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18 November 2008

111FFFNo v1ember 2008

Future demand for a higher education

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Future demand for higher education

TABLE OF CONTENTS Disclaimer


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Executive summary................................................................................................................... 1. Introduction...................................................................................................................... 1.1 Outline of the task............................................................ 1.2 Key definitions and data sources....................................... Trends in higher education demand................................................................................. 2.1 Recent trends in higher education participation................. 2.2 Applications, offers and acceptances................................. 2.3 Trends by field of education.............................................. 2.4 Diplomas and advanced diplomas...................................... 2.5 Age-based participation rates........................................... Factors affecting student demand.................................................................................... 3.1 Characteristics of those who undertake higher education... 3.2 Participation of recent migrants........................................ 3.3 Fee structures.................................................................. 3.4 State of the labour market................................................ 3.5 Sectoral composition of the labour market......................... 3.6 Pathways to skill development.......................................... Demographic projections................................................................................................. 4.1 Outlook for Australias population..................................... 4.2 Population trends for those aged 18-22............................. 4.3 Demographic projections by region................................... Projecting student demand.............................................................................................. 5.1 The forecast equation....................................................... 5.2 Projected age-based participation rates............................ 5.3 Projections for non-demographic variables........................ 5.4 Overall student demand for higher education.................... 5.5 Demand for higher education by region............................. Labour market demand for higher education skills........................................................... 6.1 Employment growth by industry/occupation....................... 6.2 Skill shortages by industry/occupation.............................. 6.3 New migrants role in meeting skill needs.......................... 6.4 Skill qualification implications of labour market demand....

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Projected labour force replacement rates......................................................................... 7.1 Projected employment growth cycle.................................. 7.2 Projected labour force participation.................................. 7.3 Projected net employment growth by industry and occupation....................................................................... 7.4 Projected replacement demand......................................... Projected labour market demand for higher education..................................................... 8.1 Projected qualification profile........................................... 8.2 Projected demand to cover for net employment growth...... 8.3 Projected demand to cover for retirements........................ Integrating student demand and labour market demand.................................................. 9.1 Assessing relative demand............................................... 9.2 Factors which will assist to align demand.......................... Sensitivity analysis alternate scenarios......................................................................... 10.1 Student demand driven solely by demographic trends........ 10.2 Labour market demand with no upskilling over time.......... 10.3 Labour market demand with a targeted skills profile.......... 10.4 Labour market demand with a constant labour force participation rate............................................................. 10.5 Student demand modified for changes in completion rates.

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References................................................................................................................................ Appendix A Details on demographic projections.................................................................... Appendix B Net employment growth methodology and detail.............................................. Appendix C Gross replacement rates methodology and detail............................................ Appendix D Detailed projections for labour market demand by qualification..........................

CHARTS
Chart 1: Projected student demand (supply) less projected implied labour market demand (demand) Chart 2: Higher education participation rates by gender, domestic students Chart 3: Female students as a share of total domestic students, 1988 - 2007 Chart 4: Domestic students by age, 2002 and 2007

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Future demand for higher education

Chart 5: Domestic students by level of qualification, 1988 - 2007 Chart 6: Domestic undergraduate students by age, 2002 and 2007 Chart 7: Domestic postgraduate students by age, 2002 and 2007 Disclaimer Disclaimer here Chart 8: Overseas share of higher education students in Australia, 1988 - 2007 Chart 9: Total undergraduate applicants, 2001 - 2008 Chart 10: Eligible applicants and eligible applicants receiving an offer, 2001 2008 Chart 11: Offer rate by age group, 2001 - 2008 Chart 12: Eligible applicants, offers and acceptances, 2001 - 2008 Chart 13: Acceptance rate by age group, 2001 - 2008 Chart 14: Domestic students by field of education, 2002 and 2007 Chart 15: Share of eligible undergraduate applicants by field, 2001 and 2008 Chart 16: Offer rate by field of education, 2001 and 2008 Chart 17: Acceptance rate by field of education, 2001 and 2008 Chart 18: Average contact hours by gender, 2002 - 2007 Chart 19: Total diploma and advanced diploma contact hours by gender, 2002 2007 Chart 20: Diploma and advanced diploma contact hours, 2002 - 2007 Chart 21: Share of diploma and advanced diploma students by field, 2002 and 2007 Chart 22: Share of diploma and advanced diploma students by State, 2002 and 2007 Chart 23: Share of diploma and advanced diploma students by age, 2002 and 2007 Chart 24: Actual and implied higher education students based on 2002 participation Chart 25: Real incomes over time for Australias poorest households Chart 26: Age profile of migrant intake and Australian population, 2006-07 Chart 27: Employment growth and labour force participation, 1988 - 2008 Chart 28: Employment growth by occupation type, 1988 - 2008 Chart 29: Apprenticeship commencements vs higher education applications, total, 2001 - 2007 Chart 30: Apprenticeship commencements (traditional trades) vs higher education applications, total Chart 31: Apprenticeship commencements (traditional trades) vs higher education applications, males Chart 32: Wage growth by occupation type, 1988 - 2008 Chart 33: Forecast Australian population by age group older Chart 34: Forecast Australian population by age group - younger Chart 35: Population pyramid for Australia

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Chart 36: Annual growth in 18-22 year olds Chart 37: 18-22 year olds as a share of national population Chart 38: State trends in 18-22 year old population (2008 - 2038) Chart 39: Demographic projections by capital city, 2008 2018 Chart 40: Projected number of students, 2008 and 2018 Chart 41: Employment growth rates by occupation Chart 42: Employment growth rates by industry Chart 43: Skilled vacancies for trades and professionals Chart 44: Occupational profile of recent migrants Chart 45: Occupational profile of migrants and Australian population, 2006-07 Chart 46: Projected employment growth, Australia Chart 47: Age-specific participation rates males Chart 48: Age-specific participation rates females Chart 49: Projected labour force participation rate, Australia Chart 50: Projected five-year average growth rate by occupation Chart 51: Projected five-year average growth rate by industry Chart 52: Projected additional number of qualifications held per annum based on labour market demand

TABLES
Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Higher education participation rates by State, domestic students Growth in total applicants by State, change on year earlier, 2002 - 2008 Offer rate by State Acceptance rate by State Age-based higher education participation rates Age-based diploma and advanced diploma participation rates Age-based participation rates in higher education and diploma/advanced diploma Table 8: Pathways taken by those who completed Year 12 in 2001, LSAY Table 9: Activities of Victorians in year following their final school year Table 10: Activities of Victorians finishing school in 2003 over time Table 11: Demographic projections by labour force dissemination region, 2008 - 2038 Table 12: Age-based participation rates by qualification, Australia Table 13: Projected Year 12 completion rates

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Future demand for higher education

Table 14: Projected unemployment rates by State Table 15: Student demand projections for postgraduate courses, 2008 - 2018 Table 16: Student demand projections for undergraduate courses, 2008 - 2018 Disclaimer Disclaimer here Table 17: Student demand projections for advanced diploma courses, 2008 2018 Table 18: Student demand projections for diploma courses, 2008 - 2018 Table 19: Student demand by labour force dissemination region, 2008 - 2018 Table 20: Contribution to ten-year average growth by occupation Table 21: Contribution to ten-year average growth by industry Table 22: Postgraduate qualification share of employment by industry and occupation, estimate for 2008 Table 23: Undergraduate qualification share of employment by industry and occupation, estimate for 2008 Table 24: Diploma/advanced diploma qualification share of employment by industry and occupation, estimate for 2008 Table 25: Employment by occupation growth rates, 2008 - 2018 Table 26: Employment by industry growth rates, 2008 - 2018 Table 27: Retirement rates by occupation, 2008 - 2018 Table 28: Turnover by occupation, 2008 - 2018 Table 29: Gross replacement rates by occupation, 2008 - 2018 Table 30: Postgraduate qualification share of employment by industry and occupation, projection for 2018 Table 31: Undergraduate qualification share of employment by industry and occupation, estimate for 2018 Table 32: Labour market demand for postgraduate qualifications by occupation Table 33: Persons employed with postgraduate qualifications by field of education Table 34: Labour market demand for undergraduate qualifications by occupation Table 35: Persons employed with undergraduate qualifications by field of education Table 36: Labour market demand for diploma qualifications by occupation Table 37: Persons employed with diploma qualifications by field of education Table 38: Retirees with postgraduate qualifications by occupation Table 39: Retirees with undergraduate qualifications by occupation Table 40: Retirees with diploma qualifications by occupation Table 41: Total retirees with a qualification by occupation Table 42: Projected student demand and implied labour market demand for qualifications Table 43: Projected supply-demand balance with supply driven solely by demographic trends

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Table 44: Projected supply-demand balance with demand driven solely by employment trends Table 45: Postgraduate qualification share of employment by industry and occupation, projection for 2018, targeted skills scenario Table 46: Undergraduate qualification share of employment by industry and occupation, estimate for 2018, targeted skills scenario Table 47: Projected supply-demand balance with demand based on targeted skills profile Table 48: Projected supply-demand balance with demand regulated by a constant labour force participation rate Table 49: Projected supply-demand balance with supply modified by target completion rates Table 50: Employment by detailed industry growth rates, 2008 - 2018 Table 51: Employment by detailed occupation growth rates, 2008 - 2018 Table 52: Retirement rates by detailed occupation, 2008 - 2018 Table 53: Turnover by detailed occupation, 2008 - 2018 Table 54: Gross replacement rates by detailed occupation, 2008 - 2018 Table 55: Persons employed with postgraduate qualifications by occupation, 2008 - 2018 Table 56: Persons employed with postgraduate qualifications by industry, 2008 - 2018 Table 57: Persons employed with undergraduate qualifications by occupation, 2008 - 2018 Table 58: Persons employed with undergraduate qualifications by industry, 2008 - 2018 Table 59: Persons employed with diploma qualifications by occupation, 2008 2018 Table 60: Persons employed with diploma qualifications by industry, 2008 - 2018

mited is unable to make any warranties in relation to the information contained herein. Access Economics Pty Limited, its employees and agents dis

Future demand for higher education

GLOSSARY OF ACRONYMS
ABS AEM ANZSCO ANZSIC ASCO CURF DEEWR HECS IT LSAY NCVER NESB TES VET AustralianDisclaimer Statistics Bureau of Disclaimer Macro (model) Access Economics here Australian and New Zealand Standard Classification of Occupations Australian and New Zealand Standard Industrial Classification Australian Standard Classification of Occupations Confidentialised Unit Record File Department of Education, Employment and Workplace Relations Higher Education Contribution Scheme Information technology Longitudinal Survey of Australian Youth National Centre for Vocational Education Research Non English-speaking background Tertiary Entrance Score Vocational education and training

Future demand for higher education

EXECUTIVE SUMMARY
The Review of Australian Higher Education is examining the future direction of the higher education sector, its fitness for purpose in meeting the needs of the Australian community and economy, and options for ongoing reform. In this report, Access Economics assesses the expected quantum and nature of demand for higher education over the next decade by prospective students and industry. Trends in higher education demand In 2007, there were nearly 757,000 domestic students undertaking higher education in Australia. Of these, more than 75% were at the undergraduate level and almost 60% were women (up from less than 52% in 1988). Students studying a course classified under the society and culture field (including law, arts and social science) comprised the largest share. While student numbers have grown over recent years, the rate of growth has become more modest over time. The higher education system overall saw an average annual increase in domestic students of 1.7% between 2002 and 2007, compared to average annual growth of 3.7% through the 1990s. Demand for undergraduate university places has been moderating, with the number of eligible applicants falling steadily (particularly in Western Australia) after a peak in 2003. The supply of university places has increased in recent years as demand has fallen away, resulting in a notable increase in the offer rate to applicants. Since 2002, domestic student numbers have been lower than would otherwise be implied by population growth. The difference between actual and implied student numbers suggests that, had higher education age-based participation rates remained at their 2002 levels, an additional 13,500 students (or an additional 2% of students) would have been attending a higher education institution in 2007. The number of diploma and advanced diploma students across Australia has been declining steadily over recent years. Although offset to some extent by an increase in average student contact hours, in terms of total student contact hours the delivery of diploma education has remained relatively constant over the past six years while the delivery of advanced diploma education has contracted. Both of these forms of education have lagged behind population growth, with males in particular showing a trend to move away from such courses. Factors affecting student demand While demographics are clearly important in analysing demand for higher education, a range of other factors also play a role. A number of Australian studies have shown that students from lower socio-economic backgrounds tend to have lower participation rates. When considered as a group, those from non-English speaking backgrounds have a higher propensity to participate in higher education, and the younger age profile of recent migrants should help to push up student numbers over the next decade. The strength of the labour market over recent years appears to have tempted some potential students away from undertaking higher education. Employment growth has averaged 2.5% per annum over the past five years, compared with 1.9% per annum over the prior decade. There has also been an improvement in wages growth, which

Future demand for higher education


improves the return to working rather than studying. The strong jobs growth in occupations linked to trades and related skills has seen a strong lift in apprenticeship commencements at the same time as declining interest in higher education from males. An analysis of data from the Longitudinal Survey of Australian Youth and the Victorian On Track data shows a variety of pathways are undertaken towards higher education. The most common for Year 12 completers is the traditional post-school university pathway, with nearly 45% commencing university immediately post-school (although one-third of that group only studied at university for one or two years at that time). By locality, a much higher share of those from a non-metropolitan location directly enter the labour force after completing school. Demographic trends The sharp decline in the number of children born in Australia in the 1970s has flowed through to significantly slower growth in student aged population relative to the total population. The rate of population growth for the 18-22 year old age cohort, an important age group for higher education, has slowed since the start of the decade. Over the next five years, population growth for this age cohort is expected to be around the national average for all age groups. However, beyond that period, population growth trends are likely to differ notably. Indeed, this cohort may see virtually no increase in population between around 2015 and 2022. While population growth is expected to be seen across almost all regions (at the labour force dissemination regional level) over the next decade, 23 regional areas are expected to record a decline in their 15-24 year old population. Many of the regions outside capital cities show a decline, but there is also a decline expected in several areas within capital cities, including for Hobart and Canberra as a whole. These demographic trends are likely to be an important factor over time in the level of applications received by particular institutions. Projections of student demand Our forecasts of student demand are driven by projections of the number of people in each relevant age cohort, a set of higher education participation rates (based on rates observed in 2007), and a set of non-demographic variables. While demographic trends are at the heart of the projections, overall student demand is expected to grow at a faster rate over the next decade than demographic movements would otherwise suggest. This reflects an expected increase in Year 12 retention rates over time (representing the trend move towards a higher skill economy), a related increase in real wages over time, and a continuing margin in wages growth favouring higher education intensive occupations. The number of postgraduate students is projected to increase by an average of 1.4% per annum over the next decade, compared with 1.1% per annum for undergraduate students, and 1.2% per annum for advanced diploma students and diploma students. Labour market trends Over time, employment growth by broad occupational group has traditionally favoured the higher skill groups (occupations classified as managers and administrators, professionals, and associate professionals). Employment growth in these occupations has also tended to be less cyclical, and these workforces have the

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Future demand for higher education


highest propensity to hold university-level qualifications (both undergraduate and postgraduate). However, recent years have seen shifts in the composition of labour demand, with a surge in demand for trades and related skills. This has had an influence on student demand for higher education, tempting people into the job market immediately postschool where higher education qualifications are not required. That movement has helped to reduce the skill shortage in trades-related areas, while the significant lift in Australias migration program (particularly in the skilled stream) has been important in stemming skill shortages in higher skill occupations. Labour market projections Looking forward, overall employment growth over the next decade (an average of 1.6% per annum) will be weaker that it has been over recent years. In the short term this will reflect significant fallout from the current global financial crisis which will see labour demand slow notably. However, we do expect labour demand growth to pick up again from 2010 and continue to be influenced by a business cycle over time. Also important will be a decline in the overall labour force participation rate over the second half of the next decade. The huge shift of people into higher age brackets means that population-wide labour force participation will fall. The 60-year olds of the future may be more likely to work than 60-year olds of the past, but they will not be more likely to work at 60 than they were at 20-50. The moderation in employment growth is expected to be felt across most occupations, with managers and administrators expected to show the fastest rate of employment growth of the broad occupational groups (though still well down on recent growth rates for this group). By industry, mining is expected to show the strongest jobs growth over the next five years, while health and community services and property and business services are expected to deliver a significant proportion of the new jobs created over time. Implied labour market demand for qualifications The labour market demand for people with qualifications is expected to be stronger than overall employment growth over the next decade. Projected growth for people with postgraduate qualifications as their highest attainment is an average of 3.6% per annum, for undergraduates the average is 2.9% per annum, and for diploma qualifications 1.8% per annum. That compares with an average for overall employment growth of 1.6% per annum. This result is driven in part by the current qualification profile and expected growth by industry and occupation. Those occupations where a higher share of the workforce has qualifications tend to be the faster growing occupations notably managers and administrators and professionals. The result is also driven by a continuation of the trend towards skill deepening over time. In order to deliver productivity gains over time, the share of the workforce with qualifications is expected to continue rising over time, consistent with the experience over recent years. The projections allow for an increase in the share of the workforce with postgraduate qualifications as their highest qualification from 6.8% in 2008 to 8.3% in 2018, and an increase in the share of the workforce with undergraduate qualifications as their highest qualification from 17.2% in 2008 to 19.6% in 2018.

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By 2018, there are expected to be 1,056,000 people employed with a postgraduate qualification as their highest attainment, 2,476,000 with an undergraduate qualification, and 1,191,000 with a diploma qualification. Cumulatively over the next decade (and noting that an additional postgraduate qualification also implies an additional undergraduate qualification), the projections imply an additional 933,000 undergraduate qualifications by 2018, an additional 313,000 postgraduate qualifications, and an additional 190,000 diploma qualifications. In addition, there is a need to replace those in the workforce with a qualification who are retiring. By 2018, that will amount to a further 22,000 postgraduate qualifications, 51,000 undergraduate qualifications and 25,000 diploma qualifications per annum. By field of education, management and commerce is expected to remain the dominant area of study, though the health field is expected to see the fastest growth over the decade. Supply-demand balance Chart 52 provides a summary of the student demand and labour market demand projections for qualifications as estimated for this report. For supply, the data represents an average years cohort of student completions (applying recent data on the rate of student completions relative to student numbers). For demand, the data represents the number of completions required in order to meet demand generated by net employment growth and retirements. CHART 52: PROJECTED
STUDENT DEMAND

DEMAND

(SUPPLY) LESS (DEMAND)

PROJECTED IMPLIED LABOUR MARKET

[Image of graphical data removed]

The bottom line results for 2008 for higher education qualifications in total are for demand for students to exceed supply. The difference is some 22,000 students. The notable slowing of employment growth expected in the short term sees that bottom line reversed in 2009. That swing into surplus in 2009 is short lived, with demand then exceeding supply in 2010 and for most of the rest of the forecast period. This is driven very much by excess demand for undergraduate qualifications (with projections for postgraduate qualifications and diplomas/advanced diplomas closer to balance). That excess demand does diminish over time as an expected drop in the labour force participation rate during the next decade causes overall employment growth to step back. At the same time the supply of students is expected to continue to grow at a solid pace, in part driven by the longer term trend towards higher skill attainment. What does a mis-match between supply and demand mean? Ultimately, it is a theoretical concept which wont actually be observed because supply and demand are two sides of the same coin. Imbalances will however create incentives for other actions to occur. These other actions could include a change in relative wages, different demographics and pathways for higher education, changes to international and interstate migration levels, demand side changes which may seek better technology, changes in the concordance between occupations and qualifications, and a different profile to overall economic growth and employment growth than is projected here.

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Scenario analysis Scenario analysis in this report highlights: Student demand is mainly driven by demographic trends. Even though student demographics are slowing, they are still contributing to solid growth in student numbers over time, even before allowing for other trend and wage variables. Upskilling over time to allow for productivity growth is a major contributor to labour market demand. In the absence of upskilling for productivity growth, labour market demand for qualifications required is projected to generally decline (other than for cyclical influences). In this scenario the likely supply of students to higher education should be more than adequate to cater for expected employment growth. A more ambitious targeted skills profile would create much stronger labour market demand for qualifications, such that the supply-demand balance in 2018 moves from what is nearly balance in the baseline scenario, to significant excess demand in this scenario. Encouraging an adequate supply of students would clearly be a major hurdle in achieving such a targeted skills profile over the next decade. The labour force participation rate has a significant influence over labour market demand. A rising labour force participation rate has been supporting strong growth in labour market demand for qualifications. When this rate plateaus or declines, it will have a notable effect on the demand for qualifications linked to growth in the workforce. If average completion ratios (number of student completions relative to number of student participants) were to rise over time for undergraduates this could reduce excess demand without the need for more education resources. That could be achieved by shorter courses, though shorter courses may of course have quality implications. There would still also be a need to encourage more students into the higher education system.

Access Economics 18 November 2008

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Future demand for higher education

1. INTRODUCTION
On 13 March 2008, the Deputy Prime Minister announced the Review of Australian Higher Education to examine the future direction of the higher education sector, its fitness for purpose in meeting the needs of the Australian community and economy, and options for ongoing reform. The Review will inform the preparation of the Government's policy agenda for higher education through 2009 and 2010, and help to develop a long term vision for higher education into the next decade and beyond. In order to address the Reviews Terms of Reference relating to productivity and participation, Access Economics was commissioned by the Department of Education, Employment and Workplace Relations (DEEWR) to prepare this report examining the likely future demand for higher education.

1.1

OUTLINE OF THE TASK

The key objectives of the project are to assess the likely quantum and nature of demand for higher education over the next decade by prospective students and industry, including an assessment by geographic area. For each area of analysis (student demand and industry demand) there are three major components: a literature review on the factors affecting prospective demand for higher education (from a student perspective and from the perspective of industrys demand for skills); a detailed analysis of factors influencing prospective student and labour market demand for higher education; and

development of a model to provide projections of prospective demand,


including with State/Territory and regional variation.

This report contains that analysis as well as the projections from the student demand and industry demand models developed for this project. The models themselves are to be provided to DEEWR in conjunction with the final report to undertake scenario analysis as well as to allow for the review of projections over time.

1.2

KEY DEFINITIONS AND DATA SOURCES

The areas of study covered by this report are undergraduate and postgraduate qualifications undertaken at Australian higher education institutions (what is traditionally termed higher education). In addition, diplomas and advanced diplomas delivered through registered vocational education and training (VET) providers are also included within the coverage for this report. The primary interest for this report is education delivered to Australian citizens, not that provided in Australia to overseas citizens. A range of data sources were used to develop a profile of higher education students over time. These include the following. Students: Higher Education Statistics Series. This data is collected and maintained by DEEWR. It contains a range of statistics relating to students

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enrolled in higher education at each Australian higher education provider. Undergraduate Applications, Offers and Acceptances. The inaugural 2008 publication of this series was used to examine data on the number of total (and eligible) applicants as well as the number of offers and acceptances by State, age and field of education. Students and courses. VET data from the National Centre for Vocational Education Research (NCVER) was used to examine trends in students studying towards a diploma or advanced diploma.

Population projections which are shown in this report are based on Australian
Bureau of Statistics (ABS), Population Projections, Australia, 2006 to 2101, Catalogue Number 3222.0, released in September 2008. Projected population growth for detailed labour force dissemination regions are calculated based on the ABS projections at the national and State level. For the labour market demand analysis, the key data source in developing a qualification profile of the workforce is detailed data from ABS, Survey of Education and Work, Catalogue Number 6227.0 from 2007. This data allowed for the development of a matrix showing employment by occupation, by industry, by the highest level qualification held and the field of education of that qualification. A key data source for projections of employment by industry and employment by occupation were estimates provided by the Labour Supply and Skills Branch of DEEWR based on DEEWRs modelling and labour market research. These were used in combination with Access Economics labour market forecasts for the projections shown in this report. The reporting of employment by occupation in this report is in terms of the Australian Standard Classification of Occupations (ASCO) rather than the more recent Australian and New Zealand Standard Classification of Occupations (ANZSCO). The reporting of employment by industry in this report is in terms of the 1993 Australian and New Zealand Standard Industrial Classification (ANZSIC) rather than the more recent 2006 ANZSIC. In both cases the classification is used is by necessity given the reporting of historic data.

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2. TRENDS IN HIGHER EDUCATION DEMAND


There were nearly 757,000 Australian students undertaking higher education in 2007. While student numbers have grown over recent years, the rate of growth has become more modest over time. Australias higher education system overall saw an average annual increase in domestic students of 1.7% between 2002 and 2007, compared to average annual growth of 3.7% through the 1990s. The share of female students has increased steadily over the past two decades. In 2007, almost 60% of domestic higher education students were female, up from less than 52% in 1988. Over time, there has been a marginal shift towards a higher share of students being aged in their early 20s. The data also suggests a notable drop in the share of students aged between 30 and 50 over recent years. Student numbers at university have continued to rise at a modest pace, though there is evidence that demand for university places has been moderating. The number of eligible applicants has fallen steadily after a peak in 2003, particularly in Western Australia. As demand has fallen away, the supply of undergraduate higher education places has increased in recent years, resulting in a notable increase in the offer rate to applicants. By field of education, over the past five years there has been an increase in the share of students studying courses classified under society and culture, health, education, creative arts and architecture. There has been a large decrease in the share of students studying information technology (IT), as well as in students studying management and commerce, engineering and agriculture. Examining higher education participation rates by age, student numbers are lower than would be implied by population growth. There was a notable shortfall in 2005, with some improvement in student numbers relative to population over 2006 and 2007. The difference between actual and implied student numbers in 2007 suggests that, had higher education participation rates remained constant since 2002, an additional 13,500 students (or an additional 2% of students) would have been attending a higher education institution in 2007. While growth in university participation has been modest, the number of diploma and advanced diploma students across Australia has been declining steadily over recent years. To some extent this has been offset by a notable increase in average student contact hours (with a trend towards longer courses or more modules). However, even in terms of total student contact hours delivered, the delivery of diploma education has remained relatively constant over the past six years, while the delivery of advanced diploma education has notably contracted. Both of these forms of education have lagged behind population growth, with males in particular showing a trend to move away from such courses.

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This chapter provides a profile of higher education students by examining a range of characteristics over time. These characteristics include age, gender, State, field of education and level of qualification. The data in this chapter is focused on domestic (non-overseas) students. These students are the primary focus of the analysis in this report, though some examination of overseas students is also undertaken. Many of the charts and tables used for comparison of student characteristics over time in this chapter do not include data from before 2002 due to a change in data definition for the Students: Higher Education Statistics Series at that time. Specifically, prior to 2002 this data source only included students as at 31 March (omitting any students commencing on a subsequent date in that year). From 2002, all students attending higher education in the year were included. Some 2001 data has been made available using the revised definition and is presented in this report as noted.

2.1

RECENT TRENDS IN HIGHER EDUCATION PARTICIPATION

The total number of Australian students undertaking higher education amounted to nearly 757,000 students in 2007. In recent years, growth in the number of domestic higher education students has been relatively modest. Australias higher education system overall saw an
average annual increase in domestic students of 1.7% between 2002 and 2007, compared to average annual growth of 3.7% through the 1990s. As a result, higher education participation rates (students as a share of a relevant age or gender population cohort) have flattened, and have even declined in some instances.

2.1.1

STUDENTS BY GENDER

Chart 52 shows higher education participation rates for domestic students over time. This rate has been calculated as the total number of domestic higher education students in Australia as a share of the civilian population aged between 15 and 64. The chart shows that the higher education participation rate increased steadily through to the mid 1990s, before declining. While a change in the way the student data was collected makes the series difficult to compare over time, it appears that the participation rate declined further after 2002 before lifting marginally in 2006 and 2007. Notably, the chart shows that the female higher education participation rate has

been higher than the male participation rate for the past two decades, with the gap between the two series widening considerably over time.
CHART 52: HIGHER
EDUCATION PARTICIPATION RATES BY GENDER, DOMESTIC STUDENTS

[Image of graphical data removed]

Much of the growth in domestic student numbers that has occurred in recent years can be attributed to a rise in female students. Between 2001 and 2007, there were

an additional 2.75 new female domestic students for every one new male domestic student in the Australian higher education system.
Chart 52 clearly shows the increasing share of females in Australias domestic higher

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education population. The share of female students has increased steadily over the past two decades. In 2007, almost 60% of domestic higher education students were female, up from less than 52% in 1988. CHART 52: FEMALE
STUDENTS AS A SHARE OF TOTAL DOMESTIC STUDENTS,

1988 - 2007

[Image of graphical data removed]

2.1.2

STUDENTS BY STATE

Table 60 details higher education participation rates by State. The table shows that the overall rate has been relatively constant for each of the States (and nationally) over the past five years. The Australian Capital Territory currently has the highest participation rate, with some 7.7% of the entire civilian population aged between 15 and 64 attending a higher education institution in some capacity in 2007. This is significantly higher than any of the other States, with New South Wales recording the second highest rate of 4.5% in 2007. TABLE 60: HIGHER 2002 NSW VIC QLD SA WA TAS NT ACT
Australia 4.4% 4.5% 4.7% 3.9% 4.5% 3.8% 4.3% 7.4% 4.6%
EDUCATION PARTICIPATION RATES BY

STATE,

DOMESTIC STUDENTS

2003
4.4% 4.5% 4.6% 3.9% 4.5% 3.8% 4.2% 7.7% 4.5%

2004
4.3% 4.4% 4.5% 3.9% 4.4% 3.9% 4.0% 8.0% 4.4%

2005
4.3% 4.3% 4.3% 3.9% 4.4% 3.6% 3.9% 7.8% 4.4%

2006
4.3% 4.3% 4.4% 4.0% 4.4% 3.7% 3.9% 7.6% 4.4%

2007
4.5% 4.3% 4.4% 4.1% 4.4% 3.8% 4.1% 7.7% 4.5%

Source: DEEWR Students: Higher Education Statistics Series, ABS 6202.0.

Tasmania consistently records the lowest higher education participation rate, while the South Australian and Northern Territory rates are also well below average.

2.1.3

STUDENTS BY AGE

An examination of student data by age shows that Australian domestic higher education students are spread quite broadly across age groups. Chart 52 shows the share of students by age group in 2002 and 2007. The large proportion of undergraduate students in the Australian higher education system means that the age distribution shown in Chart 52 is skewed towards younger people. For single age groups, 19 year olds comprise the largest share of students, closely followed by 18 and 20 year olds.

Examining the data over time shows that the share of students aged 20 and

18

Future demand for higher education under has been decreasing slightly, while the share of students aged between 21 and 24 has been increasing. This could be the result of a number of potential
factors such as the decision by some students to defer study in order to work or travel (either before or partway through higher education studies), or an increase in the relative number of postgraduate students in the Australian higher education system.

The data also suggests a notable drop in the share of students aged between 30 and 50 over recent years, with this potentially related to the strong performance
of the labour market having a greater influence over mature aged students. CHART 52: DOMESTIC
STUDENTS BY AGE,

2002

AND

2007

[Image of graphical data removed]

2.1.4

LEVEL OF QUALIFICATION

The analysis of the level of qualification in this section is limited to the distinction between undergraduate and postgraduate study at the university level. A separate section examining students undertaking diploma and advanced diploma studies at the VET level can be found in Section 2.4. Chart 52 shows the share of undergraduate and postgraduate domestic students between 1988 and 2007. The chart shows a gradual increase in the share of postgraduate

students over that time, though undergraduates still comprised more than 75% of all students in 2007.
CHART 52: DOMESTIC
STUDENTS BY LEVEL OF QUALIFICATION,

1988 - 2007

[Image of graphical data removed]

Chart 52 shows the age distribution of domestic higher education students studying at the undergraduate level. Unsurprisingly, the majority of students are aged between 18 and 22 years old, though a broad distribution of students exists. Between 2002 and 2007, there was a relative increase in the number of students aged between 18 and 25, resulting in relatively fewer mature aged students at the undergraduate level in 2007. CHART 52: DOMESTIC
UNDERGRADUATE STUDENTS BY AGE,

2002

AND

2007

[Image of graphical data removed]

Chart 52 shows the accompanying distribution of domestic higher education students studying at the postgraduate level. The chart shows that domestic postgraduate students are spread quite broadly across age groups, with most students aged between 22 and 29 years old. The chart shows there has been little change in the share of students in each age group between 2002 and 2007, with a slight increase in students aged between 22 and 29 and a decrease in the share of older students occurring. CHART 52: DOMESTIC
POSTGRADUATE STUDENTS BY AGE,

2002

AND

2007

[Image of graphical data removed]

2.1.5

OVERSEAS STUDENTS

While this report focuses on domestic higher education students, overseas students are increasingly attending Australian institutions and are having an important impact on many aspects of the higher education system, particularly university funding. For

19

Future demand for higher education


this reason, it is important to briefly examine the increase in overseas student numbers in recent years. Also, many overseas students later become Australian citizens and may go on to postgraduate study as Australian citizens. Chart 52 shows the dramatic rise in overseas students as a share of the total higher education student population in Australia since the late 1980s. In 1988, fewer than 5% of all students attending an Australian higher education institution were from overseas, compared to almost 30% in 2007. CHART 52: OVERSEAS
SHARE OF HIGHER EDUCATION STUDENTS IN

AUSTRALIA, 1988 - 2007

[Image of graphical data removed]

The increase in overseas student numbers has helped the education sector to develop into an important export market for Australia, and has provided Australian higher education institutions with an important source of revenue.

2.2

APPLICATIONS, OFFERS AND ACCEPTANCES

In addition to examining actual student numbers, data on university applications, offers and acceptances can be useful in identifying trends in the types of individuals applying for university places, and the rate at which offers are accepted (or deferred in favour of alternative work or study paths). This section discusses trends in applications, offers and acceptances over recent years using data drawn from a recent DEEWR publication: Undergraduate Applications, Offers and Acceptances 2008. This was the inaugural issue of the publication and contains data since 2001.

2.2.1

UNDERGRADUATE APPLICATIONS

While a significant proportion of applicants for undergraduate university places are current Year 12 students, many other applicants are older people who have spent time in the workforce or undertaken other forms of study such as VET. In 2008, Year 12 students accounted for approximately 46% of total undergraduate applicants. Chart 52 shows the total number of undergraduate applicants and the number of eligible applicants from 2001 to 2008. The calculation of eligible applicants in this report excludes any school leavers with a Tertiary Entrance Score (TES) below a minimum benchmark, where this benchmark is the lowest TES with which an applicant could reasonably expect to gain entry into university. This definition is consistent with the DEEWR report mentioned above and with methodology adopted by University Australia, and does not necessarily mean that those applicants considered ineligible will not receive an offer of a university place. CHART 52: TOTAL
UNDERGRADUATE APPLICANTS,

2001 - 2008

[Image of graphical data removed]

Chart 52 shows that the total number of applicants for undergraduate university

places increased notably in 2007, reversing the downward trend of the previous few years. However, the number of eligible applicants continues to fall after a peak in 2003.
The continued decline in the number of eligible applicants comes despite a lift in the

20

Future demand for higher education


number of students achieving a TES of 80 or above in 2007 and 2008. Students achieving a TES in this band are considerably more likely to apply and accept offers to university than other students. Table 60 shows the growth in total applicants by State since 2002. Of note, the number

of undergraduate applicants in Western Australia has fallen consistently over the past four years. This may be influenced by the resources boom providing strong
labour market conditions and good wages, encouraging school leavers away from further study. TABLE 60: GROWTH
IN TOTAL APPLICANTS BY

STATE,

CHANGE ON YEAR EARLIER,

2002 - 2008 2008


1.8% -1.7% 0.1% -1.2% -2.7% 11.7% 0.2%

2002 NSW/ACT VIC QLD SA/NT WA TAS


Australia 7.5% 12.5% 4.1% 3.5% 6.8% 0.2% 7.5%

2003
2.0% -0.8% 1.1% 17.2% 13.5% 10.8% 3.5%

2004
1.4% -1.3% -1.0% 4.3% 4.6% 2.6% 0.8%

2005
-2.9% -2.9% -4.9% -3.9% -8.9% -10.0% -4.2%

2006
-0.8% -2.9% 3.4% -8.2% -7.9% 1.8% -1.8%

2007
2.4% 5.8% -0.5% 5.9% -3.3% 21.0% 3.1%

Source: DEEWR Undergraduate applications, offers and acceptances 2008.

2.2.2

OFFERS

Not all university applicants will receive an offer of a university place. Some applicants will not have met the required entry criteria for a particular course, while other courses may have been too popular, resulting in some excess demand for places. Table 60 shows the offer rate by State. The offer rate has been calculated as the number of applicants receiving an offer as a share of the total number of eligible applicants. The table shows that, after declining through to 2004, the offer rate picked up notably in 2005 across all States. Interestingly, the pick up in offers in 2005 coincided with a decrease in the number of eligible applicants across Australia, implying that the supply of undergraduate higher education places has increased in recent years as demand has fallen away.

21

Future demand for higher education


TABLE 60: OFFER 2001 NSW/ACT VIC QLD SA/NT WA TAS
Australia 84.2% 71.9% 81.0% 88.9% 86.2% 86.1% 80.7%
RATE BY

STATE 2005
83.4% 70.4% 86.0% 83.6% 83.9% 88.7% 80.7%

2002
78.1% 63.8% 78.1% 87.4% 85.8% 87.4% 75.8%

2003
75.3% 61.8% 73.3% 81.9% 82.0% 85.4% 72.5%

2004
72.2% 62.9% 75.7% 81.4% 79.5% 86.1% 72.3%

2006
85.9% 79.8% 86.4% 84.3% 87.1% 90.0% 84.6%

2007
87.4% 78.5% 88.7% 84.4% 88.6% 83.4% 85.1%

2008
87.5% 79.7% 87.4% 84.0% 88.0% 73.1% 84.7%

Source: DEEWR Undergraduate applications, offers and acceptances 2008.

Chart 52 shows the recent trend in eligible applicants and the number of applicants receiving an offer. The chart clearly shows that despite a downward trend in the number of eligible applicants, the number of offers has increased sharply since 2004. Indeed, 2007 saw the largest number of offers to undergraduate applicants so far this decade. In 2008, the number of offers dipped back as the number of eligible applicants fell further. CHART 52: ELIGIBLE
APPLICANTS AND ELIGIBLE APPLICANTS RECEIVING AN OFFER,

2001 - 2008

[Image of graphical data removed]

Chart 52 shows the offer rate by broad age group. Since 2001, the offer rate for applicants aged 20 and under has been consistently higher than for applicants aged 21 and over. This margin has widened in recent years. In 2008, some 88.1% of eligible applicants for an undergraduate university place aged 20 and under received an offer, compared to 77.5% of applicants aged 21 and over. CHART 52: OFFER
RATE BY AGE GROUP,

2001 - 2008

[Image of graphical data removed]

2.2.3

ACCEPTANCES

Table 60 shows the acceptance rate by State. The acceptance rate represents the number of applicants who accepted an offer of a place at university as a share of the number of applicants who were offered a place. The table shows that the acceptance rate has declined since peaks in 2003 and

2004 across most States. For many States, 2008 saw the lowest acceptance rate on record. In New South Wales and the Australian Capital Territory, 2008 saw
less than 55% of the offers for an undergraduate university place accepted, a result which was well down on the 81% acceptance rate seen in 2003.

22

Future demand for higher education


TABLE 60: ACCEPTANCE 2001 NSW/ACT VIC QLD SA/NT WA TAS
Australia 64.1% 73.6% 81.5% 94.8% 78.9% 48.4% 73.9%
RATE BY

STATE 2006
64.0% 77.0% 88.0% 72.7% 73.9% 76.3% 74.8%

2002
66.3% 72.1% 81.9% 97.4% 79.6% 75.0% 75.5%

2003
81.0% 71.9% 81.1% 96.8% 76.7% 75.8% 79.6%

2004
79.3% 72.0% 81.2% 96.6% 77.7% 75.4% 79.1%

2005
79.3% 59.4% 87.1% 72.8% 76.4% 80.7% 75.7%

2007
67.8% 80.5% 87.7% 71.9% 71.5% 77.0% 76.2%

2008
54.6% 83.0% 88.9% 71.3% 70.3% 73.1% 72.4%

Source: DEEWR Undergraduate applications, offers and acceptances 2008.

Chart 52 shows the number of eligible applicants along with the number of offers and acceptances from 2001 until 2008. The chart shows that despite a lift in the number of eligible applicants receiving an offer from 2004, the number of acceptances has increased only modestly over that time, and actually declined in 2008. CHART 52: ELIGIBLE
APPLICANTS, OFFERS AND ACCEPTANCES,

2001 - 2008

[Image of graphical data removed]

As a result, the national acceptance rate has been on a downward trend since 2003. Only 72.4% of offers were accepted in 2008, down from 79.6% in 2003. Chart 52 shows that the traditional gap in acceptance rates for applicants aged 20 and under compared to those aged 21 and over has been eroded in recent years. From 2001 to 2004, applicants aged 21 and over were significantly more likely to accept an offer relative to those aged 20 and under. This may be due to the fact that older applicants have had more time to consider their future and may have already participated in the workforce or other study before deciding to pursue higher education, while younger applicants may apply for university while in Year 12 but decide to pursue an alternative path or take a gap year after graduating. Since 2004, there has been a marked drop in the acceptance rate for those aged 21 and over. CHART 52: ACCEPTANCE
RATE BY AGE GROUP,

2001 - 2008

[Image of graphical data removed]

2.3

TRENDS BY FIELD OF EDUCATION

Trends in the number of students studying across different fields of education can provide important insights. The popularity of different courses can change over time and is driven by a number of factors including the availability of places, course fees, expected labour market outcomes and broader macroeconomic influences. The broad classifications of field of education discussed below have applied since 2001, and replaced the previous field of study classifications.

2.3.1

STUDENTS

Chart 52 shows the share of domestic higher education students by field of education in 2002 and 2007.

23

Future demand for higher education


In 2007, students studying a course classified under the society and culture field comprised the largest share of domestic students. These students predominantly study courses in law, arts and social science. Management and commerce students account for the next largest group of students by field, followed by students studying health, education, and natural and physical science.

Over the past five years, there has been an increase in the share of students studying courses classified under society and culture, health, education, creative arts and architecture. There has been a large decrease in the share of students studying IT, as well as in students studying management and commerce, engineering and agriculture.
The decrease in the share of IT students is understandable given that the relative boom in IT which occurred earlier this decade has now subsided. The increase in students studying health and education is no doubt linked to the increased supply of university places in nursing and teaching. CHART 52: DOMESTIC
STUDENTS BY FIELD OF EDUCATION,

2002

AND

2007

[Image of graphical data removed]

2.3.2

ELIGIBLE APPLICANTS

Chart 52 shows the share of eligible undergraduate applicants by field of education in 2001 and 2008. In general, the share of applicants across fields has not changed substantially since 2001, though there are some important exceptions. Arts, health and commerce remain the most popular fields of education in 2008, though a notable increase in the proportion of applicants for health-related courses (such as medicine, dentistry, nursing and veterinary) almost made that field the most popular in 2008. CHART 52: SHARE
OF ELIGIBLE UNDERGRADUATE APPLICANTS BY FIELD,

2001

AND

2008

[Image of graphical data removed]

Commerce and IT were the only two fields to lose a substantial proportion of overall eligible undergraduate applications between 2001 and 2008. For IT, this trend is likely to be the product of the conclusion of the IT boom after 2001.

2.3.3

OFFER RATE

Chart 52 shows the offer rate by field of education in 2001 and 2008. The chart shows that all fields except natural and physical sciences saw an increase in offer rates between 2001 and 2008. This is especially true for fields which have become relatively less popular over time (as evidenced by a declining share of applications), which have seen an increase in offer rates. For example, in 2001 just 72.1% of eligible IT applicants received an offer, compared to 98.9% of eligible IT applicants in 2008. CHART 52: OFFER
RATE BY FIELD OF EDUCATION,

2001

AND

2008

[Image of graphical data removed]

Some applicants may receive more than one university offer if they, for example, apply for a university place at more than one institution. As a result, some fields of education show offer rates in excess of 100%.

24

Future demand for higher education 2.3.4

ACCEPTANCE RATE

Chart 52 shows the acceptance rate by field of education in 2001 and 2008. The chart shows that acceptance rates have not changed significantly across fields over the last seven years, though acceptance rates have generally moved in the opposite direction to offer rates. That is, fields of education which experienced an increase in the offer rate between 2001 and 2008 also tended to experience a decrease in the acceptance rate over the same period. CHART 52: ACCEPTANCE
RATE BY FIELD OF EDUCATION,

2001

AND

2008

[Image of graphical data removed]

2.4

DIPLOMAS AND ADVANCED DIPLOMAS

The preceding section covered students enrolled at higher education institutions. Technical and vocational education institutions compete with higher education institutions for students, particularly across more advanced vocational courses such as diplomas and advanced diplomas. Data from the NCVER can be used to examine the characteristics of Australian diploma and advanced diploma students over the past few years. The analysis for higher education institutions is conducted in terms of student numbers. An analysis of the number of students undertaking diplomas and advanced diplomas shows a very marked decline over recent years, with the number of students undertaking diplomas falling by 13.5% between 2002 and 2007 (from 154,783 to 133,930); and the number of students undertaking advanced diplomas falling by 33% between 2002 and 2007 (from 49,760 to 33,141).

Across both diplomas and advanced diplomas the trend by gender has been: a significant decline in the number of male students by 25.5% (from 101,017 in 2002 to 75,258 in 2007); and a more moderate decline in the number of female students by 11.3% (from 103,526 in 2002 to 91,813 in 2007).

In this case however student numbers do not tell the complete story as there has also been a notable increase in the average length of courses. Average contact hours per student have risen from 332 per annum in 2002 to 387 per annum in 2007, with this trend seen across both male and female students (see Chart 52). CHART 52: AVERAGE
CONTACT HOURS BY GENDER,

2002 - 2007

[Image of graphical data removed]

The result is that there are not as many students undertaking diplomas and advanced diplomas, but the courses they are doing are more substantial (longer courses or students on average are undertaking more modules). The overall demand for education resources (and the overall benefit to the community from those resources) is perhaps best measured by trends in total student contact hours as shown in the following charts. Chart 52 shows that the total number of contact hours for female diploma and advanced

25

Future demand for higher education


diploma students has increased slightly over the past six years (by 3.3%), despite a substantial fall in the total number of students over that time. The number of annual contact hours for males has fallen (by 13.5% between 2002 and 2007), though by far less than the 25% drop in male student numbers over the same period. CHART 52: TOTAL
DIPLOMA AND ADVANCED DIPLOMA CONTACT HOURS BY GENDER,

2002 - 2007

[Image of graphical data removed]

The number of contact hours by qualification type is shown in Chart 52. While the number of students undertaking a diploma fell between 2002 and 2007, the chart below shows that the number of annual contact hours for diploma students has remained relatively constant (increasing by 1.8% between 2002 and 2007). The number of annual contact hours for advanced diploma students has however fallen notably, by 23% between 2002 and 2007. CHART 52: DIPLOMA
AND ADVANCED DIPLOMA CONTACT HOURS,

2002 - 2007

[Image of graphical data removed]

All up the delivery of diploma education has remained relatively constant over

the past six years, while the delivery of advanced diploma education has notably contracted. Both of these forms of education have lagged behind population growth, with males in particular showing a trend to move away from such courses.
The majority of diploma and advanced diploma students study courses related to business information and administration, science, engineering and design, health and welfare and management. As many courses in these areas can be studied at the university level, there may be more students able and choosing to go the direct higher education route of late. Other factors are also likely to be contributing, including the strength of the labour market and the availability of places. Chart 52 shows the share of diploma and advanced diploma students by field in 2002 and 2007. Over that time, there has been a decrease in the share of management and commerce, engineering and IT students and an increase in society and culture, architecture and health students. Similar trends can be seen at the university level, particularly in the area of IT. CHART 52: SHARE
OF DIPLOMA AND ADVANCED DIPLOMA STUDENTS BY FIELD,

2002

AND

2007

[Image of graphical data removed]

Chart 52 shows the share of diploma and advanced diploma students by State. Victoria clearly has the largest share of students, with around one-third of total diploma and advanced diploma students around Australia, which is perhaps linked to its engineering and manufacturing base. Unsurprisingly, New South Wales and Queensland also have significant shares of diploma and advanced diploma students. Notably, Queensland, Western Australia and the Northern Territory were the three jurisdictions to see a reduction in their share of diploma and advanced diploma students between 2002 and 2007. These three jurisdictions are currently enjoying rapid rates of economic growth and very strong labour market conditions, potentially encouraging school leavers away from studying diplomas and advanced diplomas and towards a more traditional trade or directly into the workforce.

26

Future demand for higher education


CHART 52: SHARE
OF DIPLOMA AND ADVANCED DIPLOMA STUDENTS BY

STATE, 2002

AND

2007

[Image of graphical data removed]

Chart 52 shows the share of Australian diploma and advanced diploma students by age. The age profile for these types of qualifications is similar to that for higher education, with recent school leavers aged between 18 and 20 making up the largest proportion of students. Between 2002 and 2007 there was slight shift in the age profile of diploma and advanced diploma students. A decrease in the share of 17 and 18 year olds and in 25 29 year olds saw a larger share of students aged between 19 and 24. CHART 52: SHARE
OF DIPLOMA AND ADVANCED DIPLOMA STUDENTS BY AGE,

2002

AND

2007

[Image of graphical data removed]

2.5

AGE-BASED PARTICIPATION RATES

Higher education participation rates by age are important in developing forecasts of likely student demand for higher education going forward. These rates have been calculated as the total number of domestic students (including undergraduate and postgraduate) as a share of the total Australian population for each age group. Agebased participation rates for students studying toward a diploma and advanced diploma have also been calculated. Across the key higher education age groups (ages 17-24), higher education participation rates have risen marginally since 2004 and are now approaching the levels seen in 2002. This suggests that slower growth in higher education

participation over recent years has been against a backdrop of only modest growth in the most relevant age demographic.
Chart 52 compares the actual number of domestic higher education students (undergraduate and postgraduate) with the implied number of students using 2002 participation rates. (That is, the latter is the number of higher education students there would have been had higher education participation rates remained at their 2002 levels.) The chart shows that since 2002, student numbers have been lower than would be implied by population growth. The shortfall was at its highest in 2005, with some improvement in student numbers relative to population over 2006 and 2007. That said, a gap between the two series remains.

The difference between actual and implied student numbers in 2007 suggests that, had higher education participation rates remained constant since 2002, an additional 13,500 students (or an additional 2% of students) would have been attending a higher education institution in 2007.
CHART 52: ACTUAL
AND IMPLIED HIGHER EDUCATION STUDENTS BASED ON

2002

PARTICIPATION

[Image of graphical data removed]

While there has been a reduction in the number of eligible applicants for higher education, the increased number of offers and acceptances since 2004 helps to explain the lift in participation rates, and suggests that growth in the acceptance rate by age cohort has been faster than population growth in recent years. Data examined earlier in this chapter showed that the number of acceptances for an

27

Future demand for higher education


undergraduate university place declined noticeably in 2008. While data on the number of total students in 2008 has not yet been released, it is likely to show a decrease in the number of younger students (and hence a reversal of the recent rise in participation rates) due to the drop in acceptances. Table 60 shows age-based higher education participation rates across a broad range of age groups. The table shows that participation rates in 2007 were similar to those in 2002 for most persons, including those aged between 17 and 24 years the core age group for higher education. TABLE 60: AGE-BASED 2002 16 year olds 17 year olds 18 year olds 19 year olds 20 year olds 21 year olds 22 year olds 23 year olds 24 year olds 25 year olds 26 year olds 27 year olds 28 year olds 29 year olds 30 39 year olds 40 49 year olds
0.4% 13.7% 27.3% 28.1% 26.7% 20.9% 15.2% 11.5% 9.4% 8.2% 7.2% 6.7% 5.8% 5.5% 3.8% 2.3%
HIGHER EDUCATION PARTICIPATION RATES

2003
0.4% 12.7% 25.5% 28.2% 26.4% 21.6% 15.4% 11.6% 9.5% 8.2% 7.4% 6.6% 6.2% 5.5% 3.9% 2.3%

2004
0.4% 12.3% 24.9% 27.0% 26.4% 21.3% 15.9% 11.5% 9.4% 8.1% 7.3% 6.6% 6.1% 5.6% 3.8% 2.2%

2005
0.4% 12.5% 25.3% 26.9% 26.0% 21.4% 15.7% 11.8% 9.1% 7.9% 7.0% 6.4% 5.9% 5.4% 3.7% 2.2%

2006
0.5% 13.0% 26.2% 27.6% 25.9% 21.4% 15.9% 11.7% 9.4% 7.8% 6.9% 6.2% 5.8% 5.4% 3.7% 2.1%

2007
0.6% 13.0% 27.4% 28.4% 26.7% 21.8% 16.2% 12.1% 9.5% 8.0% 7.0% 6.2% 5.7% 5.3% 3.7% 2.1%

Source: DEEWR Students: Higher Education Statistics Series, ABS 6202.0.

Error: Reference source not found shows age-based participation rates for the study of diplomas and advanced diplomas. The data shows that participation rates for

diplomas and advanced diplomas have been declining over recent years, consistent with the falls in the actual number of enrolled students.

28

Future demand for higher education


TABLE 60: AGE-BASED
DIPLOMA AND ADVANCED DIPLOMA PARTICIPATION RATES

2002 16 year olds 17 year olds 18 year olds 19 year olds 20 year olds 21 year olds 22 year olds 23 year olds 24 year olds 25 year olds 26 year olds 27 year olds 28 year olds 29 year olds 30 39 year olds 40 49 year olds
0.3% 1.4% 6.4% 7.2% 5.7% 4.1% 3.3% 2.8% 2.5% 10.5% 2.1% 2.0% 1.9% 1.7% 1.4% 1.0%

2003
0.2% 1.4% 6.2% 7.2% 5.4% 4.0% 3.1% 2.6% 2.3% 9.5% 2.0% 1.8% 1.7% 1.6% 1.3% 0.9%

2004
0.2% 1.2% 5.8% 7.1% 5.2% 3.7% 2.9% 2.3% 2.1% 8.2% 1.7% 1.6% 1.6% 1.4% 1.2% 0.9%

2005
0.2% 1.1% 5.6% 6.9% 5.0% 3.6% 2.7% 2.2% 1.9% 7.7% 1.6% 1.5% 1.4% 1.4% 1.1% 0.9%

2006
0.2% 1.0% 5.0% 6.5% 4.8% 3.3% 2.6% 2.0% 1.8% 7.2% 1.6% 1.5% 1.3% 1.3% 1.1% 0.9%

2007
0.2% 0.8% 4.4% 5.8% 4.4% 3.1% 2.4% 2.0% 1.7% 6.7% 1.4% 1.4% 1.3% 1.2% 1.1% 0.9%

Source: NCVER Students and courses series, ABS 6202.0.

Error: Reference source not found combines data on higher education students and diploma and advanced diploma students to create a measure of participation towards the key non-school education qualifications covered in this report.

29

Future demand for higher education


TABLE 60: AGE-BASED
PARTICIPATION RATES IN HIGHER EDUCATION AND DIPLOMA/ADVANCED DIPLOMA

2002 16 year olds 17 year olds 18 year olds 19 year olds 20 year olds 21 year olds 22 year olds 23 year olds 24 year olds 25 year olds 26 year olds 27 year olds 28 year olds 29 year olds 30 39 year olds 40 49 year olds
0.7% 15.1% 33.6% 35.3% 32.4% 25.0% 18.5% 14.3% 11.8% 18.7% 9.3% 8.7% 7.7% 7.3% 5.3% 3.3%

2003
0.6% 14.1% 31.7% 35.4% 31.7% 25.7% 18.6% 14.3% 11.8% 17.8% 9.3% 8.5% 7.9% 7.1% 5.2% 3.2%

2004
0.6% 13.6% 30.7% 34.1% 31.6% 25.0% 18.8% 13.9% 11.5% 16.3% 9.0% 8.2% 7.6% 7.1% 5.0% 3.1%

2005
0.6% 13.6% 30.8% 33.9% 31.0% 25.0% 18.3% 14.0% 11.0% 15.6% 8.6% 7.9% 7.3% 6.8% 4.9% 3.0%

2006
0.7% 14.0% 31.2% 34.2% 30.7% 24.7% 18.5% 13.8% 11.2% 15.0% 8.5% 7.7% 7.2% 6.7% 4.8% 3.0%

2007
0.7% 13.9% 31.8% 34.2% 31.1% 24.9% 18.6% 14.1% 11.2% 14.8% 8.4% 7.6% 7.0% 6.5% 4.8% 3.0%

Source: NCVER Students and courses series, DEEWR Students: Higher Education Statistics Series, ABS 6202.0.

30

Future demand for higher education

3. FACTORS AFFECTING STUDENT DEMAND


While demographics are clearly important in analysing demand for higher education, for a given age cohort, a range of other factors also play a role. Females are more likely to participate in higher education than males, students from independent and Catholic schools have higher participation, while students outside metropolitan areas have lower participation as do Indigenous students. Students from lower socio-economic backgrounds have lower participation rates, though this may become less important over time as real incomes gradually lift across the spectrum. Those from non-English speaking backgrounds (NESBs) tend to have higher participation rates, and the NESB share appears to be gradually rising over time (and is likely to continue to rise as Australias migration program has been boosted significantly). Migrants also have a younger age profile on average which should help to push up student numbers in higher education over the next decade. Fees appear to have had minimal impact on overall participation, though they may be more significant for mature aged students. What does appear to have been important in enticing some would-be higher education applicants away has been the strength of the labour market. Recent years have seen very strong jobs growth, and particularly in occupations linked to the mining and construction industries. Hence there has been a strong lift in apprenticeship commencements (encourage by additional Government subsidies) at the same time as declining interest in higher education from males. An analysis of data from the Longitudinal Survey of Australian Youth (LSAY) and the Victorian On Track data shows that a variety of pathways are undertaken towards further study post-school. LSAY data shows that nearly 45% of Year 12 completers commenced university, but one-third of that group only studied at university for one or two years at that time. Socio-economic status is higher on average for respondents on the traditional post-school university pathway. By locality, a much higher share of those from a metropolitan location follow the traditional university pathway, though non-metropolitan students are relatively more likely to either start university and not complete, or enter university at a later date (perhaps reflecting a move to a major city first and then university later). A much higher share of non-metropolitan students directly enter the labour force after completing school. The Victorian On Track data confirms that university immediately postschool is not the only option, with a rise in university participation in the second and third year after school . Those entering university after a period of deferral (of which there are a significant proportion in year 1) outweigh the number of students who commence university but do not continue. The survey also showed that some students abandon their

university study in favour of study in other sectors such as VET,

31

Future demand for higher education

although this is a relatively small proportion. Those who do not complete university were more likely not to be participating in any study.
The previous chapter noted trends in participation and student demand for higher education over recent years, including information on age-based participation rates. This chapter examines some of the non-demographic factors which might affect student demand, and in particular those influential factors which may have changed over recent years such as the state of the labour market.

3.1

CHARACTERISTICS OF THOSE WHO UNDERTAKE HIGHER EDUCATION

We know that the propensity to undertake higher education is much higher for those aged 18 to 22 (immediately upon completion of school). But within a given age demographic, what factors influence whether individuals will seek to undertake higher education or not? Australian research has identified a range of characteristics that influence student participation in higher education. Citing research by Carpenter and Western, James (2000) explains that student choice and opportunities for access to tertiary education are influenced by a complex range of inter-related factors, including: social origins (gender, parental occupation, geographic location, perceived family income, area wealth); schooling (type of school, interest in school); influence of significant others (perception of parental influence, perception of teacher influence, friends plans); academic self-assessment (opinion of academic ability, perceived utility of education for later life); educational aspirations (plans for education beyond Year 12); and academic achievement (final school academic results).

3.1.1

SOCIO-ECONOMIC STATUS

A number of studies have shown that socio-economic status is a major source of educational inequality. Long et al (1999) found that parents occupation, parents education and family wealth (used as proxies for socio-economic status) all had a positive effect on participation. They concluded that young people from higher

socio-economic backgrounds were more likely to participate in higher education than those from lower socio-economic backgrounds.
Birrell et al (2000) found that there is a positive link between the level of family income and participation by 18-19 year olds living at home: the higher the family income, the greater the higher education participation rate. They concluded that cultural and other related factors also influence entrance to university, with participation strongest in the middle income range where parental occupations are classified as professional and lowest where families have similar incomes but parental occupations are classified as

32

Future demand for higher education


clerical or blue collar. They noted the effect appears to be stronger for young males from working class backgrounds than females. Socio-economic status is the dominant factor in the variation in student perspectives on the value and attainability of higher education. James (2002) found that, overall, students from lower socio-economic backgrounds: have a weaker interest in the subjects they could study at university (62%, compared with 78% of students from higher socio-economic backgrounds), and a stronger belief that a TAFE course would be more useful than a university degree (30% compared with 14%); have a weaker belief their parents want them to do a university course (44% compared with 68%); have a stronger interest in earning an income as soon as they leave school (35% compared with 20%); and are more likely to report concerns about costs: they are more likely to believe the cost of university fees may stop them attending (39% compared with 24%) and that their families probably could not afford the costs of supporting them at university (41% compared with 23%).

The influence of socio-economic status on higher education participation is examined further in Section Error: Reference source not found. ABS data on household income distribution over time suggests that at a macro level, Australias safety net has strengthened over time. Movements in real household income levels for lower earning Australian households (those with the lowest 30% of incomes) have been in line with income gains for the community as a whole over the past decade. Chart 52 shows growth in real income over time for these groups. CHART 52: REAL
INCOMES OVER TIME FOR

AUSTRALIAS

POOREST HOUSEHOLDS

[Image of graphical data removed]

The forces at work in lifting income adequacy include not merely a surge in jobs which has brought many more Australians into the workforce, but also changes to the tax/transfer system.

With steady improvements in living standards across all income levels over recent years, those classed as lower socio-economic status today are perhaps less disadvantaged than in previous decades. There will always be a group at the
bottom of spectrum who have a lower socio-economic status relative to the average at the time. However, evidence suggests that living standards for this group have been improving over time so their level of disadvantage has been falling over time. That may make it less of a stretch for those of lower socio-economic status to attend university than in years gone by. This would suggest the negative influence of low socio-economic status on participation in higher education should become less important over time (which, other things equal, should raise demand for higher education). This may well be the case, but the trends over recent years suggest this positive influence is being swamped by other factors.

33

Future demand for higher education 3.1.2

LANGUAGE BACKGROUND

Research has shown that, when considered as group, students from NESBs are

more likely to participate in higher education than students from English-speaking backgrounds. Long et al (1999) and Marks et al (2000) analysed
university participation among NESB persons, and found that students whose fathers were born in primarily non-English speaking countries had higher participation rates than those whose fathers were born in either Australia or in other English-speaking countries. The rates were substantially higher in a number of instances, including for the Asia group which had a participation rate of 60% compared to the overall rate of around 30%. The differences in rates were significant even after controlling for other factors such as fathers occupation and educational backgrounds. While university participation is favoured, it may mean that VET participation is lower for the NESB group. James (2000) suggests the high NESB participation rates reflect the value attached to university education by many migrant groups and the expectations of many families that their children will attend university and enter professional careers. Dobson, Birrell and Rapson (1996) also showed that NESB persons had higher participation rates than English-language speakers. They noted, however, that there are wide variations in participation between the various NESB language categories. Students from Chinese, Vietnamese, Korean and Eastern European language backgrounds have participation rates twice as high as English-language speakers, and four times higher than Arabic, Italian, Khmer and Turkish speakers. Thanks to the significant increase in Australias migration program over recent years, the share of the prime tertiary education age cohort who are of a NESB has been gradually increasing. The 2006 Census reported that of the 15-24 age cohort, 17.9% spoke a language other than English at home. In 2001 the equivalent share was 17.1%. The trend towards a higher NESB share should be a positive one for higher education participation over time.

3.1.3

OTHER INFLUENCES
Gender females are more likely to participate in higher education than males. Marks et al (2000) found that the odds of participation/non-participation for young women are around two times greater than for young men. This gap is widening as shown earlier in Chart 52. School type Long et al (1999) and Marks et al (2000) found that students from

Several other factors have been found to influence student participation.

independent and Catholic schools have a participating than those from government schools.

higher

likelihood

of

Geographical location students from non-metropolitan areas or areas with low population densities are less likely to participate in higher education . James (2000) found that rural students are concerned about the financial cost of studying at university, particularly the additional costs of accommodation and living in a city. ` Indigenous background the participation rate of Indigenous students is significantly lower than for non-Indigenous students. Financial factors are highly significant in the access and retention of these students.

34

Future demand for higher education

3.2

PARTICIPATION OF RECENT MIGRANTS

The number of migrants settling in Australia under Australias migration program has lifted substantially in recent years, which also has some implications for student demand for higher education given the migrant age structure. (Note that foreign students are not counted within the higher education participation noted here. However, many do apply for citizenship following their undergraduate study, and some may then appear as Australian citizens when they go on to postgraduate study.) Chart 52 shows the age profile of the 2006-07 permanent migrant intake by broad age cohort compared to that of the Australian population. The age structures are quite different, with the migrant intake heavily weighted towards the younger age cohorts (73.8% of migrants are in the under 35 age cohorts compared to 47.0% of the Australian population). Migrants have a greater share of the school and

university aged cohort than the general population (38.6% of those aged 5-24 compared to 33.0%).
CHART 52: AGE
PROFILE OF MIGRANT INTAKE AND

AUSTRALIAN

POPULATION,

2006-07

[Image of graphical data removed]

The proportion of the permanent migrant intake born in non-English speaking countries has also increased over the past two decades. With research showing that non-English speakers have a higher propensity to participate in higher education (Section 3.1.2), the younger age profile of migrants should be a factor which helps to push up student numbers in higher education over the next decade.

3.3

FEE STRUCTURES

A number of studies have examined the impact of the Higher Education Contribution scheme (HECS) on student participation in higher education, and have generally found that the introduction of HECS and subsequent changes in the level of charges

have had minimal impact, both in terms of overall applications and on enrolments by students from lower socio-economic status backgrounds .
Studies that have asked people about found that HECS has not been decision-making, either in aggregate Chapman and Ryan (2003) suggest the research. the factors that shaped their decisions have a dominant factor influencing individual or for low socio-economic status groups. following conclusions can be drawn from the

The relatively disadvantaged were less likely to attend university even when there were no student fees. The introduction of HECS in 1989 was associated with aggregate increases in higher education enrolments. HECS did not result in decreases in the participation of prospective students from low socio-economic status groups, although the absolute increases were higher for relatively advantaged students, especially in the middle of the wealth distribution. There was a small decrease in the aggregate number of applicants after the HECS changes in 1997, but no apparent decreases in commencements of members of low socio-economic groups, except perhaps for a small number of

35

Future demand for higher education


males with respect to courses with the highest charges. Aungles et al (2002) found the HECS changes had a more significant impact on mature aged persons, with applications declining by around 17,000 students per year (compared to 9,000 students per year for school leavers). These potential students are more likely to already be earning above the repayment threshold, such that HECS changes have a more immediate potential effect. So the evidence suggests that the fee structures in place are not creating a disincentive to higher education participation, but overall financial returns to study are important. Wage trends over time are discussed in the following sections.

3.4

STATE OF THE LABOUR MARKET

Periods of strong employment growth do not see additional people join the workforce solely from the ranks of the unemployed the strong job prospects tempt many people into the labour market when they were previously classed as not in the labour force (not employed and not actively looking for work). Similarly, periods of weaker employment growth often coincide with a fall in the labour force participation rate poor job prospects result in fewer people actively looking for work. This is known as the encouraged/discouraged worker effect. Chart 52 shows the relationship between employment growth and labour force participation over time. CHART 52: EMPLOYMENT
GROWTH AND LABOUR FORCE PARTICIPATION,

1988 - 2008

[Image of graphical data removed]

Over recent years, average labour force participation has increased as the rate of employment growth has been consistently strong. On the other hand, periods of weaker employment growth, such as the early 1990s and late 1990s, saw the average labour force participation rate fall. One of the areas that people are drawn from/to during periods of strong/weak job growth is full-time study, and that includes higher education. The Review of Australian Higher Education Discussion Paper (2008) notes that the strong labour market appears to have led to a decline in recent years in domestic student demand at some higher education institutions. Earlier research undertaken by James et al (1999) found that future employment prospects are a consideration for prospective students when deciding whether to participate in higher education.

Employment growth has certainly been strong over recent years, averaging 2.5% per annum over the past five years, compared with 1.9% per annum over the decade prior. This saw the unemployment rate drop to a three decade low of just
4.0% early in 2008. Also encouraging labour force participation has been an improvement in wages growth, although in 2008 this has been somewhat offset by growth in prices. Stronger wages growth improves the return to working rather than studying and those returns are more immediate. For an individual where undertaking full-time study may be a marginal decision, an alternate offer of a job at a high wage, or a job with high wage prospects, can be tempting.

36

Future demand for higher education


As well as overall employment growth and wage trends having an influence over participation in the labour force relative to other options, the sectoral composition of those trends can also be important, as discussed in the next section.

3.5

SECTORAL COMPOSITION OF THE LABOUR MARKET

Employment growth over recent years has been unusual, not only for its strength but also for its composition. The mid 2000s saw very strong housing activity, increasing the demand for tradespeople. While housing activity has moderated over the past couple of years, it has been more than offset by a boom in engineering construction activity thanks to the resources boom. A series of major resource and infrastructure projects has spawned a surge in demand for engineering, trades and related skills. Chart 52 shows employment growth over time for higher education intensive occupations and non-higher education intensive occupations. The indexes used for this chart are weighted averages of employment growth by occupation over time, where the weights reflect that occupations share of the workforce who either have or dont have higher education qualifications (based on those with postgraduate or undergraduate qualifications as their highest attainment). The weights are derived from the ABS Survey of Education and Work, which is discussed in more detail in section 6.4 Jobs growth has certainly favoured the set of higher education intensive occupations. This was consistently the case between 1998 and 2003, though there have been occasions since then when the order has been reversed, thanks to stronger demand for trades and related skills. This demand hasnt altered the trend in favour of jobs where a higher education qualification is more typically seen, but it has been a relative shift which at times over recent years has favoured other occupations. CHART 52: EMPLOYMENT
GROWTH BY OCCUPATION TYPE,

1988 - 2008

[Image of graphical data removed]

The focus in recent years on trades and related skills can also be seen in increasing interest in apprenticeship commencements something the Federal Government has been actively encouraging via a greater level of incentives to employers to take on apprentices. This can be seen in Chart 52 which tracks apprenticeship commencements over recent years (split into those commencing in the occupation and existing workers) and compares these against applications for higher education. CHART 52: APPRENTICESHIP
COMMENCEMENTS VS HIGHER EDUCATION APPLICATIONS, TOTAL,

2001 - 2007

[Image of graphical data removed]

Chart 52 shows that, since 2004, there has been a significant difference in trends higher education applications have been on the decline before a modest pick up in 2007, while there has been strong growth in the level of apprenticeship commencements. The pick up in apprenticeship commencements since 2004 has been seen across both newly commencing workers (which grew by 7.2% between 2004 and 2007), and existing workers (which grew by 8.4% between 2004 and 2007). The relative shift away from higher education and towards apprenticeships is more notable when one only looks at apprenticeships in traditional trades (see Chart 52).

While higher education applications peaked in 2004 at 247,900, and were 7,400

37

Future demand for higher education applications lower than this level in 2007, apprenticeship commencements in traditional trades have increased steadily over the decade (with 10,700 higher commencements in 2007 than in 2004).
CHART 52: APPRENTICESHIP
COMMENCEMENTS

(TRADITIONAL
TOTAL

TRADES) VS HIGHER EDUCATION APPLICATIONS,

[Image of graphical data removed]

This trend is particularly notable amongst males, as shown in Chart 52. In 2007,

higher education applications by males were 5,800 below their 2004 peak, but apprenticeship commencements in traditional trades by males were 23,700 higher than in 2004.
CHART 52: APPRENTICESHIP
COMMENCEMENTS

(TRADITIONAL
MALES

TRADES) VS HIGHER EDUCATION APPLICATIONS,

[Image of graphical data removed]

The above suggests that males in particular have followed the stronger job market (and the Federal Government incentives) towards trades and related careers and away from higher education at the margin. There have been anecdotes suggesting very high salaries are now available to workers without tertiary qualifications in the resources sector and associated industries. However the aggregate data of wage movements from the ABS Labour Price Index suggests higher education intensive occupations have maintained a slender lead in wage growth over recent years, relative to non-higher education intensive occupations. Movements in these wage indexes are shown in Chart 52. CHART 52: WAGE
GROWTH BY OCCUPATION TYPE,

1988 - 2008

[Image of graphical data removed]

Further discussion of trends in employment by occupation occurs in Chapter 6 as the employer side of labour market demand is examined.

3.6

PATHWAYS TO SKILL DEVELOPMENT

The majority of higher education students are still within the 18 to 22 year old age cohort, generally on the traditional pathway of undertaking higher education immediately after completing school. But Chart 52 earlier showed there are a notable proportion of students in older age cohorts, suggesting there are many who are delaying higher education or using it to improve their skills at a later age. On average, people are staying in the workforce for longer (a large contributor to the rising labour force participation rate), and often will need to retrain or refresh their skills over their working life. Wells (2008) notes the growth in postgraduate enrolments as a result of the changing labour market, which requires different qualifications and regular updating of skills and knowledge. It is possible that some of the people who recently may have considered higher education, but instead opted for a trades or related job tempted by strong short-term wage prospects, may undertake some form of university education later in their career. In part, this depends on the extent to which the recent shifts in favour of occupations which are not higher education intensive are cyclical or more permanent in nature.

38

Future demand for higher education


Two datasets are examined below which provide information on the pathways taken from school to education and work at present the LSAY and the On Track survey from Victoria.

3.6.1

LONGITUDINAL SURVEY OF AUSTRALIAN YOUTH

The LSAY is a longitudinal survey tracking cohorts of students on an annual basis from Year 9. It is a national survey with a large sample size and has been specifically designed to examine youth transition issues, so it collects information on a range of relevant characteristics. This report examines the most recent group of students for which there is significant post-school information, the cohort of students who were in Year 9 in 1998 (and therefore completed Year 12 in 2001). Table 60 summarises the most common post-school transitions, or pathways, taken by those who competed Year 12 in 2001. The respondents who were included in this analysis are those who were interviewed in each year following 2001 through to, and including, 2006. In each year starting in 2002, each respondents status is recorded as either in the labour force or not, currently undertaking higher education (limited to university study) or not, or currently undertaking other education (limited to traineeships, apprenticeships and VET) or not. For example, a respondent may choose to pursue further study at university for three years and then decide to enter the labour force upon completion. Alternatively, a respondent may choose to enter the labour force straight after completing Year 12, work for several years (or part thereof), and then decide to pursue further study (either through university or other institutional arrangement). Given the large number of possibilities that exist, some broad pathways have been defined, as follows. Pathway 1 represents the traditional university pathway. It captures respondents who go on to pursue higher education through university for three, four, or five years and then, upon completion, enter the labour force. This is the typical pathway taken by school leavers who go on to pursue an undergraduate degree, for example. Pathway 2 represents those who follow the university pathway but do not complete university. It captures those respondents who only pursue higher education for one or two years before entering the labour force. Respondents who are captured here include those who deferred university to work for a period of time or who drop out altogether for various reasons. Pathway 3 represents later entry to university. Here, respondents enter the labour force immediately after completing school, remain there for several years, and then subsequently decide to take on further study through university. Pathway 4 represents a post-school VET pathway. It captures respondents who take on further training or study (through traineeships, apprenticeships or VET) immediately after school for one or more years before entering the labour force. Pathway 5 represents a later entry to VET study. It captures respondents who either enter the labour force or pursue higher education after completing school, who then subsequently go on to pursue qualifications through traineeships, apprenticeships or VET. Pathway 6 represents those who are primarily in the labour force after school and not studying. It captures those respondents who are employed in four or more of the five survey years since completing school. The years in which the respondent is

39

Future demand for higher education


employed need not be consecutive. Pathway 7 represents those who have had more than one episode of being unemployed and/or not in the labour force at survey time. The years in which the respondent is unemployed or not in the labour force need not be consecutive. TABLE 60: PATHWAYS
Pathway 1 2 3 4 5 6 7 All Total 29.6% 14.9% 11.4% 8.2% 8.8% 21.8% 5.4% 100.0%
TAKEN BY THOSE WHO COMPLETED

YEAR 12

IN

2001, LSAY
Regional, rural or remote 23.2% 14.2% 11.9% 8.4% 10.0% 25.7% 6.7% 100.0%

Males 28.8% 12.9% 10.3% 8.2% 9.9% 24.4% 5.4% 100.0%

Females 30.3% 16.6% 12.4% 8.2% 7.7% 19.4% 5.3% 100.0%

Average ANU3 score 47.5 43.9 43.1 34.5 36.6 37.8 40.0 41.9

Metropolitan 34.3% 15.6% 11.0% 8.2% 7.6% 18.8% 4.6% 100.0%

Source: LSAY, Year 9 1998 cohort; Pathways defined by Access Economics.

The above table shows the distribution of Year 12 completers across each of the seven defined pathways, as well as the gender distributions across those pathways. Overall, our balanced longitudinal data set contained 3,250 respondents, of whom 47.1% were male and 52.9% were female. The most common pathway for Year 12 completers is the traditional university pathway. Combining pathways 1 and 2, nearly 45% of Year 12 completers

commenced university, but one-third of that group only studied at university for one or two years at that time. All three university pathways (including pathway
3, later entry to university) have higher representation from females than from males. The second most common pathway is the post-school labour force pathway (pathway 6). It is favoured far more by males than females. The share of Year 12 completers with one or more unemployed or not in the labour force experiences and not studying is relatively low at 5%.

Combining pathways 1 through 5 shows that 73% of Year 12 completers undertake some post-school study within the five years after completing school. For males this proportion is 70% while for females it is 75%.
As a proxy for socio-economic status, we have examined the ANU3 score, an ordinal measure for ranking respondents.1 Within each pathway, the average ANU3 score is calculated and then compared with those of other pathways. There is statistical evidence in the literature which suggests that young people with parents in professional and white collar occupations are more likely than otherwise similar young people with parents in blue collar occupations to pursue higher education through university a difference in participation attributable solely to differences in parental occupation. On an occupational-based measure of socioeconomic status, such as the ANU3 score, students with parents in white collar occupations are likely to score higher than those whose parents are employed in blue
1 The ANU3 index or score is an occupational-based measure derived from codes assigned to the respondents fathers (or mothers) occupation according to the ABS ASCO schema, and uses the average educational and income levels of the respondents father (or mother) to derive an index.

40

Future demand for higher education


collar occupations. Table 60 shows that this is indeed the case here, as the ANU3 score is higher on

average for respondents on the traditional university pathway (pathway 1) than it is for other pathways. Interestingly, the not in the labour force/unemployed
pathway had, on average, a higher socio-economic status than the VET or labour force pathways. The overall ANU3 score of 41.9 out of 100 is an average weighted by the number of respondents falling within each of the seven pathways. By locality, respondents were classified by their location during school as either metropolitan or living in a regional, rural or remote area. Of the 3,250 respondents analysed, approximately 57.4% resided in metropolitan areas compared with 42.6% in regional, rural or remote areas.

A much higher share of those from a metropolitan location follow the traditional university pathway (pathway 1), though non-metropolitan students are
relatively more likely to either start university and not complete, or enter university at a later date (perhaps reflecting a move to a major city first and then university later). A much higher share of non-metropolitan students follow the labour force pathway or have periods of unemployment and/or not being in the labour force. The above discussion is a small component of the data which is available from LSAY, focusing on the characteristics of different pathways of most interest to this project.

3.6.2

VICTORIAN ON TRACK SURVEY

The Victorian Government has launched the On Track initiative to aid the transition from high school education to further education, training and work. Since 2002, the program has been contacting young people who left school in Years 10 to 12 the previous year to establish if they are currently studying or in full-time work. Those who are not studying or working are put in touch with local career services. The On Track program also involves a research component to provide details on the experiences and destinations of young people as they leave school. The data collected is analysed and tabled by a range of individual characteristics. Time series data The On Track program records time series data on the destinations of Year 12 school leavers over time, with the survey undertaken in April and May of the year following the participants final year of school. Table 60 shows the results of surveys of Year 12 leavers in the year following their final school year. Interestingly, the On Track data shows that university study is becoming a more attractive option for both males and females over time . Indeed, between 2003 and 2007, the proportion of males attending university in the year following Year 12 increased from 36.7% to 44.6%, while the proportion of females increased from 44.3% to almost 50%. Over the same period, the proportion of students attending a Certificate IV or higher VET course in the year following school has declined, consistent with the data earlier showing a marked drop in diploma and advanced diploma enrolments. Participation in entry level VET has also declined, though the share undertaking

41

Future demand for higher education


apprenticeships/traineeships has increased. Consistent with the strong jobs performance overall, those school leavers heading straight to the labour market are having more success, with a drop in the share which are unemployed. TABLE 60: ACTIVITIES
OF

VICTORIANS

IN YEAR FOLLOWING THEIR FINAL SCHOOL YEAR

% of survey participants Males - University - VET Cert. IV+ - Entry-level VET - Apprentice/Trainee - Employed - Looking for work - Total Females - University - VET Cert. IV+ - Entry-level VET - Apprentice/Trainee - Employed - Looking for work - Total Persons - University - VET Cert. IV+ - Entry-level VET - Apprentice/Trainee - Employed - Looking for work - Total
Source: On Track time series data.

2003
36.7% 20.5% 6.9% 8.3% 21.9% 5.7% 100%

2004
39.5% 20.0% 5.6% 8.6% 21.2% 5.1% 100%

2005
39.9% 17.7% 5.4% 13.5% 19.0% 4.6% 100%

2006
42.7% 15.7% 3.8% 12.9% 20.1% 4.7% 100%

2007
44.6% 14.4% 4.4% 10.7% 21.8% 4.1% 100%

44.3% 19.2% 7.0% 3.9% 20.2% 5.5% 100%

45.4% 19.7% 6.2% 4.3% 20.1% 4.3% 100%

45.8% 18.4% 5.3% 7.1% 19.1% 4.3% 100%

49.1% 16.9% 4.2% 6.0% 20.1% 3.6% 100%

49.8% 15.3% 3.9% 5.9% 21.7% 3.4% 100%

40.8% 19.8% 7.0% 6.0% 21.0% 5.6% 100%

42.7% 19.8% 5.9% 6.3% 20.6% 4.7% 100%

43.1% 18.1% 5.3% 10.1% 19.0% 4.4% 100%

46.1% 16.4% 4.1% 9.2% 20.1% 4.1% 100%

47.4% 14.9% 4.1% 8.1% 21.8% 3.7% 100%

Longitudinal data The longitudinal aspect of the On Track data tracks the activities of Victorians who finished school in 2003. There are currently four data points which track the activities of the 2003 cohort between 2004 and 2007. Table 60 shows the activities of the 2003 school leaver cohort over time. The table shows that in 2004 (the year immediately following Year 12 study), some 29% of participants in this

42

Future demand for higher education


survey were studying at university, while 22.5% were working either full time or part time. Note that the proportions shown below differ from the 2004 results in Table 60 as only a subset of school leavers from 2003 were included in the longitudinal analysis shown in Table 60. Interestingly, the data shows a rise in university participation in the second and third year after school. Those entering university after a period of deferral (of which there are a significant proportion in year 1) outweigh the number of students who commence university but do not continue. Participation in entry level and higher level VET declines over time as one might expect, although there is a rise in the share of people undertaking an apprenticeship over time. This may reflect some initial deferrals as well as the labour market cycle which has been in favour of trades over recent years, and the greater willingness of employers to take on apprentices given larger incentives being provided. TABLE 60: ACTIVITIES
OF

VICTORIANS

FINISHING SCHOOL IN

2003

OVER TIME

% of survey participants University VET Cert. IV+ Entry-level VET Apprenticeship Traineeship Working full-time Working part-time Unemployed or NILF or deferred Total
Source: On Track time series data.

2004
28.7% 13.9% 8.0% 4.3% 3.4% 9.5% 13.0% 19.3% 100%

2005
34.6% 14.0% 5.0% 8.8% 6.4% 12.0% 16.0% 4.4% 100%

2006
36.3% 8.4% 2.8% 10.6% 5.0% 19.7% 13.0% 4.1% 100%

2007
33.9% 7.0% 2.3% 10.2% 3.1% 27.8% 11.9% 3.6% 100%

Figure 1 is drawn from the 2006 On Track longitudinal results and shows the pathways that university students took over time. The pathways track students who completed Year 12 in 2003 and attended university in 2004. The diagram shows that 72% of Year 12 completers who were at university in 2004 (their first year after school) were still studying their original course at university in 2006. FIGURE 1: PATHWAYS
OF

2003 YEAR 12

STUDENTS WHO ATTENDED UNIVERSITY IN

2004

[Image of graphical data removed]

Source: On Track Longitudinal 2006 results.

Around 10% of the university students surveyed changed university course at some stage over the three years, with most movement between university courses occurring during the second year of study. The survey also showed that some students

abandon their university study in favour of study in other sectors such as VET.

43

Future demand for higher education However this is a relatively small proportion around 2% of the 2004 university
group transferred to other forms of study in 2005, with a further 2% doing the same in 2006. Additionally, some students abandon study altogether (a more significant proportion than those changing to VET). The 2006 On Track longitudinal survey found that

around 8% of the 2004 university group were no longer participating in any form of study or training in 2005, while a further 6% left university after 2005 and were not studying. Notably, around one-quarter of university students who
were not studying in 2005 returned to university in 2006, while a further 15% were participating in another form of study. Student characteristics Data from the On Track survey also suggests that university participation and retention differs as a result of differences in location (defined as metropolitan or nonmetropolitan) and by socio-economic status.

Students from lower socio-economic status backgrounds tend to have belowaverage rates of participation in university study and above-average rates of participation in VET study. University completion rates also tend to be below average for students from lower socio-economic backgrounds. Data shows that,
for students who began university in 2004, around 85% of students from the highest socio-economic group were still in university in 2006, compared to around 78% of students from the lowest socio-economic group. Data from the On Track longitudinal 2007 results also show that university participation and continuation can be different between students from metropolitan and non-metropolitan backgrounds. On average, Victorian students from

metropolitan backgrounds were more likely to attend university (or participate in study or training beyond Year 12 in general), and have a lower rate of university discontinuation compared to students from non-metropolitan backgrounds. In particular, of those metropolitan students who attended university
in 2004, almost 72% were still attending university in 2007, compared to 61% of nonmetropolitan students.

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Future demand for higher education

4. DEMOGRAPHIC PROJECTIONS
Australias population structure is undergoing a major shift as a result of trends that have developed over the past 40 years. While gradual increases in longevity will see people living longer, the sharp decline in the number of children born in Australia is now flowing through to significantly slower growth in student aged population relative to the total population. An important age group for higher education is those aged 18-22. The rate of population growth for this age cohort has slowed since the start of the decade. The slower growth in this population cohort is consistent with slower growth in the number of higher education students, and partly explains the decline seen in eligible applications. For around the next five years in Australia, population growth for this age cohort is expected to be around the national average for all age groups. However, beyond that period, population growth trends are likely to differ notably. While national population growth rates are tipped to gradually decline from around 1.5% per year to 1.0% per year, the decline for the 18-22 year age group is likely to be sharper this cohort may see virtually no increase in population between around 2015 and 2022. Over the next 30 years, average annual population growth across all age cohorts is expected to be around 1.2% per annum, with growth for the 15-24 age cohort expected to average 0.7% per annum. The differences are particularly sharp over the next decade with 1.4% per annum average growth for the population as a whole versus just 0.5% per annum on average for the 15-24 age cohort.

Some 23 of the regional areas shown here are expected to record a decline in their 15-24 population level over the next decade . Many of
the regions outside capital cities show a decline, but there is also a decline expected in several areas within capital cities, including declines expected for Hobart and Canberra as a whole. These demographic trends in

feeder regions are likely to be an important factor over time in the level of applications received by particular institutions.

4.1

OUTLOOK FOR AUSTRALIAS POPULATION

While Australias population continues to grow, that growth is slowing. Additionally, within the overall population, Australia is ageing, reflecting both lower fertility rates and increased life expectancy. Within the latter, substantial declines in infant mortality began to occur a century ago, while higher life expectancy at older ages has become particularly evident in the past two decades. The current ageing phase that the Australian population (in total) is entering will probably take around four decades to stabilise, ending only once the huge post-World War II baby boomer cohort has died and the impacts of the steep fall in national fertility rates seen in the 1970s have worked their way through the population

45

Future demand for higher education


statistics.

There are over 2.8 million people in total aged 65+ in Australia at present, which should increase to over 6.7 million by 2038. By contrast, there are currently just under 3.0 million Australians aged 15-24, which is tipped to rise to just 3.7 million across the same period. That is, comparatively speaking, the 15-24 group will go from 200,000 more than the 65+ group to 3 million fewer in 30 years.
The expected degree of ageing over the next 30 years can be seen clearly in Chart 52. The number of people aged 85 and over is projected to more than treble over this time although growth is from a low base, so this group will see its share of the population rise from 1.7% to 4.3%. The 65-84 year old age group has the second largest gains, although this flattens just beyond the forecast period as the baby boomers move beyond this cohort. CHART 52: FORECAST AUSTRALIAN
POPULATION BY AGE GROUP

OLDER

[Image of graphical data removed]

The younger groups do not fare well, with the number of those aged 0-14 hardly changing for the next five years, before the current increase in the level of births begins to lift population in these age groups (Error: Reference source not found). The working age population (officially defined as those aged 15 to 64) may grow by just 30.1% in total between 2008 and 2038. CHART 52: FORECAST AUSTRALIAN
POPULATION BY AGE GROUP

YOUNGER

[Image of graphical data removed]

The change in Australias age structure is best encapsulated by the population pyramid (Chart 52), which sees a significant increase in the share of population in older age groups. CHART 52: POPULATION
PYRAMID FOR

AUSTRALIA

[Image of graphical data removed]

4.2

POPULATION TRENDS FOR THOSE AGED 18-22

The key age group for higher education is those aged 18-22, which is a broad measure of the base level of supply for the sector. Chart 52 shows historic and forecast growth rates in the number of 18-22 years olds in Australia. The rate of growth for this age cohort has declined from around 2% per annum earlier in the decade to just over 1% per annum at present the slower growth in this population cohort is consistent with slower growth in the number of higher education students, and partly explains the decline seen in eligible applications. Looking forward, the next few years may see an increase in population growth for this cohort before a medium-term decline. While national population growth rates are

tipped to gradually decline from around 1.5% per year to 1.0% per year, the 1822 year old age group may see virtually no increase in population between around 2015 and 2022. Other things being equal, that will drive slower growth in
demand for higher education by students. The Federal Governments 2007 Intergenerational Report suggested that university participation rates will remain fairly

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Future demand for higher education


static over the longer term thanks to these demographic trends. CHART 52: ANNUAL
GROWTH IN

18-22

YEAR OLDS

[Image of graphical data removed]

As Chart 52 shows, the changing pattern of growth in this age group saw it slip sharply as a share of the national population across the 1990s before recovering slightly at the start of the present decade. While the next few years should see the current shares maintained (implying growth in this age group will be in line with national trends), from about 2015 growth ebbs again relative to the total population, dropping from 7% to 6% of the national population before stabilising in the longer run. It is vital to remember that these demographic changes are the results of trends that were set in motion two decades before the actual results are seen. The fall in the 1990s was a response to the fall in birth rates that accelerated across the 1970s, while further falls in birth rates from the late 1990s (combined with increasing number of retirees) will drive further falls in the latter years of the forecast. In essence, the declining growth rates in the next decade are already ensured by trends seen up to ten years ago, and could only be avoided by a massive increase in migration of younger age groups to Australia. CHART 52: 18-22
YEAR OLDS AS A SHARE OF NATIONAL POPULATION

[Image of graphical data removed]

Growth rates for the 18-22 year old age group vary sharply across States, although they broadly run at around 0.5% below the overall population growth rate, with a slightly larger gap in regions with overall slower population growth South Australia, Tasmania and the Australian Capital Territory. These growth rates are averages, and like the national growth rate for this age cohort (which varies from between -0.1% and 1.7% annual growth in this period), State growth rates may at times be well above or below these rates. Average projected population growth by State is shown in Chart 52, which highlights that a pretty low average rate of growth is expected for the number of 18-22 year olds outside of Queensland, Western Australia and the Northern Territory. CHART 52: STATE
TRENDS IN

18-22

YEAR OLD POPULATION

(2008 - 2038)

[Image of graphical data removed]

4.3

DEMOGRAPHIC PROJECTIONS BY REGION

Based on the ABS population projections Series B, Access Economics developed demographic forecasts by labour force dissemination region covering 85 regional groups. The forecasts are developed via a top-down approach, disaggregating the State totals into statistical regions, and utilising the detailed age structure data by region which is only available from Census data. Further detail on the projection methodology is provided in Appendix A. There are clear differences in population growth prospects by State, and even by regions within major cities. Generally, those differences in population growth prospects come down to two factors the existing age structure of the population, which will influence birth and death rates, and employment opportunities in particular

47

Future demand for higher education


regions, which are a major influence over migration between regions. While students do move around the country to attend university from their location prior to university, the vast bulk of students attend a university which is at least in their home State. DEEWR (2008) report that of eligible year 12 applicants receiving an offer in 2008, 94% came from within the home State of the university. So

demographic trends in feeder regions are likely to be an important factor over time in the level of applications received by particular institutions.
Firstly, expected population growth by capital cities and for Australia as a whole is shown in Chart 52. While the national average growth rates for 15-24 year olds over the next decade is expected to be 0.6% per annum, the growth in Hobart and Canberra is expected to be negative, while Adelaide will see minimal growth in its 2008 population level for 15-24 year olds over the next 10 years. CHART 52: DEMOGRAPHIC
PROJECTIONS BY CAPITAL CITY,

2008 2018

[Image of graphical data removed]

Table 60 provides projections of expected population growth at the labour force dissemination region level. Average population growth over both the next ten and next 30 years is shown, for the total population of each region and for the 15-24 age cohort.2 Over the next decade population growth is expected to be seen across almost all the regions presented. The only exceptions are two regional areas of New South Wales (Far West North Western and Murray-Murrumbidgee) and the Northern and Western region of South Australia. However, there are many more regions falling into negative territory when one focuses on just the 15-24 age cohort. Some 23 of the regional areas shown here are

expected to record a decline in their 15-24 population level over the next decade. Many of the regions outside capital cities show a decline, but there is also a
decline expected in several areas within capital cities, including declines expected for Hobart and Canberra as a whole as shown earlier. Average population growth prospects for the 15-24 age cohort are generally a little stronger over the next 30 years than they are for the next ten years. That said, many of the regions showing negative growth for this cohort over the next ten years are still showing a negative over the next 30 years.

2 The detailed regional modeling uses five year age cohorts rather than single year age cohorts. Accordingly, projections at this level for the 18-22 age cohort cannot be produced, so the 15-24 age cohort is displayed instead.

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Future demand for higher education

TABLE 60: DEMOGRAPHIC

PROJECTIONS BY LABOUR FORCE DISSEMINATION REGION,

2008 - 2038
Avg growth to 2018 0.3% 0.4% 0.7% -0.8% 0.1% 1.0% 0.9% -0.6% 1.3% 1.5% 0.1% 0.8% -0.4% 0.8% 0.6% 0.1% 0.7% 1.2% -1.0% -1.1% -0.9% 0.7% -1.0% 1.0% -0.9% 0.4% 0.6% 0.7% 1.1% 0.4% -0.3% 0.7% 0.4% -0.6% 1.7% 1.3% -0.2% -0.2% -0.1% 0.0% 0.1% -1.0% 1.3% 1.3% -2.0% 1.3% 3.0% 2.9% 2.5% 0.6% 1.6% 0.6% 0.4% 0.9% 0.3% -0.4% 1.5% 1.6% -0.1% 0.8% 0.2% 0.4% 0.3% 0.0% 0.6% 1.1% -1.5% -1.0% -0.6% 0.1% -0.7% 0.6% -1.3% 0.7% 0.9% 1.2% 1.3% 1.3% 0.4% 0.5% 0.6% -0.1% 1.5% 1.0% 0.0% 0.1% 0.1% 0.1% 0.0% -0.5% 1.3% 1.4% 1.3% 1.2% 0.9% 2.3% 1.8% Avg growth to 2038 0.4%

2008 Population (All) New South Wales Sydney Inner Sydney Eastern Suburbs St George-Sutherland Canterbury-Bankstown Fairfield-Liverpool Outer South Western Sydney Inner Western Sydney Central Western Sydney North Western Sydney Lower Northern Sydney Central Northern Sydney Northern Beaches Gosford-Wyong Rest of New South Wales Hunter Illawarra South Eastern Richmond-Tweed Mid-North Coast Northern Far West-North Western Central West Murray-Murrumbidgee Victoria Melbourne Outer Western Melbourne North Western Melbourne Inner Melbourne North Eastern Melbourne Inner Eastern Melbourne Southern Melbourne Outer Eastern Melbourne South Eastern Melbourne Mornington Peninsula Rest of Victoria Barwon-Western District Central Highlands-Wimmera Loddon-Mallee Goulburn-Ovens-Murray All Gippsland Queensland Brisbane Brisbane City Inner Ring Brisbane City Outer Ring South and East BSD Balance North BSD Balance Ipswich City 6,964,263 4,386,738 338,816 251,207 449,957 321,013 363,821 242,190 184,602 332,527 603,593 315,002 436,772 241,025 306,219 2,577,525 629,872 423,345 210,881 235,761 305,928 180,807 138,287 179,589 273,059 5,284,622 3,870,499 663,557 306,082 307,730 455,048 614,734 416,724 403,969 433,859 268,793 1,414,123 383,195 200,069 273,083 304,875 252,897 4,273,720 1,897,248 449,410 578,834 363,363 353,543 152,095

Avg growth to 2018 1.1% 1.2% 1.8% 0.7% 1.1% 1.0% 1.0% 0.7% 2.6% 2.4% 0.7% 1.6% 1.0% 1.1% 1.0% 0.9% 1.0% 1.4% 0.6% 0.9% 1.8% 0.1% -0.5% 0.5% -0.1% 1.4% 1.6% 1.8% 1.6% 2.5% 0.9% 1.5% 1.0% 0.7% 2.4% 1.2% 0.8% 1.4% 0.3% 0.9% 0.8% 0.4% 2.1% 2.1% 3.1% 1.0% 1.5% 2.8% 2.4%

Avg growth to 2038 0.9% 1.1% 1.6% 0.5% 1.1% 1.0% 0.8% 0.8% 1.8% 1.6% 0.8% 1.0% 1.1% 0.9% 1.5% 0.7% 0.9% 1.4% 0.3% 0.5% 1.4% -0.1% -0.7% 0.7% -1.0% 1.2% 1.4% 1.8% 1.5% 2.0% 1.0% 0.9% 1.1% 0.6% 1.9% 1.3% 0.6% 0.9% 0.4% 0.7% 0.7% 0.4% 1.8% 1.8% 1.8% 1.2% 2.0% 2.3% 2.0%

2008 Population (15-24) 950,736 618,935 46,770 33,680 60,792 44,238 55,817 38,558 25,994 50,428 91,329 40,471 62,977 28,164 39,722 331,801 84,301 55,653 24,565 28,548 35,653 24,187 17,479 24,327 37,086 737,955 555,710 93,612 44,854 54,898 63,528 91,167 52,612 57,778 62,618 34,640 182,245 50,259 26,620 35,336 38,424 31,604 602,776 287,088 73,658 84,591 57,814 48,145 22,881

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Future demand for higher education


2008 Population (All) Rest of Queensland Gold Coast Sunshine Coast West Moreton Wide Bay-Burnett Darling Downs-South West Mackay-Fitzroy-Central West Northern-North West Far North South Australia Adelaide Northern Adelaide Western Adelaide Eastern Adelaide Southern Adelaide Rest of South Australia Northern and Western SA Southern and Eastern SA Western Australia Perth Central Metropolitan East Metropolitan North Metropolitan South West Metropolitan South East Metropolitan Rest of Western Australia Lower Western WA Remainder - Balance WA Tasmania Hobart Rest of Tasmania Northern Territory Darwin Rest of Northern Territory Australian Capital Territory Australia 2,376,472 554,435 315,246 75,760 283,431 257,299 385,889 248,334 256,084 1,600,445 1,169,922 373,548 214,785 238,989 342,601 430,523 159,385 271,138 2,152,914 1,589,672 139,831 268,232 483,525 338,933 359,149 563,242 310,074 253,168 497,747 209,872 287,875 219,543 120,638 98,905 343,806 21,339,473 Avg growth to 2018 2.1% 3.3% 3.3% 1.8% 2.4% 0.8% 1.6% 0.6% 0.9% 1.0% 1.0% 0.9% 0.6% 1.4% 1.1% 0.9% -0.4% 1.6% 2.0% 2.1% 2.5% 1.9% 2.1% 2.2% 2.0% 1.6% 2.8% 0.0% 0.7% 0.9% 0.4% 1.5% 1.9% 1.1% 1.1% 1.4% Avg growth to 2038 1.7% 2.5% 2.2% 1.4% 1.8% 1.0% 1.4% 1.0% 1.2% 0.8% 0.9% 0.8% 0.8% 1.2% 0.8% 0.7% 0.0% 1.0% 1.7% 1.8% 1.8% 1.7% 2.0% 1.8% 1.7% 1.3% 2.0% 0.3% 0.5% 0.8% 0.2% 1.4% 1.6% 1.0% 1.0% 1.2% 2008 Population (15-24) 315,688 77,601 38,803 9,361 32,753 34,749 52,635 37,116 32,672 217,609 167,437 54,293 28,536 36,653 47,955 50,172 18,322 31,850 307,089 238,363 21,794 38,579 72,797 48,556 56,637 68,726 38,128 30,598 65,523 29,812 35,711 34,388 17,875 16,513 54,374 2,970,749 Avg growth to 2018 1.3% 0.1% 1.9% 2.6% 3.9% 1.5% 1.4% -0.6% 1.2% 0.0% 0.1% 0.1% 0.6% 0.7% -0.7% -0.6% -0.7% -0.5% 0.8% 1.1% -1.2% 1.8% 2.0% 0.9% 0.4% -0.2% 0.1% -0.4% -0.5% -0.5% -0.5% 0.5% 0.7% 0.3% -0.1% 0.5% Avg growth to 2038 1.2% 1.5% 1.8% 1.4% 2.0% 0.5% 0.9% 0.3% 0.9% 0.3% 0.4% 0.6% 0.3% 0.7% 0.2% -0.1% -0.7% 0.2% 1.1% 1.3% 1.0% 1.4% 1.4% 1.3% 1.3% 0.4% 0.8% -0.2% -0.1% 0.3% -0.4% 0.9% 1.1% 0.7% 0.4% 0.7%

Note: State/Territory regions may not sum to total due to rounding. Source: Access Economics.

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Future demand for higher education

5. PROJECTING STUDENT DEMAND


The forecasts of student demand by qualification type are driven by projections of the number of Australians in each relevant age cohort, a set of higher education participation rates (based on rates observed in 2007), and a set of non-demographic variables. The non-demographic factors represented in the modelling include projected Year 12 completion rates (expected to continue rising over the next decade), reflecting a trend toward a higher skilled workforce over time that is broadly independent of economic cycles. Movements in unemployment rates by State provide variation in the short-term trade-off between work and study. Other drivers are wage movements over time (representing the longer-term return to studying), and movements in wages by sector (focusing on the relative movement in wages for sectors which are higher education intensive compared with those sectors which are not). While demographic trends are at the heart of the projections, overall student demand is expected to grow at a faster rate over the next decade than demographic movements would otherwise suggest. The strength of student demand (beyond that implied by demographics) reflects an increase in Year 12 retention rates over time (representing the trend move towards a higher skill economy over time), a related increase in real wages over time (which provides a greater return to studying and working), and a continuing margin in wages growth favouring higher education intensive industries and occupations. The number of postgraduate students is projected to increase by an average of 1.4% per annum over the next decade, compared with 1.1% per annum for undergraduate students, and 1.2% per annum for advanced diploma students and diploma students.

5.1

THE FORECAST EQUATION

The equations for student demand attempt to estimate the supply of students wanting to undertake tertiary study. Student numbers are projected, though the changes over time are driven by student demand rather than any interaction with a limited supply of actual places. Separate, though similar, equations are derived for: undergraduate applications; postgraduate applications; advanced diploma level courses; and diploma level courses.

The equations are developed at the State level, with the sum of the States reflecting national demand. Separate forecasting is not undertaken at the regional level, though we do report likely regional implications of these forecasts, based on the regional demographic projections and State-wide trends for higher education participation. The key components of the forecast equation are as follows.

51

Future demand for higher education


A demographic estimate of the number of Australians in each relevant age cohort. A set of higher education participation rates which reflect the shares of the population by age cohort who are likely to be studying at any point in time. Note that these reflect an input to the modelling, rather than the final output (the other factors discussed below will influence the overall estimate of student demand such that the projection is likely to vary a little from that used as an input).

Several non-demographic factors. Projected Year 12 completion rates, representing a broad 'trend in
demand' ratio for applications that is broadly independent of economic cycles. It reflects underlying changes in the demand for education (Australias move to becoming a higher skill economy).

Unemployment rates by State, as an economic cycle driver that may


reflect short-term choices between work and study.

Wages by State, which captures trends in the choice between work and
study.

A relative wage measure for higher education intensive sectors of the economy, which captures trends in wage movements between sectors
which are higher education intensive relative to those which are not.

Algebraically the equations can be represented as a linear regression function of the general form yj = xj + j, for j = UG, PG, Diploma, Advanced Diploma,

where the dependent variable y is a series of participation rates for undergraduate, postgraduate, diploma and advanced diploma, respectively; the vector x contains explanators that drive participation, including State and Territory dummy variables, the unemployment rate and the real was index; is a vector of parameter estimates, including an intercept; and is the idiosyncratic error term. The equations are estimated using ordinary least squares and the resulting parameters then fed into the projection model. The previous chapter outlined the demographic section of the equation while the following sections look at the participation rates and the non-demographic drivers.

5.2

PROJECTED AGE-BASED PARTICIPATION RATES

Age-based higher education participation rates have generally been rising over many years, though over the past few years that growth has moderated (as discussed through Chapter 2). There is some potential for these to rise further over time. A comparison with other OECD countries shows that in general, Australia has lower age-specific labour force participation rates than our peers3, but a slightly higher rate for those aged 15-24, both of which reflect lower tertiary attendance rates in Australia.

The forecast model uses age-based higher education participation rates based on the most recent complete set of data (the 2007 year) to drive the projections .
3 Indeed, many of the trends forecast in the Productivity Commission report (and others) tend to project Australias age-specific participation rates moving towards OECD equivalents, often moving towards the top five or six countries within that group.

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Future demand for higher education


There is no trend movement (up or down) assumed for these rates, though they are allowed to vary based on changes to non-demographic variables discussed in the next section. In other words, if no allowance was given to the non-demographic drivers, the forecasts of student demand would be driven by higher education participation rates as recorded in 2007 and projected demographic movements (as discussed in the previous chapter). Table 60 shows the aged-based participation rates used for Australia with a separate profile of participation rates for each State used in the modelling. TABLE 60: AGE-BASED
Source: Access Economics.
PARTICIPATION RATES BY QUALIFICATION,

AUSTRALIA

[Image of graphical data removed]

5.3

PROJECTIONS FOR NON-DEMOGRAPHIC VARIABLES

Year 12 completion rates Over time Australia is moving towards becoming a higher skill economy. That involves investing more in education and training, with a payoff from having a more productive workforce where labour force participation is also likely to be higher. The student demand projections here include a trend parameter that is broadly independent of economic cycles which reflects this move towards higher skills. As a proxy for a trend in overall demand for higher education, Year 12 completion rates seem an appropriate variable to use. As completion rates rise, the share of the broad population that is tertiary ready is likely to rise as well. Note, this is not saying that only Year 12 graduates can enter the tertiary sector, just that as a larger share of the population completes secondary education, there is likely to be an increase in the rate of commencement in tertiary education. Projected Year 12 completion rates which are used in the modelling are shown in Table 60. These are based on recent information on Year 12 completion rates by State, with a forecast where those completion rates rise by around 0.1% per annum over the next decade. This rate of growth is consistent with experience over the past few years. TABLE 60: PROJECTED YEAR 12
Source: Access Economics.
COMPLETION RATES

[Image of graphical data removed]

Unemployment rates by State Movements in unemployment rates by State are included in the modelling as an economic cycle driver that may reflect short-term choices between work and study. The effects of movements in the unemployment rate (representing that state of the labour market) on participation in higher education are estimated based on the experience over recent years. The importance of this factor varies by type of qualification: For undergraduate, advanced diploma and diploma qualifications, an increase in the unemployment rate provides an incentive for more people to undertake

53

Future demand for higher education


study, but it is a relatively minor incentive. Labour market prospects are less good so people may be more inclined to study in order to get ahead. (The corollary is that in recent years, applications for higher education have waned as the labour market has been strong.) This is a short term trade-off. For postgraduate qualifications, the labour market influence is estimated to be more significant for those aged 15-24. For this age group, a higher unemployment rate produces a more notable inclination to undertake postgraduate study. For postgraduate students aged over 24 the unemployment rate once again has a more minor effect.

Projected unemployment rates by State are shown in Table 60 based on Access Economics macroeconomic forecasts (as detailed in Chapter 7). Essentially, the projection is for unemployment rates to move up in the short term given current global economic weakness, though overall remain reasonably low with some cyclical movement through the forecast period. TABLE 60: PROJECTED
Source: Access Economics.
UNEMPLOYMENT RATES BY

STATE

[Image of graphical data removed]

Relative wage index The relative wage indexes used within the modelling are a composite of the following. Trends in overall wage growth at the State level, which captures trends in the choice between work and study. Faster wage growth overall encourages more people to study in order to be able to take best advantage of the stronger rewards to working and to higher skill levels. Movements in wage growth by industry, which captures trends in wage movements between industries which are higher education intensive relative to those which are not. If wage growth improves in industries which are less higher education intensive (relative to wage growth in those occupations which are more higher education intensive), that would suggest lower participation rates.

The estimated effect of changes in real wages on student demand for qualifications is stronger across all qualifications for the younger age cohort (age 15-24). Across qualifications the effect is strongest for postgraduate qualifications, followed by undergraduate qualifications. The real wage effect is more marginal for diploma and advanced diploma qualifications. Over time, Access Economics projections are for solid growth in real wages, with unemployment rates continuing to hold at a level which suggests the economy is very close to full employment. We also expect a continuing margin in wages growth favouring industries which are more higher education intensive relative to those which are less higher education intensive. That suggests stronger wage growth over time to those industries and occupations with higher levels of qualification and skill. This trend in relative wages will provide an additional support to demand for higher education over the coming years.

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Future demand for higher education

5.4

OVERALL STUDENT DEMAND FOR HIGHER EDUCATION

The following tables report the projections of student demand which are derived from the modelling process outlined above. While demographic trends are at the heart of the projections, overall student demand is expected to grow at a faster rate over the next decade than demographic movements would otherwise suggest. (Chapter 10 presents an alternate scenario where the implications for student demand based on demographic trends alone are presented.) That result largely reflects three additional factors at work in the modelling: an increase in Year 12 retention rates over time, representing the trend move towards a higher skill economy over time; a related increase in real wages over time, which provides a greater return to studying and working; and movements in relative wages favouring higher education intensive sectors to a greater extent, providing a greater incentive to undertaking higher education relative to alternative career paths.

Strong student demand is expected for postgraduate courses over the next decade, benefiting from the above factors as well as a more evenly distributed demographic profile (and so will be less affected by the slowdown in population growth for the 1524 age cohort over the next decade). TABLE 60: STUDENT
Source: Access Economics.
DEMAND PROJECTIONS FOR POSTGRADUATE COURSES,

2008 - 2018

[Image of graphical data removed]

Table 60 shows that student demand for undergraduate courses over the next decade is expected to grow by 1.1% per annum on average (relative to 1.4% per annum for postgraduate courses). Undergraduate demand is far more heavily skewed towards the 15-24 age cohort and so is affected by the slower population growth for this age group. TABLE 60: STUDENT
DEMAND PROJECTIONS FOR UNDERGRADUATE COURSES,

2008 - 2018

[Image of graphical data removed]


Source: Access Economics.

Average demand for advanced diploma courses (which has been falling over the past few years) is seen as rebounding over the projection period. TABLE 60: STUDENT
Source: Access Economics.
DEMAND PROJECTIONS FOR ADVANCED DIPLOMA COURSES,

2008 - 2018

[Image of graphical data removed]

Table 60 shows a similar pattern for diploma level courses over time, with average student demand for diploma and advanced diploma courses projected to run at 1.2% per annum over the next decade. TABLE 60: STUDENT
Source: Access Economics.
DEMAND PROJECTIONS FOR DIPLOMA COURSES,

2008 - 2018

[Image of graphical data removed]

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Future demand for higher education


Chart 52 shows the projected number of students over time by qualification type, with student demand for higher education continuing to be dominated by undergraduate courses. Overall the share of the population undertaking some form of higher education moves from 4.4% in 2008 to 4.3% in 2018 (a minor decline thanks to relatively stronger population growth expected for older age cohorts). CHART 52: PROJECTED
NUMBER OF STUDENTS,

2008

AND

2018

[Image of graphical data removed]

5.5

DEMAND FOR HIGHER EDUCATION BY REGION

Based on the demographic projections by region reported earlier, plus State-wide agebased participation rates, Table 60 sets out the likely implications for higher education by labour force dissemination region. The table reports on students undertaking either postgraduate or undergraduate courses.

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Future demand for higher education

TABLE 60: STUDENT

DEMAND BY LABOUR FORCE DISSEMINATION REGION,

2008 - 2018

[Image of graphical data removed] [Image of graphical data removed]

Source: Access Economics.

Table 60 shows growth in higher education demand across a number of regions in Australia (these regions are Statistical Region level categories for the mainland States, with Tasmania and the Northern Territory split into a capital city region and the remainder of the State). A comparative figure for average growth in total population over that time is also given. Stronger growth in student demand is found in those States that are seeing strong growth in overall population (due to inflow from other States or strong migrant flows) notably Queensland and Western Australia. Growth is also stronger in urban areas, States capitals plus the Brisbane Hinterland, the Hunter and Illawarra). Due to increasing participation (driven by higher year 12 completion rates and other trends) total growth in higher education demand is in line with overall population growth. This is fairly significant in that it is quite different to the trends generally expected in Australias demographics where the strongest growth rates are among older Australians.

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Future demand for higher education

6. LABOUR MARKET DEMAND FOR HIGHER EDUCATION SKILLS


Our modelling of labour market demand for higher education skills comprises two components: (1) analysis of employment growth by industry and occupation; and (2) a profile of the typical qualification mix that is associated with specific industries and occupations. The latter represents current average propensities to hold qualifications in most cases these are not necessarily a strict requirement in order to undertake a particular job. Over time, employment growth by occupation has traditionally favoured the higher skill occupation groups (managers and administrators, professionals and associate professionals). Employment growth in these occupations has also tended to be less cyclical. However, recent years have seen shifts in the composition of labour demand, which have spawned a surge in demand for trades and related skills. We have seen much stronger than usual growth over the past five years for occupations which predominantly consist of blue collar workers (production and transport workers, tradespersons, and labourers and related workers). Information from the ABS Survey of Education and Work tells us that it is professionals who have by far the highest propensity to hold universitylevel qualifications (both undergraduate and postgraduate). Managers and administrators and associate professionals are the occupations with the next highest qualification shares. Note that for these occupational groups, the share of the workforce with higher education qualifications can differ notably depending on the industry in which the occupation is located. Industries with a higher propensity for higher education qualifications are government administration, education, health and community services, communication services, finance and insurance, property and business services, and cultural and recreational services. For advanced diplomas and diplomas, there is a far more even spread of qualifications across occupations and industries. Those occupations which have a greater higher education intensity also tend to be those occupations where employment growth has been the strongest, although the trades-related surge over recent years has been a point of difference from the normal pattern. That stronger demand from trades-related areas has had an influence on student demand for higher education tempting people into the job market straight away where higher education skills are not required. That movement has helped to reduce the skill shortage in trades-related areas, seen as declining in recent years according to the DEEWR Skilled Vacancies Index. A big lift in Australias migration program, and in particular the Skilled stream within the program, has also been very important in stemming skill

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Future demand for higher education

shortages, most particularly among professionals.

6.1

EMPLOYMENT GROWTH BY INDUSTRY/OCCUPATION

Over time, employment growth by occupation has traditionally favoured the higher skill/ higher qualification occupation groups (managers and administrators, professionals and associate professionals). Employment growth in these occupations has also tended to be less cyclical. However, recent years have seen shifts in the composition of labour demand, which have spawned a surge in demand for trades and related skills. Economic prosperity has also created new opportunities for work in areas which have traditionally been carried out by members of the home, such as cleaning, personal care, meal preparation and other related home duties. Chart 52 shows average employment growth by broad occupational group. The lighter shaded bars represent the five-year average growth rate for employment to 2003, while the darker shaded bars represent the most recent five-year average growth rate to 2008. CHART 52: EMPLOYMENT
GROWTH RATES BY OCCUPATION

[Image of graphical data removed]

There have been some marked differences in the composition of employment growth over time. In particular, much stronger growth is shown in the recent five-year

average for occupations which predominantly consist of blue collar workers (production and transport workers, tradespersons, and labourers and
related workers).

The most recent period has also seen much stronger demand for managers and administrators, along with professionals but not associate
professionals. Productivity and skill improvements have meant relatively lower employment growth recently for clerical, sales and service workers at all levels.
TO TEN-YEAR AVERAGE GROWTH BY OCCUPATION

TABLE 60: CONTRIBUTION

Contribution to 10-yr average growth 10-yr avg growth (1999-2008) 4.2% 3.9% 3.4% 1.9% 1.8% 1.5% 0.9% 0.6% -0.2% 5-yr avg to 2003 70.8% 15.1% 42.3% 57.2% 28.9% 20.7% 82.0% 15.4% 48.2% 5-yr avg to 2008 29.2% 84.9% 57.7% 42.8% 71.1% 79.3% 18.0% 84.6% 51.8%

Associate Professionals Managers and Administrators Professionals Intermediate Clerical, Sales and Service Workers Intermediate Production and Transport Workers Tradespersons and Related Workers Elementary Clerical, Sales and Service Workers Labourers and Related Workers Advanced Clerical and Service Workers

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Future demand for higher education


All Occupations
Source: ABS Cat No. 6291.0 Table 7; Access Economics.

2.2%

44.3%

55.7%

Table 60 complements Chart 52 by decomposing the ten-year average growth rate for each occupation into the two five-year periods and reports their contribution to the occupations employment growth. Although, comparably, the growth in blue collar occupations has been nowhere near as strong as that seen in white collar occupations over the past ten years, the contribution of the recent five-year average of the former has been enormous (almost 85% for labourers and almost 80% for tradespersons). A similar story can be told on the industry level. Chart 52 compares the five-year average growth rate for employment to 2003 with the equivalent to 2008 by ABS-defined industries. Chart 52 shows some differences in trends across the most recent five years compared with the previous five years:

Mining employment is the stand out as having been much stronger over the past five years compared with the previous five. This is also true for the
construction industry, as well as trades-related sectors such as utilities and transport and storage.

Some service sectors have also had relatively strong employment growth recently, including health and community services, education, and finance and insurance (though the latter is now feeling the brunt of the credit crunch during 2008). Relatively weaker employment growth of late has come from other service sectors, including communication services, property and business services, and retail trade (which again has suffered particularly during 2008). CHART 52: EMPLOYMENT
GROWTH RATES BY INDUSTRY

[Image of graphical data removed]

Table 60 decomposes the ten-year average employment growth by industry into the contributions from the two five-year periods as seen above in Table 60. The past five years has seen a much stronger contribution to employment growth from the mining, manufacturing, and transport and storage industries, as well as finance and insurance. TABLE 60: CONTRIBUTION TO TEN-YEAR AVERAGE GROWTH BY INDUSTRY
10-yr avg growth (1999-2008) 7.2% 4.7% 4.0% 3.8% 3.2% 3.2% 3.0% 2.8% 2.4% 2.4% Contribution to 10-yr average growth 5-yr avg to 5-yr avg to 2003 2008 4.9% 95.1% 33.6% 66.4% 44.6% 55.4% 80.2% 19.8% 40.1% 59.9% 59.5% 40.5% 48.1% 51.9% 37.7% 62.3% 77.7% 22.3% 28.2% 71.8%

Mining Construction Electricity, Gas and Water Supply Government Administration and Defence Health and Community Services Property and Business Services Cultural and Recreational Services Education Communication Services Transport and Storage

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Future demand for higher education


Accommodation, Cafes and Restaurants Retail Trade Finance and Insurance Personal and Other Services Manufacturing Agriculture, Forestry and Fishing Wholesale Trade All Industries
Source: ABS Cat No. 6291.0 Table 4; Access Economics.

2.3% 2.3% 2.2% 2.0% 0.2% -0.8% -1.3% 2.2%

46.3% 76.3% 29.4% 53.9% 11.3% 114.9% 106.2% 44.8%

53.7% 23.7% 70.6% 46.1% 88.7% -14.9% -6.2% 55.2%

6.2

SKILL SHORTAGES BY INDUSTRY/OCCUPATION

In a dynamic labour market, new jobs are being created and are evolving in nature and skill needs. Skill shortages the lack of appropriate labour for the jobs required have been a feature of the Australian economy over recent years as the unemployment rate has fallen to a generational low of 4%. Skill shortages have been apparent across both trades and professional occupations. The trend in vacancies in trades and professional occupations is shown in Chart 52. The Skilled Vacancies Index, published monthly by DEEWR, is a broad indicator of trends in the demand for skilled labour. 4 Both vacancies for trades and professionals have been trending down over the past couple of years. Trades vacancies were at a peak in the early part of the decade,

while vacancies for professionals reached a recent peak in 2006 and have also moderated since then. Over the year to August 2008, vacancies have dropped for
most of the professional and trades group occupations covered by the survey. Exceptions (where vacancies have risen over the past year) are science professionals and those in metal and wood trades. CHART 52: SKILLED
VACANCIES FOR TRADES AND PROFESSIONALS

[Image of graphical data removed]

The data suggests the Australian economy has had some success in limiting skill shortages over recent years when there has been very strong employment growth. Part of the solution has no doubt been the role of migration.

6.3

NEW MIGRANTS ROLE IN MEETING SKILL NEEDS

There has been a steady rise in the number of skilled migrants in recent years, reflecting an increase in migrant numbers as well as the increased emphasis on the Skilled stream of the migration program (the other streams are Family and Humanitarian). The significant lift in the number of skilled migrants in recent years has been very significant in helping to meet skill shortages on the demand side. Chart 52 shows the occupational profile of migrants from 2003-04 to 2006-07 (where migrants report their occupations, with this data dominated by Skilled stream migrants). Migrants whose occupations were classified as managers and administrators, professionals and associate professionals comprised 76.6% of
4 The Skilled Vacancies Index is compiled by counting the number of skilled vacancy advertisements in major metropolitan newspapers in each State and the Northern Territory, usually on the first Saturday of each month. Note that advertisements may be for multiple positions. The data are trended by applying a Henderson 13 term weighted moving average across the series.

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Future demand for higher education


migrants in the workforce in 2006-07, compared to 73.1% in 2003-04. So not only are

the numbers of new permanent migrants rising, but they are also moving toward the higher skill end of the occupational spectrum.
CHART 52: OCCUPATIONAL
PROFILE OF RECENT MIGRANTS

[Image of graphical data removed]

New migrants are also more highly skilled than the general workforce, with these same occupational groups (managers and administrators, professionals and associate professionals) representing only 40.7% of total employed persons in 2007 (Chart 52). CHART 52: OCCUPATIONAL
PROFILE OF MIGRANTS AND

AUSTRALIAN

POPULATION,

2006-07

[Image of graphical data removed]

Note: Data on the Australian population is for May 2007.

6.4

SKILL QUALIFICATION IMPLICATIONS OF LABOUR MARKET DEMAND

To assess the future qualification implications of labour market demand, we utilise a

profile of the typical qualification mix that is associated with specific industries and occupations. This represents recent information on average propensities to
hold qualifications in most cases these are not necessarily a strict requirement in order to undertake a particular job. The propensities shown here for certain proportions of the workforce to hold qualifications (for a given occupation in a given industry) represent current average practice. These propensities may change over time. However, in most cases, those changes may be slow and tend to move in an upward direction (increasing the average qualification levels of occupations). Using data from the Confidentialised Unit Record File (CURF) from the ABS 2007 Survey of Education and Work (ABS, 2007), Access Economics has derived the

proportion of the workforce by the three levels of highest educational attainment and field of education, and by industry and occupation. Information
on the field of education of the qualifications is also contained in the dataset (it is not reported in this section but is used for the projections in chapter 8). The industry data presented in the CURF dataset are based on the 2006 ANZSIC and the occupation data are based on the ANZSCO both are at the one-digit level. To enable comparability with other labour-related datasets and to undertake projections of the skill needs implied by labour market developments: the industry data were translated from 2006 ANZSIC to 1993 ANZSIC; and the occupation data were translated from ANZSCO to the ASCO.

The concordance between ANZSCO and ASCO was based on the ABS correspondence matrix presented in ABS (2008). In the absence of a similar correspondence matrix for the 2006 and 1993 ANZSIC, a proxy correspondence matrix was developed. This was based on ABS 2006 Census data, which presents

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Future demand for higher education


employment by industry data for Australia on both a 1993 and 2006 ANZSIC basis (ABS, 2008a and 2008b). Table 60 presents the share of the workforce with a postgraduate degree, graduate diploma or graduate certificate by industry (1993 ANZSIC) and occupation (ASCO) as estimated from the 2007 data and applied in the projections for 2008. Key results include the following.

Professionals show by far the highest share of postgraduate qualification. At


least almost 10% of professionals in all industries except accommodation, cafes and restaurants have postgraduate qualifications.

Managers and administrators show the next highest level of postgraduate


qualification, though the profile is far more diverse by industry. There are high shares of this group with postgraduate qualifications in education, health and community services, and government administration, as well as mining, but the shares are low across areas such as construction and retail.

A similar story is seen across associate professionals, though with lower postgraduate qualification propensities. Across other occupations the propensity for postgraduate qualifications is low, but does increase for employment in the government or health and community services sectors.
QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, ESTIMATE FOR

TABLE 60: POSTGRADUATE

2008

[Image of graphical data removed]

Source: ABS (2007), Cat No. 6227.0.30.001.

Note that these profiles report the highest level of qualification which people have achieved. So those shown in Table 60 with a postgraduate qualification would also have an undergraduate qualification (but are not included in Table 60). Table 60 presents the share of the workforce with a bachelor degree (but without a postgraduate qualification) by industry (1993 ANZSIC) and occupation (ASCO). Key results include the following.

Professionals again lead the way significantly, with nearly half of those in this
occupational group possessing a bachelor degree (and then add in over 20% who have achieved postgraduate qualifications). This strong profile holds up across most industries.

As one would expect, managers and administrators and associate professionals are next in the pecking order. Government administration, education, and health and community services are likely industries for high undergraduate qualification shares, but so too are communication services, finance and insurance, property and business services, and cultural and recreational services. There are also relatively high proportions of people in the above industries working as tradespersons or as clerical and service workers (advanced, intermediate and elementary) who possess an undergraduate degree.

The latter group (possessing an undergraduate degree but working in roles which may

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Future demand for higher education


not necessarily require one) may be seen as having some people working below their skill potential, suggesting there may be scope to improve productivity in the workforce just based on the existing qualification mix. In some cases, there may be issues of recognition of qualifications (if the qualification was received overseas), or the qualification may be dated and those people may need some additional education to meet current practice and work in a higher level occupation. TABLE 60: UNDERGRADUATE
QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, ESTIMATE FOR

2008

[Image of graphical data removed]


Source: ABS (2007), Cat No. 6227.0.30.001.

Finally, Table 60 presents the share of the workforce with an advanced diploma or diploma by industry (1993 ANZSIC) and occupation (ASCO). Key results include the following.

A far more even spread across occupational groups in the share of the
workforce holding these qualifications as their highest educational attainment, with only a slender advantage to professionals across other occupational groups.

By industry there is also a more even spread, with health and community
services, government administration, education, communication services, finance and insurance, and property and business services showing the highest shares. TABLE 60: DIPLOMA/ADVANCED
DIPLOMA QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, ESTIMATE FOR

2008

[Image of graphical data removed]


Source: ABS (2007), Cat No. 6227.0.30.001.

The propensities outlined in the tables above are used as a base to project over time the share of the workforce who hold qualifications. In conjunction with the labour market forecasts described in the following chapter, this data is used to produce projections of labour market demand for higher education qualifications (presented in Chapter 8).

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Future demand for higher education

7. PROJECTED LABOUR FORCE REPLACEMENT RATES


Looking forward, overall employment growth over the next decade (an average of 1.6% per annum) will be weaker that it has been over recent years. In the short term this will reflect significant fallout from the current global financial crisis which will see labour demand slow notably. However, we do expect labour demand growth to pick up again from 2010 and continue to be influenced by a business cycle over time. Also important will be a decline in the overall labour force participation rate over the second half of the next decade. The huge shift of people into higher age brackets means that population-wide labour force participation will fall. The 60-year olds of the future may be more likely to work than 60year olds of the past, but they will not be more likely to work at 60 than they were at 20-50. Applying DEEWR projections, the moderation in employment growth is expected to be felt across most occupational groups, with managers and administrators expected to show the fastest rate of jobs growth of the broad occupational groups (though still well down on recent growth rates for this group). By industry, mining is expected to show the strongest jobs growth over the next five years, while health and community services and property and business services are still expected to deliver a significant proportion of the new jobs created over time. Gross replacement per occupation covers net employment growth, retirements and turnover between occupations. Retirements are estimated from Census data on age profiles per occupation and show average retirement rates over the next decade for broad occupational groups averaging between 1.6% per annum for elementary clerical, sales and service workers, and 2.6% per annum for managers and administrators. Occupational turnover is estimated from the ABS Labour Mobility Survey and generally shows that the higher the level of skill (or the more qualified one has to be to undertake the occupation), the lower the rate of occupational turnover. Professionals have the lowest rate, with an average 2.4% per annum leaving their occupation to move to another, while 10.5% of elementary clerical, sales and service workers move to another occupation every year. While net employment growth and retirements require new entrants to come in to the workforce to cater for these, occupational turnover does not. However, it may still imply an additional skill or qualification requirement. The extent of this requirement is difficult to assess as sometimes people moving to a new occupation may already have the required skills (their existing qualifications and work experience covers them to do the work in their new occupation).

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Future demand for higher education

7.1

PROJECTED EMPLOYMENT GROWTH CYCLE

Over the past five years, employment growth has been stronger than one might expect it to usually be. From 2003 to 2008, employment growth averaged 2.4% per annum, well up on the five-year average employment growth to 2003 of 1.9% per annum. Strong employment growth has delivered a serious erosion of the unemployment rate, from over 6% in early 2003, to 4.0% in early 2008. Strong demand has also tempted more people into the labour force, with the labour force participation rate rising from around 63% in 2003 to just over 65% in 2008. Where to from here? October 2008 has seen a crash in global financial markets stemming from the US in particular. The effects of the current crisis will be widespread, including a significant drop in commodity prices (which have been so supportive to the Australian economy) and a significant fall in the $A. It will also mean much slower economic growth

around the world in 2009 than we have become accustomed to seeing over recent years.
Australia will be affected by the global financial crisis, though given our strong economic fundamentals, the impact is likely to be more muted than in most other developed economies. Nevertheless, 2009 in particular is likely to be a year of much weaker labour demand than seen of late. Access Economics expects employment growth to slow notably (see Chart 52) and for the unemployment rate to rise.

Beyond a slowdown through 2009, our projections show a rebound in jobs growth in 2010, stimulated by lower interest rates and more activity from the housing
market. The period of strength may then wane as business investment starts to decline from its record peaks. A continuation of the business cycle is then projected over the next decade as shown in Chart 52.

The projection of weaker jobs growth over the second half of the next decade largely reflects supply side issues. There will simply not be enough workers
available for employment to grow much faster, as Australias labour force participation rate will be declining. CHART 52: PROJECTED
EMPLOYMENT GROWTH,

AUSTRALIA

[Image of graphical data removed]

7.2
7.2.1

PROJECTED LABOUR FORCE PARTICIPATION


TOTAL LABOUR FORCE

There are many factors that may encourage an increase in labour force participation rates across most age groups in the future. As the labour force shrinks relative to demand, the unemployment rate is likely to fall, thereby encouraging job seekers of all ages back into the market. This may be particularly true for the younger cohorts, who may feel there is less need for tertiary education in order to get ahead in the job market. Older cohorts may choose to stay in the workforce for many reasons, such as the recent changes to the superannuation and personal income tax system for the mature

66

Future demand for higher education


aged introduced by the Federal Government, the need to work longer to generate enough income to support themselves, or they may increasingly want to have an active working life. The benefits of work for both mental and physical health are increasingly being recognised, and many people are choosing to go into semiretirement, where they work occasionally or on a part-time basis. Workplaces are rapidly becoming more flexible to accommodate all sorts of work patterns in order to keep their employees. Falling unemployment rates may also see increases in real wages as employers compete for scarce labour. This may encourage workers to enter or remain in the labour force (though this is ambiguous, as it may also lead to an increase in less-thanfull-time employment in older age groups who may find part-time work sufficient to fund their lifestyle requirements). A possible set of trends in age-specific participation rates was outlined in the Productivity Commissions 2005 report Economic Implications of an Ageing Australia. These have been drawn upon in framing the participation rate projections contained here. In general, male participation rates from ages 20-59 edge down slightly in line with recent historic trends (Chart 48), while female participation rates continue to rise (Chart 48). There are also strong increases in participation in the over 65s (and over 60s for females). CHART 48: AGE-SPECIFIC CHART 48: AGE-SPECIFIC
PARTICIPATION RATES

MALES

[Image of graphical data removed]


PARTICIPATION RATES

FEMALES

[Image of graphical data removed]

However, while most age-specific participation rates are expected to rise, the

increases are not expected to be sufficient to stop the overall labour force participation rate falling over time. The huge shift of people into higher age brackets means that population-wide labour force participation will still fall (as
shown in Chart 52). The 60-year olds of the future may be more likely to work than 60year olds of the past, but they will not be more likely to work at 60 than they were at 20-50. CHART 52: PROJECTED
LABOUR FORCE PARTICIPATION RATE,

AUSTRALIA

[Image of graphical data removed]

7.3

PROJECTED NET EMPLOYMENT GROWTH BY INDUSTRY AND OCCUPATION

Access Economics has developed a model to forecast employment by industry and occupation using the components of final demand (as defined by the ABS National Accounts data). Appendix B provides detail on the methodology employed by Access Economics to generate these forecasts. The forecasts are undertaken at a detailed level for 81 occupations (three-digit ASCO) and 55 industries (two-digit ANZSIC) but are aggregated for presentation to the one-digit level for occupations (nine occupations) and industries (17 industry sectors) in this chapter with further detail in Appendix B.5
5 Since 2006, data has been collected using the ANZSCO definition of occupations although there is insufficient history to use this as the basis of the projections.

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Future demand for higher education


The profile and cycle of the Access Economics modelling have been maintained, although the projections by industry and by occupation have been adjusted to

meet DEEWR estimates of average employment growth over the next five years.6 These projections are then extended out ten years using the same
methodology and adjustment parameters. The forecasts by occupation presented in Chart 52 show that a moderation in

employment growth is expected over the next five years (compared with the past five years), and this is true across most occupational groups. Only
elementary and advanced clerical sales and service workers are expected to show stronger growth. The biggest reduction in growth will be in managers and administrators (down from average job growth of 6.7% per annum over the past five years to an average of 2.9% expected over the next five years). However, this group

(managers and administrators) is still expected to show the fastest rate of jobs growth of the broad occupational groups.
CHART 52: PROJECTED
FIVE-YEAR AVERAGE GROWTH RATE BY OCCUPATION

[Image of graphical data removed]

Table 60 shows projected employment growth rates by broad occupational group over the next decade. The latter years of the next decade will see slower employment growth, consistent with the drop in labour force participation rates at that time. Over the next decade, the strongest employment growth is still expected in the higher skill/higher qualifications occupations (managers and administrators, professionals and associate professionals). Tradespersons and labourers may experience a cyclical downswing in 2010-11 and 2011-12, post the current surge in business investment and expected lift in housing construction in 2009-10. TABLE 60: EMPLOYMENT
BY OCCUPATION GROWTH RATES,

2008 - 2018

[Image of graphical data removed]

Source: DEEWR projections, Access Economics.

The forecasts by industry presented in Chart 52 show an expected notable slowing in employment growth for those industries which have performed very strongly over the past five years mining, construction, utilities, transport and storage, and finance and insurance. Given the significant impetus to the sector at present, mining is still

expected to show the strongest jobs growth over the next five years, while health and community services and property and business services are still expected to deliver a significant proportion of the new jobs created over time.
CHART 52: PROJECTED
FIVE-YEAR AVERAGE GROWTH RATE BY INDUSTRY

[Image of graphical data removed]

Table 60 shows projected employment growth rates by broad industry group over the next decade, with mining, utilities, health and community services and construction leading the way, while employment is expected to go backwards in wholesale trade and manufacturing.

6 DEEWR estimates of average employment growth by occupation and industry were provided by the Labour Supply and Skills Branch of DEEWR based on DEEWRs modelling and labour market research.

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Future demand for higher education


TABLE 60: EMPLOYMENT
BY INDUSTRY GROWTH RATES,

2008 - 2018

[Image of graphical data removed]

Source: DEEWR projections, Access Economics.

7.4

PROJECTED REPLACEMENT DEMAND

This section provides Access Economics estimates of gross replacement per occupation for broad occupational groups. Gross replacement is the sum of three components:

net employment growth (with projections for this set out in the previous
section);

retirements (where people leave the labour force altogether); and turnover (defined as movement from one occupation to another).

Appendix C provides detail on the methodology employed by Access Economics to generate the retirement and turnover projections. As with net employment growth, the projections are undertaken at the three-digit ASCO level for 81 occupations, but the broad occupational groups at the one-digit ASCO level are presented in this chapter (with the detail in Appendix C).

7.4.1

RETIREMENTS

Access Economics has estimated and projected the level of retirements in each occupation using the age profile of each occupation from 2006 Census data. The estimate takes into account changes in the age profile of an occupation over time, as well as the typical age of retirement in each occupation. The latter varies by occupation and is estimated based on an examination of when older typically leave an occupation, relative to the national average labour force participation rates. Some further increase in the labour force participation of older cohorts is projected to continue which will help to keep retirements lower than they would otherwise be. Some occupations will typically retain their workforce to an older age than others. Doctors for example tend to continue working well beyond a typical retirement age, whereas police officers tend to leave their occupation much earlier. The estimated retirement rates by broad occupational groups are shown in Table 60. The highest expected rate of retirement is for managers and administrators people often move into management later in their careers and so at any point in time there are a higher proportion of this group retiring. This is also true for advanced clerical and service workers. Professionals have a much lower retirement rate as they often keep working until much later in life. This can be expected from the lower physical stress required at the professional level as well as the combination of the higher wages and the long time spent developing skills and experience. TABLE 60: RETIREMENT
RATES BY OCCUPATION,

2008 - 2018

[Image of graphical data removed]

Source: Access Economics.

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Future demand for higher education


Over time, the number of people retiring in most occupations is projected to increase. However, the base number of people entering an occupation is also on the rise so the retirement rates shown in Table 60 are for a marginal reduction over the next decade.

7.4.2

TURNOVER

A further element of gross replacement is normal occupational turnover. This covers those who remain employed but move to a different occupation (and excludes those who change employers but stay within the same occupation). It also excludes the frictional element of the workforce those who become unemployed or those that leave the workforce temporarily. This is because many of the people in this group can be expected to re-enter their occupation at some later stage with less or no further skill development required relative to those that are new to the occupation. Estimated rates of occupational turnover are drawn from the 2006 ABS Labour Mobility Survey. This is a bi-annual survey tracking movements between occupations and out of the labour force. Generally, the Labour Mobility Survey shows that the

higher the level of skill (or the more qualified one has to be to undertake the occupation), the lower the rate of occupational turnover . Professionals have the
lowest rate, with an average of 2.4% per annum leaving their occupation to move to another, while 10.5% of elementary clerical, sales and service workers move to another occupation every year. TABLE 60: TURNOVER
BY OCCUPATION,

2008 - 2018

[Image of graphical data removed]

Source: Access Economics based on ABS, Labour Mobility Survey, Cat No. 6209.0.

While net employment growth and retirements require new entrants to come in to the workforce to cater for these, occupational turnover does not by definition it is people moving from one occupation of employment to another. However, it may imply an additional skill or qualification requirement. People moving to a new occupation need to have or develop the skills to perform in that occupation. Sometimes people may already have these skills (their existing qualifications and work experience covers them to do the work in their new occupation), but in other cases the movement may mean an additional skill requirement, and therefore implies a demand for more education and training. How much of this occupational movement implies a skill requirement, and what sort of skills, we dont know. In terms of qualification demand assessed in the next

chapter we focus on requirements from net employment growth and retirements. There may be some additional demand for skills based on normal
occupational turnover, though this may largely be covered in the tendency for the employment profile to move towards higher skill occupations over time.

7.4.3

GROSS REPLACEMENT

The three components (net employment growth, retirements and occupational turnover) are summed to provide estimates of gross replacement by occupation. This is the share of the workforce in each occupation who needs to enter the occupation and are likely to be new to the occupation, with projections over the next decade

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Future demand for higher education


reported in Table 60. TABLE 60: GROSS
Source: Access Economics.
REPLACEMENT RATES BY OCCUPATION,

2008 - 2018

[Image of graphical data removed]

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Future demand for higher education

8. PROJECTED LABOUR MARKET DEMAND FOR HIGHER EDUCATION


The labour market demand for people with qualifications is expected to be stronger than overall employment growth over the next decade. Projected growth for people with postgraduate qualifications as their highest attainment is an average of 3.6% per annum, for undergraduates the average is 2.9% per annum, and for diploma qualifications 1.8% per annum. That compares with an average for overall employment growth of 1.6% per annum. This result is driven in part by the current qualification profile and expected growth by industry and occupation. Those occupations where a higher share of the workforce has qualifications tend to be the faster growing occupations notably managers and administrators and professionals. The shares of people with qualifications by occupation also tend to be higher within the faster growing industries (such as health and community services, education, and property and business services) than in slower growing industries (such as retail trade and manufacturing). The result is also driven by a continuation of the trend towards skill deepening over time. In order to deliver productivity gains over time, the share of the workforce with qualifications is expected to continue rising over time, consistent with the experience over recent years. The projections allow for an increase in the share of the workforce with postgraduate qualifications as their highest qualification from 6.8% in 2008 to 8.3% in 2018, and an increase in the share of the workforce with undergraduate qualifications as their highest qualification from 17.2% in 2008 to 19.6% in 2018. By 2018, there are expected to be 1,056,000 people employed with a postgraduate qualification as their highest attainment, 2,476,000 with an undergraduate qualification, and 1,191,000 with a diploma qualification. Cumulatively over the next decade (and noting that an additional postgraduate qualification also implies an additional undergraduate qualification), the projections imply an additional 933,000 undergraduate qualifications by 2018, an additional 313,000 postgraduate qualifications, and an additional 190,000 diploma qualifications. In addition, there is a need to replace those in the workforce with a qualification who are retiring. By 2018, that will amount to a further 22,000 postgraduate qualifications, 51,000 undergraduate qualifications and 25,000 diploma qualifications per annum. Note that these qualifications for net employment growth and replacement of retirees are not necessarily being undertaken in Australia the growth may in part reflect additional migrants who bring qualifications with them to Australia. By field of education, management and commerce is expected to remain

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Future demand for higher education

the dominant area of study, though the health field is expected to see the fastest growth over the next decade. The projections for employment by qualification level are essentially driven by:

projected growth in employment by occupation; projected growth in employment by industry; a profile of occupational employment within each industry; and a profile of the share of the workforce holding qualifications (by type and by field of education) for each occupation within each industry.

The shares used in the qualification profile are projected to change over time, with these projections discussed below. The chapter then discusses the implicit labour market demand for higher education to cover for net employment growth, followed by an analysis of the qualification implications associated with retirements. Appendix D provides further details on projections for the number of people employed by industry and occupation by level of qualification. No specific allowance is in the projections for qualification demand associated with normal occupational turnover. This may be conservative, although such demand may largely be covered in the tendency for the employment profile to move towards higher skill occupations over time (and this is already contained in the employment growth forecasts which favour higher skill occupations based on past trends).

8.1

PROJECTED QUALIFICATION PROFILE

Section 6.4 outlined the qualification profile of those employed by industry and occupation. This was based on 2007 data from the ABS Survey of Education and Work and is assumed in these projections to also hold for 2008. However it is unlikely that for the projections this profile of employment by highest level qualification will stay constant over time.

One would reasonably expect Australia to require a deepening of workforce skills over time. Further skill development is likely to be very important in helping to deliver productivity growth over the coming decade. Given that we
know Australias population growth is set to slow and the labour force participation rate is likely to turn down, productivity gains form the key in delivering on expectations of rising living standards over time.

Raising skill levels is one of the key means of achieving productivity gains
additional capital investment is another, and often the two are complementary. Given the importance to productivity growth of raising skill levels, by how much would one expect the average qualification profile to increase by over time? Some guidance comes from the Survey of Education and Work which shows a trend increase in the share of the workforce holding both postgraduate and undergraduate qualifications as their highest level qualification over recent years. Over the past five years this has occurred across most broad occupational categories.

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Future demand for higher education


For these projections that trend increase in the share of the workforce with qualifications is assumed to continue over the next decade. For most broad occupational groups the trend increase over the past five years is applied, with any declining shares set at a no change level. In some cases the average growth in qualifications held over the past five years appears unsustainably high going forward for these groups the average growth over the past ten years is used instead. That produces a qualification map by 2018 for postgraduate and undergraduate qualifications as shown in the following tables, and which can be compared to the 2008 qualification maps shown earlier in Table 60 and Table 60. In the projections, this increase in qualification share is achieved steadily over the next decade. Apportionment across industries within each occupation is assumed to occur in an equal manner. TABLE 60: POSTGRADUATE
QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, PROJECTION FOR

2018

[Image of graphical data removed]


Source: Access Economics

TABLE 60: UNDERGRADUATE

QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, ESTIMATE FOR

2018

[Image of graphical data removed]


Source: Access Economics

Overall the projections allow for: an increase in the share of the workforce with postgraduate qualifications as their highest qualification from 6.8% in 2008 to 8.3% in 2018; and an increase in the share of the workforce with undergraduate qualifications as their highest qualification from 17.2% in 2008 to 19.6% in 2018.

The share of the workforce holding diplomas or advanced diplomas as their highest level qualification has changed little in aggregate over the past decade, and there is a mixed picture of increases and declines across occupations. Note that the Survey of Education and Work data reports highest level qualification. Some people who previously held a diploma as their highest qualification may have moved on to an undergraduate qualification or higher. Given that there has been little change in aggregate over time, the projections here show a constant profile for the share of the workforce with their highest level qualification as a diploma or advanced diploma.

8.2
8.2.1

PROJECTED DEMAND TO COVER FOR NET EMPLOYMENT GROWTH POSTGRADUATE QUALIFICATIONS

Expected growth in the number of people employed with postgraduate qualifications by occupation is shown in Table 60. TABLE 60: LABOUR
MARKET DEMAND FOR POSTGRADUATE QUALIFICATIONS BY OCCUPATION

[Image of graphical data removed]

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Future demand for higher education


Source: Access Economics.

Note that the ten-year average growth rates for employment with postgraduate

qualifications by occupation are faster than the equivalent growth rates for the occupation itself (which were reported in Table 60). The occupational growth rates are
a driver for the table above, but these do vary by industry (employment growth for professionals in faster growing industries such as health and community services is faster than employment growth for professionals in slower growing industries such as retail trade). It follows that the share of the workforce with postgraduate qualifications by occupation also tends to be higher in those faster growing industries (such as health and community services, education, and property and business services) than in slower growing industries (such as retail trade and manufacturing). On top of those trends, the demand for postgraduate qualifications also rises because of the need for skills deepening over time (as set out in the previous section). Given its drivers, growth in qualification demand year by year follows the same employment cycle Access Economics has projected over the forecast horizon. For postgraduates, demand is weak in 2009 (as employment growth moderates) and relatively stronger in 2010 and 2011 (given strong employment growth in those years projected for education and health and community services, which contain higher proportions of workers with postgraduate qualifications). Table 60 shows projected levels of employment for people with postgraduate qualifications by their field of education. Management and commerce, education, and society and culture remain the dominant fields by number of qualifications, though health is the field with the strongest rate of growth. TABLE 60: PERSONS
Source: Access Economics.
EMPLOYED WITH POSTGRADUATE QUALIFICATIONS BY FIELD OF EDUCATION

[Image of graphical data removed]

Note that qualifications are reported by ones highest level of qualification, which means that an extra postgraduate qualification implies also having undertaken an extra undergraduate qualification (over and above the numbers reported in the next section on numbers of people with an undergraduate qualification as their highest qualification). Note that these qualifications are not necessarily being undertaken in Australia the growth may in part reflect additional migrants who bring qualifications with them to Australia.

8.2.2

UNDERGRADUATE QUALIFICATIONS

Table 60 shows that average growth over the next decade in the number of

people employed with undergraduate qualifications (2.9% per annum) is higher than overall employment growth (1.6% per annum), but less than postgraduate growth (3.6% per annum).
The stronger-than-average growth here comes down partly to undergraduates tending to be in occupations with higher-than-average growth prospects (particularly managers and administrators). The industry spread (higher chance of being

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Future demand for higher education


employed in relatively faster growing industries) also helps. It again also reflects skills deepening over time for a given occupation in a given industry, a greater share of the workforce will require undergraduate qualifications. TABLE 60: LABOUR
MARKET DEMAND FOR UNDERGRADUATE QUALIFICATIONS BY OCCUPATION

[Image of graphical data removed]


Source: Access Economics.

Table 60 shows that in 2018 there will be 2.476 million people employed with an undergraduate qualification as their highest qualification growth of 621,000 over the decade. If one adds in the additional postgraduate qualifications (as they must have also completed an undergraduate qualification), growth over the decade in undergraduate qualifications comes to 933,000 in total. TABLE 60: PERSONS
EMPLOYED WITH UNDERGRADUATE QUALIFICATIONS BY FIELD OF EDUCATION

[Image of graphical data removed]


Source: Access Economics.

By field of education, management and commerce will continue to dominate, though health is expected to have the fastest growth rate.

8.2.3

DIPLOMA QUALIFICATIONS

Diploma qualifications reported here cover both advanced diplomas and diplomas. Overall, average employment growth for people with diploma level

qualifications as their highest qualification is expected to average 1.8% per annum over the next decade slower than for the other qualification levels, but faster than overall employment growth (at 1.6% per annum).
While the occupational and industry spread of diploma-level qualifications is far more even than for other qualification levels, it is still a little skewed towards faster growing occupations and industries. TABLE 60: LABOUR
Source: Access Economics.
MARKET DEMAND FOR DIPLOMA QUALIFICATIONS BY OCCUPATION

[Image of graphical data removed]

By field of education, the strongest growth in diploma-level qualifications is again expected in health, followed by architecture and building, education, and society and culture. TABLE 60: PERSONS
Source: Access Economics.
EMPLOYED WITH DIPLOMA QUALIFICATIONS BY FIELD OF EDUCATION

[Image of graphical data removed]

8.2.4

QUALIFICATION SUMMARY

Chart 52 provides a summary of projected additional qualification requirements per annum. For this chart, the additional undergraduate qualification implicit with an additional postgraduate qualification is included in the undergraduate total. Additional undergraduate qualifications certainly lead the way based on labour market demand, though that demand does also moderate notably over the next decade as the

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Future demand for higher education


labour force participation rate tops out and starts to decline. Cumulatively the projections imply: an additional 933,000 undergraduate qualifications by 2018; an additional 313,000 postgraduate qualifications by 2018; and an additional 190,000 diploma qualifications by 2018.
ADDITIONAL NUMBER OF QUALIFICATIONS HELD PER ANNUM BASED ON LABOUR MARKET DEMAND

CHART 52: PROJECTED

[Image of graphical data removed]

8.3

PROJECTED DEMAND TO COVER FOR RETIREMENTS

Qualifications are retained throughout a workers tenure in the labour force. Therefore, as workers move from one occupation to another, there is no net loss of qualification. The previous projections highlight the increase in qualifications required to meet overall growth in employment over time. But there will need to be more qualifications produced than just to cater for growth in the labour force over time there is also a need to replace those in the labour force with a qualification when they retire. This section highlights the number of additional qualifications required to cover for those retiring from the labour force. Table 60 shows the retirement estimate for those with a postgraduate degree grows in line with occupation growth and the increase in retirements over the decade. Growth is much stronger among professionals than managers or associate professionals. This is a result of the older age profile of many professional occupations. TABLE 60: RETIREES
Source: Access Economics.
WITH POSTGRADUATE QUALIFICATIONS BY OCCUPATION

[Image of graphical data removed]

Table 60 shows a similar pattern among those with an undergraduate degree. Again, growth is much stronger among professionals than managers or associate professionals. Overall retirements of those with a bachelors degree are more than double those of a post graduate degree and almost double those with a diploma, shown in Table 60 (which covers those with advanced diplomas as well as diplomas). TABLE 60: RETIREES
Source: Access Economics.
WITH UNDERGRADUATE QUALIFICATIONS BY OCCUPATION

[Image of graphical data removed]

TABLE 60: RETIREES


Source: Access Economics.

WITH DIPLOMA QUALIFICATIONS BY OCCUPATION

[Image of graphical data removed]

These estimates show those workers leaving an occupation that have a qualification. While the retirement means that a new graduate is required, this does not imply that the new graduate must enter the same occupation . A new
graduate may enter at a lower occupational level and progress through the ranks before retiring. This model does not attempt to track movement across occupations to assess which occupations attract new entrants for each qualification level.

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Future demand for higher education


Table 60 shows the total number of retirees with a qualification. By 2018, the number of

those retiring who have a qualification will be equivalent to around 0.8% of the overall workforce. Just over half of these will have an undergraduate degree. There
will be a matching demand for qualifications that must be met by new entrants and those in the workforce who are up-skilling. TABLE 60: TOTAL
Source: Access Economics.
RETIREES WITH A QUALIFICATION BY OCCUPATION

[Image of graphical data removed]

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Future demand for higher education

9. INTEGRATING STUDENT DEMAND AND LABOUR MARKET DEMAND


9.1 ASSESSING RELATIVE DEMAND

Table 60 provides a summary of the student demand and labour market demand projections for qualifications as estimated for this report.

For supply, the data represents an average years cohort of student completions. The student demand forecasts earlier were for the total number of
students for each of the qualifications. The number of completions consistent with those student numbers have been derived using average ratios of completions to students of: 30% for postgraduate students 20% for undergraduate students; and 23% for diploma and advanced diploma students.

These ratios represent averages from recent years on the number of students completing these qualifications relative to the number participating. They are derived from Selected Higher Education Statistics for postgraduate and undergraduate courses, and from NCVER data for diploma and advanced diploma courses. Note that completions generally depend on enrolments in earlier periods. The calculation of completion rates makes no allowance for lags in the completion process which may have a marginal effect on the rates calculated. Average completion ratios may also change in the future including through policy settings. Reducing the length of courses or having greater recognition of previous study could raise the ratio of completions to participants, effectively attaining more student completions for a given amount of education resources. Variation to average completions rates is explored further in section 10.5.

For demand, the data represents the number of completions required in order to meet demand generated by net employment growth and retirements .
Consistent with the highest qualification data relied upon, an additional postgraduate demand also implies an additional undergraduate demand. These are both assumed to occur in the same year so represent people moving through the qualification profile, rather than the same person receiving both qualifications. Note that the supply projections count students separately for each course of study undertaken at the same level. The labour market projection counts the individual by their highest level qualification. Those students who are undertaking their second postgraduate qualification would therefore be counted twice on the student side but once on the demand side. While there may be few students in this category, it does raise supply numbers relative to demand. TABLE 60: PROJECTED
Source: Access Economics.
STUDENT DEMAND AND IMPLIED LABOUR MARKET DEMAND FOR QUALIFICATIONS

[Image of graphical data removed]

79

Future demand for higher education The bottom line results for 2008 for higher education qualifications in total are for demand for students to exceed supply. The difference is some 22,000 students
a reasonably large number, equivalent to 10.5% of students who are expected to complete higher education qualifications in 2008. The notable slowing of employment growth expected in the short term sees that bottom line reversed in 2009. The drop in demand for workers sees supply exceed demand by 35,000 students in 2009. That swing into surplus in 2009 is short lived, with demand then exceeding supply in 2010 and for most of the rest of the forecast period. Employment growth is expected to pick back up to a reasonable pace from 2010. In addition, skills deepening over time means employers are demanding that a higher share of their workforce to possess higher education qualifications over time. Finally, the excess demand does diminish over time as an expected drop in the labour force participation rate during the next decade causes overall employment growth to step back. At the same time the supply of students is expected to continue to

grow at a solid pace, in part driven by the longer term trend towards higher skill attainment.
By qualification: the excess of supply over demand is strongest and most consistent for postgraduate qualifications (though there may be a marginal over-estimate of supply relative to demand driven by students who undertake more than one postgraduate qualification); the economic cycle has its greatest effect on undergraduate qualifications though on these projections there is a trend towards demand moderating towards supply; and supply and demand for diploma and advanced diploma qualifications stay much closer to each other over time.

9.2

FACTORS WHICH WILL ASSIST TO ALIGN DEMAND

What does a mis-match between supply and demand mean? Ultimately, it is a theoretical concept which wont actually be observed because supply and demand are two sides of the same coin. The analysis here highlights how supply and demand when analysed separately in relatively unconstrained environments may lead to different answers on the expected number of students undertaking higher education. On these projections there is excess demand through most of the next decade though with a movement back towards balance. Imbalances will however create incentives for other actions to occur. These other actions could include one or more of the following.

A change in relative wages for those occupations which are higher education
intensive and are demanded by employers, but are receiving insufficient enrolments from students. Clearly, the higher the wage, the better the payoff for students investing their time, effort and fees into education for that occupation, and so the more likely it is that students will seek to apply to study for those occupations which are likely to be in shortage.

Different demographics and pathways one issue identified is that there

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Future demand for higher education


wont be enough people coming through in the traditional higher education feeder group (age 18-22). Boosting supply may mean older students and alternate pathways to higher education. Both the LSAY and On Track data examined earlier reported a significant proportion of students not entering higher education upon immediate completion of school, with non-metropolitan based students relatively more likely to enter university after a stint in the labour force. Attracting those who have already spent time in the workforce to higher education may be a more common practice going forward.

An even more prominent role for migration filling skill shortages on the one
hand via an increased number of skilled migrants, and adding to the supply of students on the other hand because of an age profile which is younger than the Australian average.

Increased interstate migration lecturers can move, students can move,


graduates can move, and more experienced workers can move. Or, more broadly, it would be folly to assume that not merely can supply match demand, but that it can do so at the regional level as well. Rather, and as the example of increased international migration shows, there can be a number of moves to help bring supply and demand more into line. Moreover, this includes not merely the interstate moves listed here, but also the potential for Australians to work abroad for a time of rewards are relatively better there.

Changes on the demand side the skill shortage may lead employers to seek and adopt alternate solutions, such as seeking better technology and
making their businesses more capital intensive rather than labour intensive.

Changes in the concordance between occupations and qualifications . The


qualification map reported in this analysis continues to change over time in line with historic trends. In many cases, higher education qualifications are not a specific pre-requisite for occupations (though of course the skills associated with the qualifications are). The result may be greater emphasis placed on onthe-job learning for some occupations. In turn, this comes back to the relative wage point raised earlier. If there is a mining boom, then engineers may be tempted to shift into mining by a change in relative wages. Or if there is, say, a slump in the utilities, then wage growth in that sector may lag, and engineers may be tempted to try their luck elsewhere.

Of course, skill shortages and/or the availability of surplus skills could imply a different profile for overall economic growth and employment growth than is projected here the economys speed limit is reduced/increased by the skill shortage/available labour.

Over time, it is more typically the case that wage relativities need to shift in order to encourage potential workers to shift. Those shifts in personnel can come from workers in other occupations and/or other sectors and/or other States. Moreover, there is the potential for people to come back into the workforce having spent a spell outside it (such as the return of mothers into the paid workforce), or for net migration flows across locations to help fill the gap. Ultimately, however, there will be a particularly role for relative wages to play. (Or, as ANU academic Andrew Leigh notes, ultimately skill shortages tend to be wage shortages.)

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Future demand for higher education

10. SENSITIVITY ANALYSIS ALTERNATE SCENARIOS


The bottom line supply-demand balance is examined under four alternate scenarios: The first is where student demand is driven only by demographic trends (a plain vanilla scenario for the student demand model). The second is where labour market demand is driven only be employment growth, with no allowance for upskilling over time (a plain vanilla scenario for the labour market demand model). The third examines a targeted skills profile, where there is additional growth in the qualification share by occupation beyond the baseline scenario. The final scenario is where labour market demand is regulated by a constant labour force participation rate.

10.1

STUDENT DEMAND DRIVEN SOLELY BY DEMOGRAPHIC TRENDS

The scenario here is that only demographic trends affect student demand. The non-demographic factors which were also allowed to influence student demand in the baseline scenario are switched off after 2008 for this scenario. Accordingly overall student demand over the next decade grows at a slower rate: 1.3% per annum for postgraduate courses (compared with 1.4% per annum in the baseline scenario); 0.8% per annum for undergraduate courses (compared with 1.1% per annum in the baseline scenario); 1.0% per annum for diploma courses (compared with 1.2% per annum in the baseline scenario); and 1.0% per annum for advanced diploma courses (compared with 1.2% per annum in the baseline scenario).

Table 60 shows the supply-demand balance under this scenario. While the supply of students grows at a slower rate over time, the basic supply demand pattern shown in the baseline scenario also holds in this case. TABLE 60: PROJECTED
SUPPLY-DEMAND BALANCE WITH SUPPLY DRIVEN SOLELY BY DEMOGRAPHIC TRENDS

[Image of graphical data removed]


Source: Access Economics.

An important message is therefore that even though student demographics are slowing, they are still contributing to solid growth in student numbers over time, even before allowing for other trend and wage variables.

10.2

LABOUR MARKET DEMAND WITH NO UPSKILLING OVER TIME

The scenario examined here is that only employment growth (and the direction of that employment growth by occupation and industry) affects labour market demand.

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Future demand for higher education


Specifically there is no allowance for upskilling over time (as was detailed in section 8.1 for the baseline scenario). That is, for people employed in a given occupation in a given industry, the share of those with qualifications is unchanged between 2008 and 2018. Table 60 shows that this scenario has quite a notable effect on the level of labour market demand suggested. Based on employment growth alone labour market demand would be for an additional 174,000 graduates in 2018 (compared to 237,000 in the baseline scenario), while also in 2018 supply would exceed demand in 2018 by 66,000 graduates (compared with supply exceeding demand in 2018 by 3,000 graduates in the baseline scenario). Indeed, for most years in the scenario shown here supply exceeds demand in total, while the opposite is true in the baseline scenario. This is an important point. In the absence of upskilling for productivity growth,

labour market demand for qualifications required is projected to generally decline (other than for cyclical influences). In absolute numbers, each years
addition to the labour force shrinks over time with employment growth projected to slow. TABLE 60: PROJECTED
SUPPLY-DEMAND BALANCE WITH DEMAND DRIVEN SOLELY BY EMPLOYMENT TRENDS

[Image of graphical data removed]


Source: Access Economics.

The implication is that in the absence of upskilling for productivity growth, the likely supply of students to higher education should be more than adequate to cater for expected employment growth. However, productivity growth is vitally important to Australias future economic growth and an increase over time in the average level of qualifications held is likely to go hand in hand with achieving that productivity growth.

10.3

LABOUR MARKET DEMAND WITH A TARGETED SKILLS PROFILE

This scenario looks at labour market demand with a targeted skills profile. In addition to the growth in the qualifications profile included in the baseline scenario (as explained in section 8.1), this scenario allows for an additional deepening of skill levels in those occupations where higher education qualifications will become more of an expectation over time (managers and administrators, professionals and associate professionals). The target in this scenario is also only applied for those industries where higher education qualifications are an expectation (and in some cases a necessity) for employment. For this scenario those industries are finance and insurance, property and business services, government administration and defence, education ,and health and community services. The scenario sees an additional 5% increase over the next decade in the share of people employed as managers and administrators, professionals and associate professionals in the above five industries who have postgraduate qualifications. Similarly, there is an additional 5% increase over the next decade in the share of people employed as managers and administrators, professionals and associate

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Future demand for higher education


professionals in the above five industries who have undergraduate qualifications. The resulting postgraduate and undergraduate qualifications profiles in 2018 under this scenario are shown in Table 60 and Table 60. TABLE 60: POSTGRADUATE
QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, PROJECTION FOR

2018,

TARGETED SKILLS SCENARIO

[Image of graphical data removed]


Source: Access Economics.

TABLE 60: UNDERGRADUATE

QUALIFICATION SHARE OF EMPLOYMENT BY INDUSTRY AND OCCUPATION, ESTIMATE FOR

2018,

TARGETED SKILLS SCENARIO

[Image of graphical data removed]


Source: Access Economics.

The result of this scenario is much stronger growth in postgraduate and undergraduate qualification demand. The baseline projections showed projected
growth for people with postgraduate qualifications as their highest attainment to average of 3.6% per annum over the next decade. For this scenario that moves up to 5.0% per annum. Similarly, the baseline projections showed projected growth for people with undergraduate qualifications as their highest attainment to average 2.9% per annum over the next decade. For this scenario that moves up to 3.5% per annum. That stronger labour market demand for qualifications (targeted at the higher skill level qualifications) has a notable effect on the supply-demand balance as shown in Table 60. TABLE 60: PROJECTED
SUPPLY-DEMAND BALANCE WITH DEMAND BASED ON TARGETED SKILLS PROFILE

[Image of graphical data removed]


Source: Access Economics.

This scenario again highlights that deepening skill levels can have a big effect on overall labour market demand for qualifications. The supply-demand balance
in 2018 moves from what is nearly balance in the baseline scenario, to significant excess demand in this scenario. Encouraging an adequate supply of students

would clearly be a major hurdle in achieving this targeted skills profile over the next decade.

10.4

LABOUR MARKET DEMAND WITH A CONSTANT LABOUR FORCE PARTICIPATION RATE

In the baseline scenario for the economy, overall labour force participation is expected to rise over the next five years or so and then start to moderate. The higher is labour force participation, the faster employment growth can be and the higher the demand for qualifications. This alternate scenario looks at what labour market demand for qualifications might be if average labour force participation maintained its current rate over the next decade, rather than continued to rise and then fell back.

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Future demand for higher education


The result is that in this scenario employment growth is weaker over the next five years (compared with the baseline scenario) and then stronger in the next five years relative to the baseline scenario. Over the decade jobs growth averages 1.5% per annum, compared with 1.6% per annum in the baseline scenario. Table 60 shows some movement in the supply-demand balance under this scenario. Relative to the baseline there is a smaller excess demand gap over the next few years thanks to slower employment growth at that time. However from 2014 onwards when employment growth is stronger in this scenario than in the baseline scenario (as the latter is then constrained by a falling labour force participation rate), labour market demand for qualifications is stronger and there is a larger excess demand gap. TABLE 60: PROJECTED
SUPPLY-DEMAND BALANCE WITH DEMAND REGULATED BY A CONSTANT LABOUR FORCE PARTICIPATION RATE

[Image of graphical data removed]


Source: Access Economics.

A key message is that a rising labour force participation rate has been supporting strong growth in labour market demand for qualifications. When this rate plateaus or declines, it will have a notable effect on the demand for qualifications linked to growth in the workforce.

10.5

STUDENT DEMAND MODIFIED FOR CHANGES IN COMPLETION RATES

This scenario modifies the completion rates which are used in converting a projected number of student participants into a number of student completions. In the baseline scenario the completion rates used are based on recent experience. They may however change over time, and these changes may also be driven by policy factors: Average completion rates may fall over time (courses on average are longer) if there was a compositional trend towards those qualifications which require more years of study. Average completion rates may rise over time (courses on average are shorter) if courses were delivered more efficiently and so could be reduced in length, or there was greater recognition of previous study.

This scenario examines what completion rates would need to be to notionally align supply with demand on average over the next decade. Target analysis (as shown in Table 60) suggests: the baseline completion ratio of 30.0% for postgraduate students is reduced to 24.7% (longer courses); the baseline completion ratio of 20.3% for undergraduate students is increased to 26.3% (shorter courses); and the baseline completion ratio of 23.4% for diploma and advanced diploma students becomes 23.5% (virtually unchanged).

These are the rates which would notionally close the supply-demand gap.

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Future demand for higher education


TABLE 60: PROJECTED
SUPPLY-DEMAND BALANCE WITH SUPPLY MODIFIED BY TARGET COMPLETION RATES

[Image of graphical data removed]


Source: Access Economics.

The implication is that changes in average completion ratios can have a significant effect on the overall supply-demand balance for qualifications. Focusing on the key area of excess demand in the baseline scenario (undergraduate qualifications), reducing course lengths to produce more graduates could close the gap for a given amount of educational resources, though it would still require more students being encouraged into undertaking higher education. The further challenge of course would be to achieve the higher throughput without diminishing the skills attained by the student from the course of study.

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ABS (2006), Labour Mobility, Australia, Cat No. 6209.0, February ABS (2007), Confidentialised Unit Record File, Survey of Education and Work, Australia, Cat No. 6227.0.30.001 ABS (2007a), Appendix 1 - SEW 2007 Data Items and Record Structure, Survey of Education and Work, Basic Confidentialised Unit Record File, Technical Manual, Cat No. 6227.0.30.002 ABS (2008), Summary Link Tables -- ASCO Second Edition to ANZSCO First Edition -Major Group Level, Information Paper -- Census of Population and Housing: Link Between Australian Standard Classification of Occupations (ASCO) Second Edition and Australian and New Zealand Standard Classification of Occupations (ANZSCO), Cat No. 12320DS0001 ABS (2008a), Industry of employment 2006 ANZSIC (Division) Australia, 2006 Census of Population and Housing, Cat. No. 2068.0 2006 Census Tables ABS (2008b), Industry of employment 1993 ANZSIC (Division) Australia, 2006 Census of Population and Housing, Cat. No. 2068.0 2006 Census Tables ABS (2008c), Labour Force, Australia, Detailed Electronic Delivery, Cat No. 6291.0, August ABS (2008d), Labour Force, Australia, Cat No. 6202.0, August ABS (2008d), Population Projections, Australia, 2006 to 2101, Cat No. 3222.0, September Andrews L (1999), Does HECS Deter? Factors affecting university participation by low SES groups, Higher Education Division Occasional Paper 99F, Department of Education, Training and Youth Affairs Aungles P, Buchanan I, Karmel T and MacLachlan M (2002), HECS and Opportunities in Higher Education: A paper investigating the impact of the Higher Education Contributions Scheme (HECS) on the higher education system, Department of Education, Science and Training Birrell R, Calderon A, Dobson IR and Smith TF (2000), Equity in Access to Higher Education Revisited, People and Place, vol. 8, no. 1, pp. 50-60 Centre for the Study of Higher Education (2008), Participation and Equity: A review of the participation in higher education of people from low socioeconomic backgrounds and Indigenous people, University of Melbourne, March Chapman B and Ryan C (2003), The Access Implications of Income Contingent Charges for Higher Education: Lessons from Australia, Centre for Economic Policy Research Discussion Paper No. 463, Australian National University Chapman B and Ryan C (2003a), Higher Education Financing and Student Access: A Review of the Literature, Research School of Social Sciences, Australian

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National University Commonwealth of Australia (2008), Review of Australian Higher Education Discussion Paper June 2008 DEEWR, Students: Selected Higher Education Statistics Series, 1997-2007 DEEWR (2008), Undergraduate Applications, Offers and Acceptances 2008 DEEWR (2008a), Vacancy Report, August Dobson I, Birrell R and Rapson V (1996), The participation of non-English-speakingbackground persons in higher education, People and Place, vol. 4, no. 1, pp. 4654 Ferrier F (2006), A Review of Higher Education Equity Research in Australia 2000-2005, Working Paper No. 64, March, Monash University Australian Council for Education Research Centre for the Economics of Education and Training James R (2000), TAFE, university or work? The early preferences and choices of students in Years 10, 11 and 12, National Centre for Vocational Education Research James R (2002), Socioeconomic Background and Higher Education Participation: An analysis of school students aspirations and expectations, Evaluations and Investigations Programme, Department of Education, Science and Training James R, Baldwin G and McInnis C (1999), Which University? The factors influencing the choices of prospective undergraduates, Evaluations and Investigations Programme 99/3, Department of Education, Training and Youth Affairs Karmel T (2007), The Demand for Tertiary Education in Australia, Occasional Paper, National Centre for Vocational Education Research Long M, Carpenter P and Hayden M (1999), Participation in Education and Training 1980-1994, Longitudinal Surveys of Australian Youth Research Report No. 13, Australian Council for Education Research Marks GN, Fleming N, Long M and McMillan J (2000), Patterns of Participation in Year 12 and Higher Education in Australia: Trends and Issues, Longitudinal Surveys of Australian Youth Research Report No. 17, Australian Council for Education Research Productivity Commission, Economic Implications of an Ageing Australia, 2005 Ramsay E, Tranter D, Charlton S and Sumner R (1998), Higher Education Access and Equity for Low SES School Leavers: A case study, Evaluations and Investigations Programme 98/18, Department of Education, Training and Youth Affairs Treasury (2007), Intergenerational Report 2007, April Wells J (2008), Demanding times, Campus Review, 19.02-25.02.08

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APPENDIX A DETAILS ON DEMOGRAPHIC PROJECTIONS


The national and State level population projections used in this report are benchmarked to the latest ABS population projections (Series B) released in September 2008. The forecasting methodology to develop regional population projections by age is essentially top-down, disaggregating the State totals into statistical regions. Forecasting regional populations adds a number of methodological problems due to the lack of data both at a detailed age and gender level, and from year to year. In general, the census is the only detailed look at population movement at the subState level, and this data tends to cover only the five years to census date (the intercensal period) or the twelve months to census date (the last year). This requires a number of assumptions to be made regarding the consistency of migration trends over time, as well as a judgement as to how well the latest year of data reflects typical trends (rather than statistical noise). In the modelling we have undertaken, we have made the following assumptions. Net international migration to regions within a State occurs at consistent shares. For example, the Inner Sydney statistical region received 11.6% of net international migration gains to New South Wales across the past five years 7, and the modelling assumes this continues. Net interstate population inflows to regions within a State occurs at consistent shares as well. For example, the Goulburn-Ovens-Murray statistical region accounted for 11.0% of interstate migration into Victoria in the five-year period (over the last year it was 11.7%, but most regions were very similar in the two periods). Totals for the State are as modelled in the State modelling. Net interstate population outflows from a region are estimated as a share of the regions initial population. The actual ratio used is a compound estimate based on the States average rate over the last year, and relative rates in the regions across the five years. The reason this measure is used is the average outflows measured across five years tend to understate total movements (although the relatives rates across a longer period are more likely to be reflective of regional differences). This methodology gives an initial estimate of movement out of each region, with the final estimate being normalised to the State sum estimated in the State-level modelling. Total interregional movements within a State occur at a rate equal to that in the past year. For example, it is assumed that 3.6% of the New South Wales population moves from region to region in a given year, equal to the 2005-06 rate. The rate in each State will depend significantly on the number of regions modelled and their relative location, so the relative rates used are not, by themselves, indicative of relative tendencies to move residence in a year, just the tendency to move across certain geographical lines. To understand this difference, note that interregional movement rates in the Territories are effectively 0% because there is only one region and therefore there are no lines to cross that count as an interregional move not because people in

7 Last five years refers to the period from 2001 to 2006, last twelve months is the year to the census date in 2006.

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these parts of Australia do not move house. Movements into and out of regions are modelled in a similar way within each State to how interstate movements are modelled from the national level with movements into a region a set share of the population in the rest of the State, and movements out of a region a set share of the regions starting population. In each case, an initial estimate is normalised to the total movement rates (which will ensure that total outward movements are equal to total inward movements).

These methodologies give an initial estimate of interstate movement. Combined with regional fertility and mortality differentials (taken from relevant ABS publications), we can run forward the 2006 population by region in the same way as the State modelling. However, adjustments are often made in initial years to ensure that jumping-off issues are limited. One key problem occurs when a regions migration trends are very different in terms of international, interstate and interregional trends. In this case, a change in the States overall mix of migration intakes may see large swings in migration rates. A key example of this is the Brisbane City Outer Ring statistical region. In this case, the past five years have seen large inflows of international migrants to the region (over 30,000) accompanied by large outflows to other areas in the State (over 22,000 in net terms). Eastern Adelaide (which took more than one in four international migrants to South Australia) is a further example and one where the forecast downturn in migration to the State has significant flow-on implications for overall movements.

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APPENDIX B NET EMPLOYMENT GROWTH METHODOLOGY AND DETAIL


METHODOLOGY
Access Economics has a well established framework for projecting employment demands by industry and occupation over time, based on the Access Economics Macro (AEM) model of the Australian economy. Macroeconomic variables The AEM model is a relatively small, dynamic model of the Australian economy. It has a theoretically consistent long-term open-economy growth path, together with shortterm dynamics derived from Australian economic experience over the past 30 years. The model ensures internally consistent forecasts for key economic variables GDP and its components, employment, exchange rates, inflation, and interest rates. These forecasts form the basis for Access Economics regular forecasts and commentary on the economy detailed in our quarterly Business Outlook publication. The key macroeconomic variables used for this analysis from the AEM model include components of final demand (such as categories of private consumption and investment) and total employment. Industry employment Growth in employment by industry is forecast using known relationships between components of final demand and industry employment (based on input-output data). The coefficients measure the induced employment that arises from an increase in a component of domestic final demand. That is, the coefficient measures how much employment in a given industry will rise as a result of an increase in the corresponding component of final demand. For example, if the investment forecasts suggest that housing investment is gaining strength, then the construction industry will gain strength. Or, say, if rural exports are lifting, then the farm sector is similarly seen lifting. A counterfactual estimation is conducted on historical data to determine actual employment growth not picked up by this methodology, for example due to changes in worker productivity and structural changes in the economy. Corresponding adjustments are made to the forecasts. This analysis is undertaken for 55 industries (using the ANZSIC two-digit classification). Note that the projections obtained from this methodology are then scaled to meet DEEWR estimates of average employment growth by industry over the next five years. These estimates were provided by the Labour Supply and Skills Branch of DEEWR based on DEEWRs modelling and labour market research. The projections are then extended out a further five years (to ten years of forecasts in total) using the same methodology and adjustment parameters.

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That combination means that the employment by industry forecasts used in the base case scenario reflect DEEWR estimates of the relative strength of average jobs growth by industry, and Access Economics estimates of the overall strength of employment growth, and the employment growth cycle (in total and by industry) over time. Occupational employment Forecasts for industry employment are translated into occupational employment forecasts using 2006 Census data which shows the occupational employment share for each of the industry groups examined. These relationships are allowed to move over time, allowing trends in employment structures notably the gradually increase in skill levels in the workforce to be modelled. This analysis is undertaken for 81 industries (using the ASCO three-digit classification). As with the industry projections, the occupational projections obtained from this methodology are then scaled to meet DEEWR estimates of average employment growth by occupation over the next five years. These estimates were provided by the Labour Supply and Skills Branch of DEEWR based on DEEWRs modelling and labour market research. The projections are then extended out a further five years (to ten years of forecasts in total) using the same methodology and adjustment parameters. That combination means that the employment by occupation forecasts used in the base case scenario reflect DEEWR estimates of the relative strength of average jobs growth by occupation, and Access Economics estimates of the overall strength of employment growth, and the employment growth cycle (in total and by occupation) over time.

DETAILED PROJECTIONS
TABLE 60: EMPLOYMENT
Source: Access Economics.
BY DETAILED INDUSTRY GROWTH RATES,

2008 - 2018

[Image of graphical data removed]

TABLE 60: EMPLOYMENT


Source: Access Economics.

BY DETAILED OCCUPATION GROWTH RATES,

2008 - 2018

[Image of graphical data removed]

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APPENDIX C GROSS REPLACEMENT RATES METHODOLOGY AND DETAIL


METHODOLOGY
Age profile of occupational employment Determination of the age profile within each occupation group attempts to balance three competing considerations:

The general maintenance of the existing age profile .

This reflects the requirements of some industries for continual intakes of new workers generally at the lower age cohorts.

The modelling of demographic ageing in the general economy. This would


likely work against the expected trends seen under the point above, as the supply of younger workers becomes more limited.

The modelling of the effects of ageing within specific occupations,


particularly those which may currently have a relatively older age profile due to a lack of new entrants (rather than a specific requirement for older workers). For example, some managerial occupations are likely to have an older profile due to the requirements of experience. On the other hand, teaching may have an older profile because of a lack of new teachers in recent years. Any longer-term model of this occupation might need to allow for revolutional (rather than evolutional) changes to the age profile.

Let matrix X denote the 2006 Census snapshot of employment by three-digit ASCO by age. Similarly, matrix X denotes the same snapshot in 2001. The subscript

denotes the number of people employed in an occupation and subscript denotes the number in an age group. The 2001 snapshot has then been scaled to the equivalent employment levels of the 2006 Census for consistency. An assumption about the retirement age must be made. The assumed threshold retirement age in this case is 55. Consistent with this, a person who leaves the workforce over age 55 is assumed to have retired and not left for other reasons. While some people may indeed return to work at some later time, they will be captured in the overall retirement estimate measure by reducing the retirement rates seen in the older age group. If the worker rejoins the workforce in another occupation, the effect is equivalent to retiring. Another new worker is required in the occupation they have left from and one less in their new choice. This will also be captured in estimates of the retirement rate of the older age group in their new choice. As a basis for retirement, the national change in participation rates has been used. These national rates have been denoted by P.

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Retirements by age by occupation are then estimated as follows:

( X ( 1) X ( 1) Re t = 5

P ) P 1

X * X

X ' 1 X ' ( 1)

This provides a net measure of the number of retirements for each occupation and each age group they retire from. This allows the national participation rates to be adjusted for the observed retirement age profile in each occupation. This methodology is then used to project the number of retirements for each occupation over the forecasts. Occupational turnover Data from the national ABS Labour Mobility Survey allows an estimate of normal turnover (not relating to new workforce entry or retirement) for each occupation. This provides an estimate of the percentage of the workforce who were employed in a specific occupation at the start of the year, who were no longer in that occupation a year later (not relating to retirement). Hence, that is the number of people who must enter that specific occupation during the year to replenish the ranks (before even allowing for retirements or occupational employment growth). Note that people who had changed employers over the course of the year but had the same occupation are not included within this definition of turnover, on the view that changing employers does not create an additional skill demand as employees can use their previous skills in their new job. Estimates were produced at the three-digit ASCO level for 81 occupations, though at this level some estimates of job turnover had high standard errors, making them unreliable. In these cases, the associated one-digit ASCO estimates were used.

DETAILED PROJECTIONS
TABLE 60: RETIREMENT
Source: Access Economics.
RATES BY DETAILED OCCUPATION,

2008 - 2018

[Image of graphical data removed]

TABLE 60: TURNOVER


Source: Access Economics.

BY DETAILED OCCUPATION,

2008 - 2018

[Image of graphical data removed]

TABLE 60: GROSS


Source: Access Economics.

REPLACEMENT RATES BY DETAILED OCCUPATION,

2008 - 2018

[Image of graphical data removed]

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APPENDIX D DETAILED PROJECTIONS FOR LABOUR MARKET DEMAND BY QUALIFICATION


NUMBER OF PEOPLE EMPLOYED WITH POSTGRADUATE QUALIFICATIONS
TABLE 60: PERSONS
EMPLOYED WITH POSTGRADUATE QUALIFICATIONS BY OCCUPATION,

2008 - 2018

[Image of graphical data removed]


Source: Access Economics.

TABLE 60: PERSONS

EMPLOYED WITH POSTGRADUATE QUALIFICATIONS BY INDUSTRY,

2008 - 2018

[Image of graphical data removed]


Source: Access Economics.

NUMBER OF PEOPLE EMPLOYED WITH UNDERGRADUATE QUALIFICATIONS


TABLE 60: PERSONS
EMPLOYED WITH UNDERGRADUATE QUALIFICATIONS BY OCCUPATION,

2008 - 2018
[Image of graphical data removed]
Source: Access Economics.

TABLE 60: PERSONS

EMPLOYED WITH UNDERGRADUATE QUALIFICATIONS BY INDUSTRY,

2008 - 2018
[Image of graphical data removed]
Source: Access Economics.

NUMBER OF PEOPLE EMPLOYED WITH DIPLOMA QUALIFICATIONS


TABLE 60: PERSONS
EMPLOYED WITH DIPLOMA QUALIFICATIONS BY OCCUPATION,

2008 - 2018

[Image of graphical data removed]


Source: Access Economics.

TABLE 60: PERSONS

EMPLOYED WITH DIPLOMA QUALIFICATIONS BY INDUSTRY,

2008 - 2018

[Image of graphical data removed]


Source: Access Economics.

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