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Are Broad-Based Vouchers an Effective Way to Support Life-Long Learning? Evidence from an Australian Reform

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Abstract

Increasing mature-age access to education and training in a way that is responsive to changing labour market needs is a key policy challenge. In this paper we examine the impacts of a unique reform in the Australian state of Victoria that aimed to meet this challenge by introducing a broad-based voucher for those 25 and older. In effect, the reform uncapped public course-level funding and linked it to individual student choice instead of centralised funding allocations. Using national administrative enrolment data and difference-in-differences estimation, exploiting the continuation of existing centralised funding models in other states, we find that the voucher increased mature-age vocational education and training participation and improved the alignment of course enrolments with measures of prevailing skill needs, including enrolments of disadvantaged groups. Our study provides first evidence on the use of broad-based vouchers in vocational education and training to expand access to mature-age learning in a demand-responsive way. These results provide support for policies that put student choice at the centre of efforts to lift mature-age access to training, which is especially important for countries, such as the United States, that have traditionally funded vocational education and training through centralised allocations.

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Notes

  1. Under Section 5 of the Act, this means both identifying the types of programs needed to meet local skill demands and appropriate program content. Recipients will be required to do this by annually assessing local skill needs and setting tailored training plans.

  2. The United States has recently expanded the number of subsidised places available for adult vocational education under the June 26, 2018 re-authorisation of the Perkins Act.

  3. In terms of young peoples’ education choices, for which there are many more studies, there is evidence to suggest that governments are better-informed of skill-shortages than prospective students (e.g. Lavy 2006; Jensen 2010; OECD 2010; Productivity Commission 2012), especially those from disadvantaged backgrounds (Hastings and Weinstein 2008), or may place higher weight on consumption than labour market benefits (e.g. Oreopoulos and Salvanes 2011).

  4. The voucher for 15–19 year-olds was introduced at the same time as the reforms for 25 +. The reform was different in that the 15–19 year-olds were not required to enrol at a level that was higher than the level of previously acquired qualifications.

  5. Older workers may also receive less support from employers to undertake VET; see, e.g., Taylor and Urwin (2001) for the UK, and Wooden et al. (2001) for Australia.

  6. For example, in the state of South Australia, the second state to implement reforms from July 2012, the voucher only covered select courses that were on the government’s skill needs list.

  7. Growing recognition of skills deficiencies in the Australian labour market in the late 1980′s to early 1990′s, and high rates of youth unemployment (particularly during the 1990–1991 recession), led to the establishment of the National Training Board (1990), the National Board of Employment Education and Training (1991), and the Australian National Training Authority (1994).

  8. In practice, direct tuition fees were regulated according to course level in each state, with a prescribed hourly rate and a minimum and maximum total annual fee. In Victoria, hourly fees for lower-level courses (certificates I and II, equivalent to ISCED2) were up to $1.51 per hour in 2011, with a minimum total fee of $187.50 and a maximum total fee of $875. The highest fees were for Diploma level courses—up to $3.79 per hour, minimum total fee of $375 and a maximum total fee of $2000. Many students were also eligible for reduced fees, e.g. on the grounds of receiving Income Support (welfare).

  9. We report data for ages 25–49 (and not 25–54 the age range that is the focus of the study) because this is the only age range for which historical data for is available over this extended timeframe.

  10. Exemptions to the up-skilling requirement were made for a small number of select individuals, including those enrolling in foundation courses (e.g. basic skills), courses undertaken as part of an apprenticeship, and courses undertaken by students with special circumstances (including asylum seekers, and people referred for training under the National Partnership for Single and Teenage Parents, VDEECD 2012).

  11. The latter was most likely driven by negative media that concentrated reporting on the growth in courses that were unrelated to skill shortages, especially courses that prepare students for work as health and fitness trainers and beauty therapists.

  12. Some national reforms were implemented between 2009 and 2012 that continued the traditional supply-driven model of VET subsidies (e.g. Noonan 2016, p. 8); see Appendix A for a summary.

  13. VET participation rates outside of Victoria increased by approximately 0.5 percentage points between 2008 and 2010, which is almost identical to the annual average year-on-year absolute variation in VET participation rates reported outside of Victoria for the period 1993–2008.

  14. https://www.jobs.gov.au/national-state-and-territory-skill-shortage-information.

  15. Estimated earnings premia for field-of-study and qualification combinations are available upon request from the corresponding author.

  16. While myopic behaviour in theory can lead to short-term volatility in returns to different VET courses, consistent with Freeman’s application of the cobweb model to Engineer graduates (Freeman 1976), we do not observe this in our measure of course graduate earnings.

  17. Grogger and Eide (1995) and Avery and Turner (2012), for example, do something similar to estimate returns to different college majors in the US. Where there are sparse cells, results estimated with course level and 2-digit field of study combinations are used. Field of study is 4-digit Australian Standard Classification of Education (ASCED).

  18. See http://www.ncver.edu.au/sos for further details on the SOS.

  19. See Table 12 of Total VET students and courses 2015, NCVER.

  20. Where there is only one treatment event, this is equivalent to the leads and lags model presented in Angrist and Pischke (2009).

  21. We also estimate conditional difference-in-differences model (Eq. 1), where we use interstate enrolment as a dependent variable (coded 1 for a residential address that is from a different state to where the training is conducted, 0 otherwise). The treatment effects are individually and jointly insignificant.

  22. To test this, we re-estimate Eq. (1) with two post-reform periods 2010 and 2011–2012, corresponding to the years of partial and full rollout of the voucher. Wald test statistics of differences in treatment effect parameters for the two periods are F-statistic = 10.84; Prob > F = 0.013 and F-statistic = 4.93; Prob > F = 0.062 for national skill shortage and expected returns respectively.

  23. Test statistics for joint significance of pre-treatment trends (\({\delta }_{2006}={\delta }_{2007}={\delta }_{2008}={\delta }_{2009})\) are F-statistic = 41.415; Prob > F = 0.000 and F-statistic = 71.57; Prob > F = 0.000 for national skill shortage and expected returns respectively.

  24. Test statistics for pre-treatment trends excluding 2006 (\({\delta }_{2007}={\delta }_{2008}={\delta }_{2009})\) are F-statistic = 2.78; Prob > F = 0.130 and are F-statistic = 3.84; Prob > F = 0.075 for national skill shortage and expected returns respectively respectively.

  25. We also estimate models with quadratic time trends. The treatment effects are similar to those with linear time trends in magnitude, but are less precisely estimated, possibly because it is difficult to estimate any quadratic diverging trend precisely with only four pre-reform data points (Figs. 1 and 2).

  26. See Pischke (2005) for a discussion.

  27. We choose to report sensitivity test results for linearly diverging pre-reform trends because there are too few pre-reform observations to be able to precisely estimate any non-linear diverging trend, especially given their volatility (Figs. 1 and 2). Estimates with quadratic time trends are similar in magnitude, but are insignificant for expected returns. See Table B1 in appendix B.

  28. Note, however, that the treatment effects on expected returns estimated for people from non-English speaking backgrounds are significantly less than zero when common trends are assumed, and the pre-treatment period extends to either December 2008 or December 2009 (Tables C5 and C6).

  29. In terms of the Victorian budget impacts, prior to 2009, the Victorian budget of VET subsidies was approximately $800 million per annum, which increased to $1.3 billion in 2011/12, which exceeded the anticipated cost of $900 million per annum (VDEECD, 2012).

  30. Employment rates varied by less than 0.3 percentage points within the populations aged 25 to 54 in Victoria and the remainder of Australia between 2008 and 2012.

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Acknowledgements

This research was funded in part by the National Centre for Vocational Education Research (NCVER) under the 2014 National Vocational Education and Training Research Evaluation (NVETRE) service agreement. We thank NCVER for their financial support, for providing the data and feedback on earlier drafts. NCVER were not involved in any other way and the findings and views reported in this paper are those of the authors and should not be attributed to them or the University of Melbourne. We also thank seminar participants at numerous presentations for helpful feedback on earlier drafts.

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  1. Melbourne Institute of Applied Economic and Social Rearch, The University of Melbourne, Melbourne, Australia

    Cain Polidano, Justin van de Ven & Sarah Voitchovsky

  2. National Institute of Economic and Social Research, 2 Dean Trench St., London, UK

    Justin van de Ven

  3. Graduate Institute, P.O. Box 36, 1211, Geneva 21, Switzerland

    Sarah Voitchovsky

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  1. Cain Polidano
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Polidano, C., van de Ven, J. & Voitchovsky, S. Are Broad-Based Vouchers an Effective Way to Support Life-Long Learning? Evidence from an Australian Reform. Res High Educ 62, 998–1038 (2021). https://doi.org/10.1007/s11162-021-09631-1

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