Towards a higher skilled New Zealand

The tertiary system is better aligned with our needs and with our urgent need to develop more skills.

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Speech to Annual Industry Training Federation National Conference, Hotel Intercontinental, Wellington

In March this year I met a young Modern Apprentice who has just completed four years training to gain his National Certificate in Carpentry Level 4. His name was Phillip Newport and he was the country's three thousandth Modern Apprentice.

When I met him he had just finished four years training and earned a National Certificate in Carpentry Level 4 through the Building Construction ITO. In every sense, his story is a symbol of what the Labour-led government, and you are doing to make a difference for individuals and for New Zealand.

Phillip, for example, has an ambition of building his own business.
He now has the foundation of knowledge and practical experience that gives his dream every chance of being realised. And until he is working for himself, his current employer has a well-qualified, well-trained staff member at a time when employers across the economy are struggling to find skilled staff.

Phillip is typical of the smart, young trainees coming through the system. At the end of last year there were nearly ten thousand Modern Apprentices in training. We had thirteen percent more than the year before. 176-thousand trainees took part in industry training last year - ten percent more than in 2005. They were working for nearly 35-thousand employers. Those trainees are learning valuable skills, skills that will work for them and for their employers long into the future.

Skills make a difference. Skills are crucial to higher incomes for individuals. Skills are crucial to transforming our economy.

If we want to create a high-value, knowledge-based economy capable of competing in a globalised market, we need more skills.

We need a culture of promoting more skills across the workforce - not just in young people at the threshold of their careers; not just among those looking to switch career paths, but across the workforce, from young staff like Phillip starting out to management expertise at the top.

Today I want to convince you that we need to do more to work together on improving skills; I want to outline the progress we are already making. And I want to say that those of you on the front line of industry training have a crucial role in the economic future of New Zealand.

It is no coincidence that I am both the Finance Minister and the Minister of Tertiary Education.

One of my main jobs as Finance Minister is to prepare New Zealand for the future. That's why, for example, we have created KiwiSaver, to boost our savings rate and ensure more New Zealanders have adequate financial resources when they retire. But critical as our savings challenge is, it is far from the only long-term challenge we face.

Ahead of us we can see a world where the demand for skills will only increase. As economies become ever more sophisticated and ever more integrated, we will compete for skilled and talented people against countries all over the globe.

And if we want to enjoy rising incomes, we will have to sell to the world products and services capable of earning premium incomes. Higher value economic production comes from innovation, it comes from talent and it comes from knowledge.

Consider the exports of a country like the US - economists have pointed out the weight of exports from the US in 2000 was the same as in 1900. But the total value of those exports has increased thousands of times. The difference has been made up by knowledge, by skills, and by ideas.

Skills are important not only for our overall economic wellbeing; they make the critical difference in life outcomes for individuals too.

It is a moral fundamental that we should provide for the least affluent in our community; that we should try to protect our most vulnerable. And we do that in many ways; through our social welfare system and through our community services. But the single most crucial difference we can make for someone in a low income home is to develop their skills.

Skills put people in demand. Skills mean a choice of jobs. Skills give people a stake in their community and a sense they are making a valuable contribution.

Our challenge is to keep up with rising demand for more skills training and to ensure we have a skills training system capable of meeting the needs of students, the economy and communities.

When I came to this conference last year I outlined some crucial changes this government is making to the way we invest in tertiary education. Since then, those plans have become a reality. We have reformed the tertiary education system.

It's now much more driven by the needs of those who have a stake in it. There is more focus on the quality of what we produce. And the system is better focused on our national goals and priorities. In short, the tertiary system is better aligned with our needs and with our urgent need to develop more skills.

And the key to the future of skills development is the national strategic leadership role of Industry Training Organisations. This is now better recognised. It plays a critical role in linking industry and employer needs, which is at the heart of the reforms.

I want ITOs to be the accepted voice of employers in their industries.

With the changes to the tertiary education system there is both the scope and the need for ITOs to step up to this role.

In this year's Budget the government contributed $16 million to support ITOs leadership role though a strategic leadership component. It is not just aimed at assisting with the development of ITOs but also with their strategic relationships with the wider tertiary sector - a crucial ingredient if we are to ensure that the whole of the tertiary sector is responding to the skills needs identified by industry.

In short, it is a greater focus on the bigger picture on your role as representatives of stakeholders in the new tertiary system - as employers and employees.

The Industry Training Federation has already played a constructive role working with the Tertiary Education Commission on how your sector will operate in this new environment.

I know Industry Training Organisations are beginning discussions with the Commission around the first set of plans - these will set the scene for funding.

Around the country many of you have taken part in regional processes. This has meant working with others to look at the needs of each region and produce regional statements. Those statements have a crucial role when the Commission sits down with tertiary organisations to develop investment plans.

So the tertiary reforms are moving along and I am pleased with the role of industry training organisations.

What we are seeing as a result of this co-operation is a skills system that is delivering - and improving. ITOs have done a great job in the supply of industry training. There has been huge growth and the government is proud of the work you are doing in this area.

We know of success when we go and see employers like Colin Bird - he is the employer behind Phillip Newport, the builder I started off by talking about today. He employs three apprentices - and he says the training system is far more effective than it was back in his day, when he trained. He said he loves training young people and seeing them pick up skills and watch their keenness grow.

And of course, employers value the skills we are developing.

Everywhere we go there is a demand for skills. We are trying to meet that demand. Over 35 thousand National Certificates were completed by industry trainees last year. That's over a third more than the year before.

The success of industry training is a good reason for backing it - that's why the government spent an extra $53 million increase for industry training in this year's budget. That's a 7.2 percent increase in funding for industry training.

I want to stress this increase, because it is not inevitable. I am constantly attacked for spending too much. (It's ironic, because I am also criticised for not spending more of the surplus). But we are entitled to make assumptions when we hear calls for me to cut spending to bring down the exchange rate or interest rates. The assumption we can make is that the people saying I should cut spending would do so themselves, given the chance. And that means they would not go ahead with increases such as an extra fifty million dollars for industry training. It means they might cut it in future.

We can't afford to cut industry training. The Labour-led government has shown its commitment.

For all the success I've talked about, the scale of what we need to do suggests we need to step up our skills training to keep increasing productivity and to grow our competitiveness.

Take the figures released last week on workplace literacy and numeracy, for example. They showed nine hundred thousand New Zealand employees have difficulties keeping up with the increasing and changing literacy demands of the workplace.

That doesn't mean they can't read and write. It means the demands of the workplace are continually rising and they need to keep developing their skills to keep up.

We are doing a lot across the economy and across the tertiary sector as a whole. But we could do better at tying it together. We could do better at getting different pieces of our system working together to produce better quality and better value. And we could do better at inspiring New Zealand with our skills challenge.

So our next step should be a skills strategy.

A strategy would take in industry training and workplace learning and an understanding of the specific industries where we must focus.

A strategy would target those staggering numbers of people struggling with literacy and numeracy in the workplace. It would increase the number of learning opportunities in literacy, language and numeracy.

And a strategy would inspire and motivate people to want to learn.

And I would see a strong role for industry training organisations in building the capacity of the sector to ensure we increased skills as much as possible.

I am encouraged by the strong signals the federation has sent. Last week, the Industry Training Federation was one of four partners in the publication of the Key Steps Forward for Workforce Literacy strategy which sets out some high targets to move forward.

The government is committed to delivering an improvement in the literacy skills of New Zealanders and we will make decisions in September on how this work will be taken forward.

Already we have supported the Industry Training Organisations pilots. Eleven ITOs are now working with industry to identify the literacy, language and learning needs of trainees in the workplace. More than four and a half thousand trainees have taken part so far.

Literacy steps are a start, but there is much more we can do, and I want to see us develop a strategy to guide the way forward.

There is no cap at all on the point where skills training stops. It is also moving people beyond basic workplace skills, to more advanced and sophisticated levels.

At the small business summit last week, a new study was released that looked, in part, at the skills of small business managers. Our small business managers are much less likely than large business managers to engage in regular skills training and development. That helps explain, in part, why those managers are in small businesses.

And even in larger enterprises, when NZ Trade & Enterprise looked at the barriers to growth of our large companies, one stand-out issue was the small pool of management talent with the ability to develop large multi-national businesses. The government has invested heavily in correcting that issue in recent years, in partnership with our leading management schools. But it shows the value and importance of identifying where we need to increase skills .. and that we need to apply ourselves at all levels.

A strategy would also look at the right balance between funding by employers, students and the public. If we want to motivate people to develop their skills, we need to ensure the signals are right and that we don't have avoidable barriers in the way.

We have overhauled the tertiary education sector with a strong strategy aimed at meeting New Zealand's needs.

The wider skills sector could benefit from a similar approach.

I can tell you I have asked officials to begin looking at this issue and I expect to make announcements before too long.

I believe industry training organisations are well placed to play a leadership role in a fresh strategy.

Industry training organisations are a cradle of innovation and their connections to industry are crucial.

I started out by talking about the experience of the three thousandth Modern Apprentice. I talked about the potential contribution from the investment the government, his employer, his training organisations and Phillip himself have all made.

The focus needs to remain on the individual case studies.

As we talk about the best way to configure the industry and the best way to work together to develop skills, there is a very clear purpose: It is the development of a brighter future for Phillip and those who come after him; a brighter future brought about the stronger economy skills can build and the stronger role a well-trained workforce can play within it.

ENDS

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