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Transcript of Productivity
Australia 2020 SummitEducation, Skills And The Productivity Agenda
April 2008
These background materials aim to tell an evidence-based story about how Australia is faring. They are not intended to be definitive or comprehensive, but were put together to stimulate discussion on the main challenges and opportunities facing the country and the choices to be made in addressing them. They do not represent government policy.
The materials end with a set of questions. We hope that these, along with many other questions, will be the subject of conversation both prior to and during the Summit.
3
The Australian economy faces a period of significant change both domestically and internationally
The Australian economy will need to adapt to meet coming challenges while grasping future opportunities
Source: ABS 3222.0, Population projections, Australia, 2004-2101 (2006); ABS 3201.0, Population by age and sex, Australian states and territories (2006); Australian Bureau of Meterology (2008); IMF, World Economic Outlook Database (2007)
1992
2008
Demographic transition Climate changeEvolution of the globaleconomic landscape
Trend in annual total rainfall,1970-2007 (mm/10yrs)
For more on global economic trends, see Australia's Future in the World (p2-4, 8)
For more on our demographic profile and climate change, see Population, Sustainability...
23.4
13.1
9.6
0
10
20
30
Proportion of population aged 65+ (%)
1980 2005 2030
1.0
1.9
3.6
4.4
5.4
6.8
21.1
1.0
1.7
3.1
6.6
3.6
16.6
19.0
0 5 10 15 20 25
UnitedStates
China
Germany
India
Share of world GDP (%)
UK
Canada
Australia
4
To meet these challenges, the economy will need to be flexible, productive, and highly participative
Sustainable growth
A working economy
A flexible economy
A productive economy
Covered in this stream
Human capital investment
High Participation
rates
Covered in Future Directions For The Australian Economy
Infrastructure
Marketefficiency
Competition
Regulation
Mobility
DigitalCapacity
5
Knowledge, skills and innovation are major drivers of prosperity, productivity and global competitiveness
Productivity and technological improvements drive economic growth
• Work by Robert Solow and Moses Abramovitz published in the mid-1950s demonstrated that as much as 85% of measured growth in US income per capita during the 1890-1950 period could not be explained by increases in the capital stock or other measurable inputs
• The unexplained portion has been widely attributed to the effects of technological change
• Between 50% and 60% of Australia's economic growth since 1990 can be attributed to productivity improvements
Education and economic prosperity go hand in hand
Education is also important for personal development, social mobility and health
1. Excluding Luxembourg and Japan (outlier/small economy and data not available respectively)Source: OECD, Education At A Glance 2007; Committee on Prospering in the Global Economy of the 21st Century, Rising Above The Gathering Storm: Energizing And Employing America For A Brighter Economic Future (2007)
0
25
50
75
100
0 15,000 30,000 45,000
= OECD countryGDP per capita: 2004 ($USD)
Proportion of the population that has attained at least upper secondary education - OECD countries1: 2005 (%)
6
Early childhood education and care (ECEC) are critical to outcomes later in life…
Private
Public
1. Cunha et al, Interpreting the evidence on life cycle skill formation (2005)Source: OECD, Starting Strong II: Early Childhood Education And Care (2006)
Rates of return to human capital investment1 – initially setting investment to
be equal across all ages
Longer term benefits of investment in ECEC - 40-year study group
ECEC program group
No-program group
Public and private expenditure on pre-primary education –
3- to 6-year olds only
ECEC is a key determinant of outcomes
ECEC have both private and public benefits
Australia is the lowest spender on ECEC in the OECD
Opportunity cost of funds
Job training
0 Age
Pre-school programs
Schooling
r
(% return)
0 20 40 60 80
Ready forschool at 5
Committed toschool at 14
High schoolgraduate
Earned$20k+ at 40
(%)
0.0 0.2 0.4 0.6 0.8 1.0 1.2
Sweden
US
UK
Korea
Australia
As a proportion of GDP (%)
Norway
Denmark
France
Mexico
Austria
Germany
7
…with strong evidence that starting early is essential
Note: SES denotes socioeconomic statusSource: Feinstein L, Inequality in the early cognitive development of British children in the 1970 cohort , Economica, (February 2003)
High SES, high early rank
Low SES, high early rank
High SES, low early rank
Low SES, low early rank
The importance of "starting early"
• A recent British study showed that social background is a more powerful predictor of educational outcomes by age 10 than attainment at 22 months
• It also suggested that less able richer children overtake more able poorer children by the age of six
0
20
40
60
80
100
20 30 40 50 60 70 80 90 100 110 120
Age (months)
Average position in student distribution (percentile)
8
At primary and secondary level, Australian students perform well compared to their international peers…
OECD Average
Australia
1. Program for International Student AssessmentSource: OECD, Literacy Skills for the World of Tomorrow – Further Results from PISA (2003)
Mean PISA1 Testing Score (Australia and OECD Average, 2003)
100
150
200
250
300
350
400
450
500
550
600
Reading Literacy
MathematicalLiteracy
ScientificLiteracy
9
…behind the averages, however, there are wide variations across sectors, socio-economic status and culture
Indigenous
Non-Indigenous
1. OECD Programme for International Student Assessment, a global survey of 15-year-old students 2. Includes 23,200 Indigenous people aged 15-24 years (25.2%) who were still at school and 689,400 non-Indigenous people aged 15-24 years (26.2%) who were still at schoolSource: Department of Premier and Cabinet, Victoria, Governments Working Together (2004); Productivity Commission, Overcoming Indigenous Disadvantage 2007; OECD, Literacy Skills for the World of Tomorrow – Further Results from PISA 2003
OECD Average
Australia
We have high variability in outcomes in reading and mathematical literacy by international standards...
...with significant differences in outcomes across schools, socio-economic status and culture
707071
505346
0
50
100
Male Female Persons
Proportion of population with no non-school qualification –aged 15 to 24 years2: 2004-05 (%)
0
3,000
6,000
9,000
School income per student from all government funding sources: 1992/2002 ($ per student)
Government Catholic Independent1992
2002
30%
57%64%
300
400
500
600
700
Reading Literacy MathematicalLiteracy
ScientificLiteracy
95th Percent
5th Percent
75th Percent
25th Percent
95th Percent
5th Percent
75th Percent
25th Percent
Range of PISA1 testing score (Australian students, 2003)
0
50
100
Scientific Literacy
Mathematical Literacy
Reading Literacy
Difference in PISA score between top and bottom SES quartiles
10
Analysis shows:
• Wide variance in school performance, not related to incoming aptitude or SES
• Many government schools perform very well, in fact 39% of government schools perform above the median for independent schools
• A number of independent and government schools perform poorly
• Catholic schools are more closely grouped around expected outcomes
School effectiveness also appears to vary widely across sectors and socio-economic status
Source: S. Lamb, D. Jesson, R. Rumberger and R. Teese, School Performance and Value-adding: Results From Analysis of School Effectiveness (2004)
School effectiveness measure based on VCE scores, by mean school SES and sector – Victoria (2000)
Independent school
Catholic school
Government school
-8.4
-7.2
-6.0
-4.8
-3.6
-2.4
-1.2
0.0
1.2
2.44
3.6
4.86.08
6.0
7.2
8.4
800 850 900 950 1000 1050 1100 1150 1200 1250
Mean SES score
School effectiveness measure based on VCE scores
11
We know that the quality of Australia’s teachers is strongly related to good outcomes…
1. Among the top 20% of teachers 2. Among the bottom 20% of teachersSource: Sanders & Rivers, Cumulative and Residual Effects on Future Student Academic Achievement (1996)
Impact of teaching quality on student performance in the United States: 1996 (performance percentile)
100th percentile
50th percentile
0th percentile
Student with high-performing teacher1
Student with low-performing teacher2
37th percentile
Age 8 Age 11
90th percentile
Importance of teacher quality
• Research suggests that teacher quality affects student performance more than any other variable
• On average, two students with average (50th percentile) performance could diverge by more than 50 percentile points over a three year period depending on the teacher each is assigned
• Teacher quality will arguably become better understood when analysed in the emerging context of "value adding" practices in education. This is the use of increasingly sophisticated measures and technologies to monitor the progress of students within a school, compared to students of "similar ability," or with the rest of a state
• Research suggests that the quality of school leadership is also an important factor
12
• There are around 256,000 school teachers in Australia
• Total teacher salaries amount to around $15bn
• Entry requirements for teaching degrees are relatively low
• Few incentives exist for professional development (few Australian teachers hold post-graduate degrees)
• Many outstanding teachers leave the classroom for higher-paying administrative roles
• Team leadership roles are not recognised in the same fashion as in other industries
• Only a minority of school teachers in Australia are male (27%)
• Current salary progression models mean many senior teacher salaries are not as high as in some comparable professions
• Teachers remain represented by unions and no professional body has been established as in other professions
• Teacher quality is critical to student outcomes, yet performance standards are not well defined or monitored
• Outstanding teachers are often not recognised for their excellence as might occur in other industries
• A high proportion of Australia's teachers are expected to leave the profession or retire in the next 5-10 years
• Fewer students are commencing teaching courses to fill the gap
…making the many issues on the education workforce agenda particularly important
Size of education sector Teacher education Career progression
Gender Remuneration Status of profession
Teacher quality Teacher performance Emerging teacher shortage
Source: ABS Census Tables (2006)
13
Australia's tertiary institutions are modestly funded by international standards
Source: OECD, Education at a Glance 2007
Expenditure on tertiary institutions as a proportion of GDP - selected OECD countries: 2004 (%)
Increase in public expenditure on tertiary education - selected OECD countries: 1995-2004 (%)
Australia is a moderate spender on tertiary institutions...
...and this spending has decreased over the last 10 years
0.0 0.5 1.0 1.5 2.0
UK
New Zealand
Ireland
Australia
France
OECD average
United States
Denmark
Private
Public
Proportion of GDP (%)
Australia
United Kingdom
New Zealand
Germany
Italy
Japan
Sweden
OECD average
Mexico
United States
Spain
Turkey
Poland
Ireland
Greece
0 100 150 20050
Change in expenditure (%)
14
Looking at adult skills, we are an increasingly well-educated society, but many are still missing out...
Total VET enrolments have decreased since 2000...
...but our overall qualification profile has improved
Despite this, many are still missing out
1. People aged 15-64 yearsSource: ABS 1301.0, Year Book 2008
700
750
800
850
900
950
2000 2002 2004 2006
Men
Women
Students enrolled in publicly funded VET:2000-2006 ('000)
0 10 20 30 40
(%)
Bachelor degreeor above: men
Bachelor degreeor above: women
Other non-schoolqualification:
men
Other non-schoolqualification:
women
1996
2001
2006
Highest level of education1: 1996-2006
0 10 20 30 40 50 60
(%)
Men withoutnon-school
qualifications
Women withoutnon-school
qualifications
1996
2001
2006
Proportion of people without anynon-school qualifications1: 1996-2006
15
...with millions of Australians vulnerable to a changing labour market
1. ABS study measures skills relative to "the minimum (skills) required for individuals to meet the complex demands of everyday life and work in the emerging knowledge-based economy"Source: ABS 4228.0, Adult Literacy and Life Skills Survey (2006); OECD, Education at a Glance 2005; ABS 6105.0, Australian Labour Market Statistics
Prose literacy skill levels Vocational or higher qualificationLabour force
by employment type
For more on women's education and work, see Strengthening Communities... (p7)
53.6%
46.4%
0
10
20
30
40
50
60
Prose literacy skill levels1 - proportion of people aged 15-74: 2006 (%)
Lower thanminimum basic
skill level
At or aboveminimum basic
skill level
0 10 20 30 40 50
Finland
Australia
United Kingdom
New Zealand
OECD average
Italy
Turkey
(%)
Canada
Japan
United States
Proportion of population with a vocational or higher education qualification - persons aged 25-64 in selected OECD countries: 2005 (%)
26
28
30
32
34
36
38
40
42
1996 1998 2000 2002 2004 2006
Employment type as a proportion of the labour force: 1996-2006 (%)
Professionals, managers and administrators are a continuously increasing
segment of the labour force
Clerical, sales and service workers have remained
reasonably stable, down slightly
Tradespersons, labourers, transport and production workers are a
decreasing segment
16
Although labour force participation has been rising, many other countries are still doing better
Source: ABS 6202.0.55.001, Labour Force, Australia; OECD (2002)
Participation is rising... ...but many other countries are still doing better
60
62
64
66
Labour force participation rate (%)
1978 20081988 1998
61.2%
65.2% SwitzerlandDenmark
NorwaySweden
FinlandGermanyPortugal
JapanSpain
IrelandFranceGreece
Italy
Inactive
Unemployed
Employed
0 10020 40 60 80
Participation rate (% of adult population)
Canada
AustraliaUnited States
New ZealandUnited Kingdom
Labour force participation rate, OECD countries 2005
17
Private R&D expenditure is among the lowest in the OECD...
...and, given our population, our research workforce is average in size
Looking at science and innovation, our performance is mixed
1. Or most recent available year, back to 2003Source: OECD, Main Science and Technology Indicators 2006, 2007; Productivity Commission, Public Support for Science and Innovation (2007)
Private
Government For more on innovation, research and development in the health sector, see Long-term Health Strategy (p19)
0 1 2 3 4
Gross domestic expenditure on R&D: 20061
(Proportion of GDP, %)
1.7%
(%)
2.7%
1.1%New Zealand
United Kingdom
2.3%Total OECD
2.0%Canada
1.8%
United States
Australia
3.9%Sweden
0 5 10 15 20
Total researchers per thousand workers across OECD countries (2002)
Finland
New Zealand
United States
Japan
Sweden
Australia
Canada
Total OECD
Germany
EU15
Italy
EU25
United Kingdom
18
We need to ensure that our cutting edge research has impact as well as encourage process innovation within existing industries
Turning knowledge into wealth
• Improve commercialisation of leading edge Australian science and research
• Move beyond low value-add resource exports that leave us heavily exposed to commodity markets
• Balance innovation and adaptation of global knowledge
Process innovation
• Continue to encourage people to find ways to do their jobs better
• Exploit collaboration tools: web 2.0 technologies, "just-in-time" training and mid-career training
• Transfer of international best practice
Innovation
19
Questions
What should be our approach to the early years development of our children?
What can be done to reduce the wide variations in outcomes and school effectiveness?
What should the "public commitment" to education be? Can "public" education only be delivered through "public" schools?
What can we do to ensure the highest quality teachers at all stages of the system, and for all subjects?
What can be done to extend participation in adult learning to those with the greatest learning needs and lowest participation rates?
What options are there for funding the education system, given the complexities of federalism?
How does an economy with low private investment in research and development innovate?
What can be done to ensure that Australia attracts and retains the most talented, creative and highly skilled people?
What can be done to foster innovation in the workplace and encourage the transfer of ideas across businesses?
What kinds of collaboration can best connect scientists to others in the economy?
What kinds of differences could the developing digital economy make right across the education lifecycle?
How can we continue to improve student retention rates at secondary school?