The NCVER’s report Costs and benefits of education and training for the economy, business and individuals provides an analysis on whether there is a return on investment from completing VET qualification. The presence of benefits is an important factor in whether governments, businesses and prospective students will consider it worthwhile investing in training. In assessing the value of the benefits, the buyers of training – again, governments, industry and learners as primary stakeholders – will want to ensure the benefits accrued from training are at least equal to the price paid for training. The return on investment has to be high enough to justify the expenditure. Tabatha Griffin’s NCVER report reviews what we know about return on investment from training for these three key stakeholder groups.
Information about return on investment is also important for VET providers who must decide how they market their training offer based on benefits to buyers, and must select the mix of qualifications they offer based on the cost-benefit ratio that buyers perceive. In a contestable market, a provider is likely to find it tough going if it offers a qualification that is expensive to deliver and brings low returns to industry and students.
The limitations in our evidence base
Griffin tackles her task by looking at the costs and benefits for each of the primary stakeholder groups. As she makes clear in the report, it’s no easy task to measure costs and benefits. For example, researchers have typically assessed the return on investment based on completed qualifications. But that leaves non-accredited training and informal training out of the picture. And what price would you put on increased self-esteem that many students report as a training outcome? These are important questions and Griffin suggests ways in which future research could be designed so that it delivered comparable results across research studies.
Benefits for students
For students, the findings from the review are captured on page 23:
… the evidence suggests we can be confident that higher-level VET qualifications (advanced diplomas and diplomas) provide individuals with a good return on their investment. We can also be reasonably confident that certificate III and IVs provide students with a return on investment, especially when completed part-time. These returns are due to increased participation in the workforce and, to a lesser degree, increases in productivity. The returns from lower-level qualifications (certificates I and II) were consistently low, but completion of these may result in other, non-financial, benefits.
Those non-financial benefits can be very important for particular groups of students, and those who have experienced difficult life circumstances. Griffin lists training outcomes like:
… increased confidence, self-esteem and feelings of control. Social benefits such as social interaction, friendship, concepts of family, solidarity, a sense of belonging and being part of a supportive environment were also identified. These social benefits add to the reasons for VET’s long-term use as a labour market instrument promoting social inclusion and equity.
Social and economic impacts matter for governments
Governments are frequently interested in productivity benefits as well as equity benefits. Their interest in training is framed by both social and economic returns. It’s tricky to make comfortable generalisations about these broad returns, and that makes if difficult for policy makers to come up with policy positions that efficiently serve economic and social ends. On balance, the research reviewed by the NCVER suggests there is an economic benefit from training – the problem is that we haven’t had a consistent way of measuring that benefit and we don’t seem to have enough studies that provide grounded information about the economic benefits of training. That’s also true of social benefits, which a 2011 study by Deloitte Access Economics listed as:
- increased social cohesion, inclusion and tolerance
- reduced crime rates
- strengthened social capital
- increased quality of civic life (active citizenship, civic and political participation)
- increased charitable giving and participation in community service
- technological change (that is, improved ability to adapt to and use technology).
The win for business
For business, the returns seem a little clearer. On page 17, Griffin summarises findings from research studies which show increased productivity, which means a business is generating more income for every hour worked. The uncertainty for industry is how much of that additional income goes to workers whose income increases because they are better trained and therefore more productive. A starting point for answering this conundrum is contained in the findings of a Canadian study which according to Griffin’s summary:
… found that a one per cent increase in training was associated with increases in firm productivity ranging from 0.07% to 1.7%. Furthermore, these increases in productivity were larger than the effects on wages, suggesting that both workers and firms shared the productivity gains from training (and that all benefits seen by the firm are not consumed by the increased wages paid to employees).
Research designs need more consistency so we can use findings more effectively
The evidence looks favourable for the positive effects of training. But we do need more evidence collected within a consistent framework so we can have greater confidence in the claims that training benefits society, economy, business and individuals. We have personal stories and observations that convince us of the value in VET. But VET stakeholders are more likely to want, and have a right to ask for, evidence that tells the story objectively and more fully.