The competitive education market for workers updating their skills

In 2019 I wrote a series of posts on declining participation in formal education and training by people already in employment. Falling enrolments ran counter to claims that technology-driven disruptions to work would make further education more necessary than in the past.

The 2019 blog posts identified nine sources of survey and administrative data that should be trending up if the workforce disruption analysis was right. All seven data sources on individuals were instead trending down, while two employer surveys respectively showed a small increase in informal training and a larger increase in online training.

Informal training is not or is poorly measured in the individual person surveys. If it is increasing while structured learning is decreasing then this may signal a change in how people educate themselves after their initial formal education.

Prompted by this week’s release of new data on one of my trend indicators – ATO self-education expense claims – this post updates my 2019 analysis. Most indicators show signs of recovery but on the latest available data three are still trending down.

Postgraduate education

Postgraduate coursework education returned to growth in 2019. Commencing on-campus numbers continued to decline but were offset by online commencements. People moving straight from undergraduate to postgraduate study complicate my analysis, as they are trying to start rather than advance their careers. On the publicly available data I cannot distinguish the two groups.

Postgraduate numbers for 2019 remain below their earlier peak, but I expect 2020 and especially 2021 to be growth years. This is partly because I see postgraduate education as counter-cyclical, with COVID labour market disruptions in 2020 encouraging further study. If this hypothesis is right data noise complicates analysis of longer-term trends, but convenient online postgraduate options are attracting students.

The only contrary 2020 evidence to date comes from the ABS Education and Work survey, which can compare numbers as at May 2019 and May 2020. It reports lower female but higher male domestic postgraduate enrolments. COVID might have prompted more women than men to abandon their studies in favour of child care and home schooling. But the further Education and Work drills down into sub-categories the less reliable it gets, and any missing women are more likely to have deferred than dropped out. May is also before we would expect enrolments to reflect counter-cyclical forces. The discounted short course graduate certificates announced as a COVID measure were only just becoming available.

A lead indicator, public university estimates of how much their students will borrow through FEE-HELP, is showing good growth (6 per cent 2019 to 2020, 11 per cent 2020 to 2021). The large number of additional graduate certificate short courses funded via CGS/HECS-HELP for 2021 as a temporary COVID measure will also add to numbers in the short term.

Continuing education

A source I missed in my 2019 analysis was university revenue from ‘continuing education’, defined as ‘short courses or academic activities that do not lead to the attainment of part of or complete registered award and for which a fee is charged’.

The continuing education income data shows a similar pattern to postgraduate enrolments. A period of growth is followed by decline and then recovery, although not quite to the previous peak. Total revenue from this source has always been low, so these fluctuations are not significant to the overall analysis.

Vocational education

Vocational education enrolments in the 2018 to 2019 period tell a similar story to postgraduate and continuing education, of a modest increase but still below previous peaks. With this data source I could narrow the results to get closer to the main group of interest. The chart shows full-time employees who already have a Certificate III or above qualification.

Workers studying in any formal educational institution

Another source I missed in 2019 was ABS Characteristics of Employment, like Education and Work a supplement to the labour force survey but conducted in August rather than May. As with the vocational data I can narrow this more closely to my key group of theoretical interest. The chart shows full-time workers who already hold a Certificate III qualification or higher. The survey question on education specifies studying at a TAFE, university or other educational institution but not whether the study is for a formal qualification.

Unsurprisingly given its institutional scope, Characteristics of Employment tells a similar story to the postgraduate and vocational data – a dip and then a recovery. The important additional thing showing in this chart is strong growth between 2019 and 2020, perhaps reflecting COVID factors. FWIW, women studying in August 2020 slightly outnumbered men, 2017 being the only other year in this time series that this has happened.

Self-education expenses

The apparent trend reversal in higher and vocational education is not showing for self-education expenses. A downward trend in the number of taxpayers making self-education claims continued into 2018-19. The proportion of all taxpayers making this claim is at its lowest level since records start in 1991-92, of 4.7 per cent.

The rules on tax deductions for self-education expenses require a connection to the taxpayer’s current job. People self-educating for a career shift cannot make a claim, and obviously personal income tax data misses training that is entirely employer or publicly funded. Also, the first $250 in expenditure cannot be claimed. The advantage of this time series over most others is that enrolment in an official credential or educational institution is not required. It should catch the less formal ways people add to their skills.

Legal changes, as opposed to changes in the education market, could influence these numbers. The only relatively recent change I found was stopping people on student income support making claims from 2011-12 (background here). Numbers do fall the following year, but the consistent downward trend starts later, in 2015-16.

Changed ATO practices are another possible non-educational trend explanation. From 2006-07 the tax statistics report offers more detail, and the apparent spike in that period is driven by deductions unclassified by purpose (chart below). Possibly categorisation issues distorted numbers for a few years. But this does not obviously explain the more recent decline.

It is also possible that the ATO is pushing back more against false or borderline claims. Google searches suggest the ATO regularly announces crackdowns on dubious work-related tax deductions.

But despite all these potential factors if there was a big trend towards self-financed self-education it should be showing.

The ATO also provides (or I can calculate) data on average and median self-education claims (chart below). The average has always been fairly low, suggesting that the claims are mostly not for university fees. Payments for full-fee courses, including when FEE-HELP has been used, can be deducted if a sufficient work connection exists. Both the average and median are trending slightly down, suggesting growth in cheaper educational options.

To investigate the tax statistics results further I used data on reasons for vocational subject enrolments. This includes people doing subjects without enrolling in a full program. The reasons most likely to match the tax deduction rules – getting ‘extra skills for my job’ or ‘developing my existing business’ are still trending down. I separately reported government funded students to try to minimise the impact of policy changes, but the same trends are evident regardless of funding source.

Employers

In my 2019 blog posts one of the two sources that wasn’t trending down was an NCVER employer survey. But adding an extra year to the survey it has gone negative, mainly for ‘informal training’, which is defined as ‘training that usually occurs on-the-job through interactions with co-workers as part of the day-to-day work’. It will be interesting to watch this data for 2020, when working from home rules reduced contact between employees.

Employers expressed greater satisfaction with unaccredited than accredited training, with more detailed results suggesting that this is driven by flexibility, relevance of skills taught, and cost.

What else might workers be doing to update their skills?

Pearson Education has carried out its global learner survey for the last couple of years. The rather vague survey methodology (‘survey respondents were selected based on their age and quality of response from leading online research panels’), along with the big swings between years on some indicators for their Australian sample, suggest caution about claiming any trend. The proportions are of employed people who took a training program, not of all employees.

The Pearson survey is worth reporting because it asks the right questions, even if the answers need further testing. Two forms of learning missed by the other surveys – self-taught from online content and self-directed learning from subscription services such as LinkedIn Learning – are both used by about a third of Pearson’s respondents. Employees probably like this type of learning for the same reasons as employers like unaccredited training: it is flexible, relevant and cheap.

Conclusion

Recoveries in several indicators mean that this update tells a less consistent story than my 2019 analysis. While temporary COVID factors may explain some 2020 increases, more people in 2019 and 2020 than in the preceding years see further education as relevant to their job or career progression.

Despite some soft numbers in recent years I think there will still be a big market for formal qualifications for initial occupational entry and major career shifts. These objectives need bundled or stacked units of study to cover all the necessary material. Third-party endorsement of skills acquisition encourages employers to hire someone who lacks experience.

But for more routine skills updating unaccredited training was already very big, and short online options have significant advantages over formal qualifications in relevance, price and flexibility. For current employees a credential matters less, because their employer can observe skill levels directly.

University microcredentials face a tough market because they offer less comprehensiveness and recognition than a formal qualification, but have cost and flexibility disadvantages compared to free online instruction or the modules offered by LinkedIn Learning and similar providers.

University microcredentials are not a bad idea. On some topics and skills universities possess strengths other providers lack. Microcredentials give people who only want to take a few university subjects something better than a discontinued course on their academic record. But like continuing education, I expect that microcredentials will remain a modest source of university revenue.

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