybody. But they can be a very useful opportunity for a number of people, including the employer. Employers also sometimes use them for project-based opportunities or work. That often fits in with the time-based arrangement around the duration of an internship.

I was speaking to an employer a couple of months ago who had never had graduates or interns at all, but had what I would loosely describe as significant HR difficulties in recruiting and retention and the like. They embarked on an internship program and then broadened it out to a graduate program, and they think it's the best thing they have ever done to their workplace at every level in terms of productivity, morale and the whole lot. So it was a real turnaround factor in how they went about managing their business.

CHAIR: That's good news. Aside from qualitative evidence, is there any quantifiable evidence around the benefits of these types of arrangements?

Ms Lilly : Not that I have freely available.

CHAIR: On notice, if you could provide some data that backs up the case studies, if you like, we would really appreciate that.

Ms Lilly : Yes, no problem.

CHAIR: We heard from the Grattan Institute yesterday about the sustainability of the demand-driven system. It doesn't matter whether we speak to students, vice-chancellors or the union, or indeed both sides of politics, they are committed to the maintenance of the demand-driven system. There just seems to be some contention about who should pay for that maintenance. Do you have a view about the sustainability of the system, of the value of having a demand-driven higher education system, and this reform package having the ability to deliver that sustainability?

Ms Lilly : The opening comment would be that we are in favour of a demand-driven system. We support it and we would like it to be maintained. Having said that, there are issues with it. Perhaps I will leave the funding issue last. One issue with the quality of information around that informs the student or the prospective student in terms of making a choice and the quality of that information in terms of leading them to realistic employment prospects is something about we are constantly concerned about. There are information issues around many parts of the economy and many parts of the public system. Universities aren't unique to this, but it remains an issue.

Another area that is an issue is that we don't know the impact of the demand-driven system over a sustained period of time. I'm talking now in terms of the impact on individuals. We know it is lifting participation in percentage terms in higher education more broadly. But we have not got inside that data for the break-up, loosely, from a socio-economic perspective: the sustainability of that over time, how that will track in an individual's life, what impact it has over time and whether they actually get the full benefits that you would normally derive from a university education or whether they could have possibly got more benefit from another path of education—for example, vocational education. There are some unanswered questions, and they would be unanswered now because we don't have that longevity. I think we should keep an eye on that.

The final point was about funding and who should pay for the demand-driven system. That will remain an issue of debate while we are always trying to balance public funding in a constrained environment and having that debate about where the relative public and private benefits are and what the payment balance is in relation to that. That's the debate that, frankly, is being had at the moment.

CHAIR: What's your view?

Ms Lilly : If it wasn't a constrained fiscal environment, we'd all have a different view, so that would be my opening comment.

CHAIR: I think that's a fair beginning.

Ms Lilly : Yes. We want well-funded education systems all the way through the education spectrum, so it's not one over the other. We have some concerns about the relative balance of funding across the various education and training systems. We note that the universities are particularly unhappy about efficiency dividends and the like. I don't have a strong view on that. I think you'd have to understand their financial model in substantial detail to be quite clear on that. The only way you can have a view of it is to look at it from a systemic level and compare it with the OECD and other various things.

That's the public contribution to the public institution, but there's the income-contingent loan threshold being dropped to $42,000. That's an earlier uptake of the private contribution. My view on that is that it's probably not the most desirable public policy in the first instance, but I think it's justifiable if you look at the international comparators and the fact that the percentage rate has dropped; it's not just dropping the threshold income level. There's another adjustment sitting there as well.

In the environment we're in, you either hold the public-private balance in place but extend the reach of it or you alter the balance. There's a little bit of both happening here. It's not a desirable situation but, in the absence of rivers of gold, the dial's been cranked up on both of those elements—the public and the private components.

CHAIR: I know we've been talking a lot about averages across the system in terms of public and private contributions. From an industry perspective, are there some courses that you would like to see as more accessible, more available or having more graduates from as opposed to others?

Ms Lilly : From an industry perspective, we would always highlight any STEM related programs and building that pipeline and the longevity of that pipeline. I know people can quote back to me that the employment rate for STEM graduates isn't necessarily what you'd look for in terms of the message, but I think often the missing piece is that we need a much more applied and integrated approach around a lot of that. So we've got a long way to go on STEM education in this country, and we see it as an absolutely fundamental underpinning for a lot of where the economy's shifting to. So we think it's an important piece of work and an important priority.

CHAIR: I couldn't agree more with that, so where's industry's role, then, in engaging with the education sector? Obviously you're not going to get kids excited about engineering in first year; you're going to get them excited about science at third grade. What's industry's role in ensuring we end up with the STEM graduates we need?

Ms Lilly : I think industry has a very important role and does undertake that role. Last year, in 2016, we released, with the Office of the Chief Scientist, a STEM Program Index that identified every school-industry partnership program at secondary schools and, in some cases, primary schools across the country that had a STEM basis or discipline or integration, and we shared that with all our members. That was deliberate to try to look at examples of what's happening but then also to help companies understand what they could do. We also worked with ACARA to look at how some of the findings around STEM subjects can influence pedagogy to also then help uptake. So that is about building the pipeline, and it was absolutely driven by industry. I hear your question. I think we're very actively involved. It's a very local and diverse set of arrangements out there, which is part of its strength and also part of its weakness, because it doesn't mean the message travels as well as it perhaps could. But that also absolutely needs to be sustained.

CHAIR: You said you think industry's engagement with universities should be much more applied. How well is industry engaging, particularly with undergraduate provision of higher education in these areas?

Ms Lilly : Once you start asking a question like that, you then have to respond institution by institution, so it becomes difficult to respond at that point.

CHAIR: Why?

Ms Lilly : You find examples where it works. I think it comes down to how institutions are run, their strengths, local industry in their communities, and how strong they are. So you find a lot more variability. I think, once you get to universities, industry—not always but by and large—finds it much more difficult to engage with a university than it does with a school, and I think that's largely to do with the size and structure of universities.

CHAIR: A lot of the debate we've heard critiques some uncertainty. Everyone's saying, 'Yes, we're very happy for performance criteria, but we don't want any performance criteria.' From your experience—you have an understanding of what the labour market needs are going forward, the importance of high-quality higher education in this country, attrition rates and the like—what do you think would be some good parameters around performance criteria for universities?

Ms Lilly : That's a big question.

CHAIR: We have plenty of time.

Ms Lilly : There are lots of elements to that. I don't mind having performance criteria, because I think that can focus people enormously, but a bad outcome or an adverse outcome would be performance criteria that do not measure what we want or where we want to go, so we need to make sure that we can factor in innovation, leading-edge thinking, new ideas and new ways of working. A lot of people that go through universities won't necessarily go into structured, traditional employment as they have in the past. So I'm very happy for performance criteria. I'm very happy to look at how you'd get a closer alignment and, indeed, measurement around studying, transition into work and all those sorts of things. But then we need to be very careful and cautious about not putting limitations around that. That doesn't answer your question, but I think that that's a live issue.

CHAIR: In terms of postgraduate qualifications and the increase, could you give us some commentary on industry's need for postgraduates?

Ms Lilly : My sense is that that is a growing need. In fact, I was at a company at Bendigo—believe it or not, they make disposable nappies—and they used to only employ trade based employees, but in the last few years they have started implementing innovation and all sorts of other technologies, and they now employ seven university-trained staff. This is a small company, and five of the seven have postgraduate qualifications and are doing project based work. So that little company in Bendigo is illustrative of what is happening often below the radar.

As to postgraduate work, I think there is a credential creep that has been happening for a while in any case, and, with a demand-led system, the proliferation of people with bachelor degrees will continue to grow. So postgraduate qualifications will have a couple of different purposes: they will differentiate the individual but they will also give a more focused skill-set to an already qualified individual, and often that skill-set can be quite targeted and project based and therefore very aligned to work or innovation or something like that.

CHAIR: So you see the demand for postgraduate qualifications increasing?

Ms Lilly : I think it will, but I do not think that the floodgates are going to open or anything like that. I think it will be steady.

CHAIR: As to the current system of allocation of postgraduate coursework places, we have had a lot of evidence from vice-chancellors from non-Go8 universities that the system is broken. Do you have a view on that? Do you have a view on the reforms to move more to a voucher system where, if you are an immobile regional student who wants to study a masters by coursework, for instance, you will be more able to use that locally, in the regions, at your local institution, rather than having to travel to one of those historical holders of the quota?

Ms Lilly : I am not as familiar with this area, so I will state that up-front. I do think it is a policy shift and we will need to see how it plays out and how many of those vouchers actually get used beyond their traditional footprint, for want of better terminology. There is also something about critical mass and people wanting to engage in a particular academic community. But, on the surface of the policy reform, I think it makes sense to try to get those spread more diversely geographically, particularly in regions. Regions can also then build up specialisations. And building up intellectual capital, and industrial capital, for that matter, in regions is a good thing.

CHAIR: As to the expansion of the sub-bachelor program, does AiG have any feedback on that?

Ms Lilly : We're quite concerned about this. We do not really see where the policy logic comes from. Absolutely, it is in the face of the vocational education and training system, which we see as having been underfunded and suffering some pretty significant damage in recent times, of which we must—

CHAIR: By state governments?

Ms Lilly : Well, actually, all governments, VET FEE-HELP being one particularly problematic area, but certainly, with some of the state based funding systems and the shifting of funding and the like, we have got a lot of work to do in the VET system to get it back to where we think it should be, but we also maintain that the VET system is incredibly important for the economy, particularly at that trade and technician level. As to the trade and technician level and the paraprofessional levels that the VET system has traditionally done: when it does it well, it does it very well, and it is absolutely either work-facing or work integrated and, therefore, very applied. Universities do not have the same level of traction in that space. Our concern is that we would lose a suite of qualifications that are actually pivotal in companies and they could be diluted to a quasi-academic model without delivering the same work-facing outcomes.

CHAIR: What about the dual-sector universities?

Ms Lilly : They already have the whole pathway is sewn up. I do not think they have the same needs. It is really other universities that would reach down, whereas the dual sector—and they are mostly in Victoria, where I reside—already have that full suite of qualifications available and usually have a stronger tradition of technology-based or trade-based learning. They are all universities of technology. We are quite concerned about the impact of AQF levels 5 and 6 on the VET system. The impact could be quite significant on a system that is already under a lot of strain.

CHAIR: Do you have any comments about the consultation surrounding the development of this particular piece of legislation?

Ms Lilly : No, no comment in particular.

CHAIR: There has been a lot of commentary on whether we are in a true market or not when it comes to higher education. I would appreciate your comments on whether universities operate in a competitive environment.

Ms Lilly : They do compete with each other to an extent, but any market that has significant public funding which comes with conditions and constraints and rules and regulations—as it should do, because there has to be an honest return to the public on that money—I could not call it a true market. It also competes internationally, and sometimes our focus is too much on the domestic and not enough on the international for the more competitive elements. I think competition is a good thing, but not unfettered, unrestrained competition—that is hugely problematic. They operate in a constructed market.

CHAIR: A constructed market? When you look at universities' advertising and marketing budgets and their growth under the demand-driven system, they say, 'It is a compulsory spend in this hyper competitive market.'

Ms Lilly : That is a comment about competing for undergraduate places or enrolments, and that is a very big part of their business, but it is not the only part of their business. It is not the only thing that defines them as the institutes and entities that they are. That is just a bit singular.

Senator JACINTA COLLINS: Senator McKenzie has already covered the questions I had on the AIG's position in the options paper in relation to the uncapping of sub-bachelor places. In the past the AIG has been quite supportive of access and equity measures designed to increase participation. Are you concerned with the impact of charges of up to $3200 for enabling courses?

Ms Lilly : As a rule of thumb, we are always concerned with an up-front payment for a disadvantage group because it does act as a barrier. We will sit back, look and monitor. There are other equity measures that will also be helpful. We think access and equity are very important and we continue to maintain that position.

Senator JACINTA COLLINS: With the evidence that has come before the committee thus far, I would be surprised if the government continues with this. I do not think there has been any support for it at all. I do not have any other questions, Chair.

CHAIR: Thank you so much for that commentary, Senator Collins. Thank you, Ms Lilly; I appreciate your evidence here today.