An Investment in Productivity and Inclusion

The Economic and Social Benefits of the TAFE System
by Alison Pennington

The COVID-19 pandemic has ushered in an era of unprecedented disruption and transition. Increased public investment in the skills and earning capabilities of Australians will be critical to our post-pandemic recovery.

This report from the Centre for Future Work finds despite chronic underfunding and failed market-led VET policies, Australia’s historic investment in the TAFE system continues to generate an enormous and ongoing dividend to the Australian economy. The TAFE system supports $92.5 billion in annual economic benefits through the direct operation of TAFE institutes, higher incomes and productivity generated by the TAFE-credentialed workforce, and reduced social benefits costs.

“The Australian economy is reaping an enormous flow of economic benefits from a VET ‘house’ built by the TAFE system. But the ‘house’ that TAFE institutes built is crumbling. If Australia wants to secure the benefits of a superior, productive TAFE-trained workforce as we prepare for post-COVID reconstruction, the damage must be repaired quickly,” said Alison Pennington, Senior Economist with the Centre for Future Work and author of the report.

The report adopts a multidimensional approach to measuring the wide economic and social benefits of the TAFE system resulting from Australia’s historic investments in public vocational education. Over $6 billion in economic activity and 48,000 jobs are supported by the direct operation of TAFE institutes and the TAFE supply-chain. Through its accumulated contribution to the employability and skills of Australians, the TAFE system generates another flow of benefits worth $84.9 billion per year in higher incomes and productivity. Those benefits are shared by workers in higher incomes, firms in higher profits, and federal and state governments – which receive $25 billion per year in extra tax revenues. Finally, another $1.5 billion in fiscal savings are enjoyed by governments through reduced costs for health and welfare benefits for TAFE graduates. Altogether, the TAFE system drives $92.5 billion in benefits per year – equal to almost 5% of Australia’s GDP.

“Australia will squander the demonstrated economic benefits generated by our investments in the TAFE system, and unnecessarily limit our post-COVID recovery if we don’t act quickly to reinstate the critical role that TAFE plays in the VET system.”

Key Findings:

  • Australia’s historic investments in quality TAFE education supports a combined and ongoing flow of total economic benefits worth $92.5 billion to the Australian economy in 2019 — 16 times greater than the annual ‘maintenance’ costs Australia currently reinvests in the TAFE system.
  • The presence and activity of TAFE institutes ‘anchors’ over $6 billion per year in economic activity and 48,000 jobs from the direct operation of the TAFE system and its supply chain, and ‘downstream’ consumer spending impacts.
  • The TAFE-trained workforce generates $84.9 billion per year in higher incomes and business productivity. $49.3 billion is paid in additional earnings to TAFE-credentialed workers (relative to earnings of workers without post-school training); businesses receive $35.6 billion in increased profits from a more productive TAFE-trained workforce.
  • The costs of delivering TAFE are modest – only $5.7 billion per year, or 0.3% GDP. Extra tax revenues received by governments thanks to the superior productivity and incomes of TAFE-trained workers alone are worth $25 billion per year: 4.4 times more than the total costs of running the TAFE system.
  • The TAFE system increases employability and lowers unemployment. TAFE graduates enter the labour force with better employment prospects and skills. The increased labour force participation and employability of TAFE graduates corresponds to additional employment of 486,000.
  • The TAFE system promotes wider social benefits critical to addressing inequality. TAFE helps ‘bridge’ access to further education and jobs pathways in regional areas and for special and at-risk youth groups. TAFE students are more likely to come from low-income households and identify as Aboriginal compared with private VET providers.

“Major public skills investments will be best coordinated by TAFE institutes as the longest-standing and most reliable ‘anchors’ of vocational training and must be at the centre of an economic reconstruction process.”

“By providing bridges to further education and jobs for regional, low-income and at-risk youth groups, the TAFE system is critically important to addressing systemic inequality in Australia’s economy and society.”

Full report