Industry Training stocks and flows... and the effects of the economic downturn

Introduction

1.1 Background

This paper examines the new starts, terminations and other exits in industry training, looking at the relationship between industry training take-up and the business cycle. Because participants in industry training must have jobs to enter training, and because industry shares some of the cost of training, it is expected that flows of learners into, within, and out of industry training will match changes in the business cycle. Funding for training provided by the Government is allocated on the basis of duration of study and study load, so this information will help the Government to forecast demand for industry training throughout the business cycle more accurately. ¹

This paper builds on previous statistical analyses published by the Ministry of Education on industry training and Modern Apprenticeships. ²

Industry training

Industry training is formalised learning that occurs in the workplace. It is intended to provide employees with training and learning that is linked to national qualifications through the New Zealand Qualifications Framework. It is funded partly by industry, and partly by Government through the industry training and Modern Apprenticeships funds.

Industry training is administered by industry training organisations (ITOs), who purchase training and set standards for assessment. ITOs create qualifications for industry, and arrange for training and assessment to occur in and out of the workplace. Each ITO covers a specific set of industry areas: some have wide industry coverage, while others cover a narrow range.

In the case of industry training, participants are mostly already employed when they enter training. Modern Apprentices, who are mostly 16 to 21 years old, are generally not employed before starting training, but enter employment when they take on their training. A proportion of the funds spent on Modern Apprenticeships is intended to pay for brokerage services for young people wishing to become apprentices. Modern Apprentices are also supported with additional peer mentoring and training support services, provided by Modern Apprenticeships Coordinators.

Flows in industry training

Flows of participants into and out of industry training may depend on a number of factors. Training varies in duration from trainee to trainee, and from workplace to workplace, because industry training is conducted at a pace suitable to the needs of the workplace. This complicates a flow analysis, as the flow of participants is not as clearly defined as it is in provider-based settings, where there are more rigid terms, study periods and durations.

1.2 This study

This study examines starts, terminations and other exits from industry training. The Government aims to increase the proportion of qualification completions in industry training to maximise return on its investment. Withdrawals represent an opportunity cost and a real cost to Government (as well as trainees and employers), and so it is important to understand what drives withdrawals. The higher the proportion of programme exits that are terminations and unexplained exits, the lower the proportion of exits due to programme completions. That is, completions go down as terminations increase.

The data used in this study is collected for administrative purposes by the Tertiary Education Commission (TEC). The industry training performance management system (PMS) records trainee numbers from 2001.³

The period 2003 to 2009 covered in this study encompasses a period of strong economic growth, the start of the downturn, and the economic crisis. While the effects of the downturn were obvious in New Zealand in 2009, the downturn evidently affected some industries earlier than this. As such, this study may be able to provide insight into the response of industry training to future changes in the business cycle.

Footnotes

1. See appendix table 1 for government and industry funding in industry training.
2. See Mahoney 2009 (a), 2009 (b) and 2010.
3. A window of two years has been allowed to ensure that learners are commencing training for the first time, which is why this analysis starts from 2003.