Labour mobility and vocational education and training in Australia

Labour mobility is a core element of a well-functioning and flexible labour market. Although mobility is considered to be generally desirable, this is not always the case, as individual job-movers can become better or worse off after their move. This paper examines the factors which influence ‘good’ or ‘bad’ mobility.

Using data from the Student Outcomes Survey compiled by the National Centre for Vocational Education Research (NCVER), the researchers examine the types of mobility and outcomes ensuing for those who have just completed a vocational education and training (VET) course in Australia over the period 2001—11. The different types of mobility considered include changing industry sector only, changing occupation only, and changing both sector and occupation. To determine whether job quality improves with mobility, the researchers have compared several measures of quality before and after a VET course, focusing on the association between mobility and better pay, better occupational status, a higher chance of full-time employment and a lower chance of casual employment.

Key messages

• Consistent with other labour mobility studies, it is the younger age groups and those with higher-level qualifications who are more mobile.

• Around 30% of all people completing a VET qualification change their occupation, industry sector or both within six months of finishing their studies.

• Individuals with VET qualifications who change their occupation but stay in the same industry sector have the best labour market outcomes.

• Industry sector mobility is rarely beneficial to individuals, although they may be making this change to realise benefits in the longer-term.

The benefits of changing occupation and the drawbacks of changing industry have an apt ‘human capital’ interpretation. Mobility is always a little risky, because the individual leaves behind the skills, knowledge and networks associated with a particular job. On the other hand, moving to a new occupation (particularly after completing a higher-level qualification) signals the acquisition of ‘new technology’. Thus we see the benefits of moving to a new occupation but remaining in the same industry — the pay-off from acquiring new skills without the penalty of losing sector-specific knowledge and networks.

Tom Karmel

Managing Director, NCVER

The main purpose of this research is to document and examine statistically the nature of labour mobility, with particular reference to the quality and outcomes of labour mobility during the last decade in Australia. Using data from the 2001—11 Student Outcomes Surveys and multivariate regression analysis, the research focuses on the employment of vocational education and training (VET) participants before and after the completion of their VET study. We define different types of mobility and examine how their prevalence is associated with different levels of vocational education and training. We define different labour market outcomes following each type of mobility to reflect the quality of the job obtained after the VET course. The objective is to derive an empirical measure of ‘good’ versus ‘bad’ mobility.

Labour mobility is one of the core elements of a well-functioning labour market. It is an essential part of the ability of an economy and a labour market to adapt to changes in the pattern of jobs and of worker skills and preferences. Labour mobility is a complex concept, principally because people change jobs for a variety of reasons, in different ways, and with different outcomes for their lives and careers. The literature abounds with research about the way people move geographically, between employers, occupations, industries, jobs, types of contract, hours worked and, in the most extreme manifestation of mobility, the way they either join or leave the labour force. Labour mobility can occur for positive or negative reasons and can also have positive or negative outcomes. It is crucial for policy to distinguish between them.

Labour mobility has been traditionally perceived to be ‘bad’ if it has been involuntary (for example, a lay-off) or if it has led to other less desirable labour market outcomes, such as less stable and secure employment, and ‘good’ if it has been voluntary (for example, leaving for a higher-paying or more interesting job) or if it has led to other preferred outcomes. It could equally well be argued, however, that mobility that may be bad for workers (for example, a lay-off during a recession) may be good for their employers, if, for example, this were the only way to avoid bankruptcy. Clearly, labour mobility involves different players, so what may be good mobility and what may be bad mobility will often depend on the point of view of the observer.

We define different types of mobility to reflect the different changes in human capital associated with changing jobs. These include changing industry sector only, changing occupation only, changing both sector and occupation and, finally, as a reference category, changing neither occupation nor industry sector. We explain that these changes impact differentially on different types of human capital. For example, an occupation-only change means that the new job after vocational education and training involves doing something new or better (what the literature calls a ‘new technology’) in the same sector as before the VET course. The implication is that the job change has improved occupation-specific human capital without harming industry sector-specific human capital (that is, networks and experience). In contrast, an industry sector-only change means that the new job after the VET course involves doing the same job but in a new industry sector. Here the implication is that the job change involves the loss of advantages stemming from having established networks and knowing one’s own sector. 

To assess whether mobility after participating in vocational education and training has been good or bad we examine whether job quality improves with mobility by comparing several measures of job quality before and after a VET course, focusing on the association between mobility and better pay, better occupational status, a higher chance of full-time employment and a lower chance of casual employment. We argue that a major indicator of the quality of a job is whether it pays well. Hence our first indicator is pay. In recognition of the view that the quality of a job is judged on more than the wage it offers, we incorporate into the research an indicator of the status of the occupation, the ANU Status Scales index. The ANU index captures other, primarily non-pecuniary, aspects of the job. The other two indicators we use are whether mobility has led to a full-time job, which is considered by a large proportion of the workforce to be a preferred type of employment, and whether mobility has led to a non-casual employment contract, which is also considered by a large proportion of the workforce to be a preferred type of employment. We also differentiate between what happened before the Global Financial Crisis (GFC) and after, by splitting our sample between 2001—07 and 2008—11. In several instances, where we judge more detail could help, we split the second part of the sample between 2007—08 (the core financial crisis years for Australia) and 2010—11 (the post-financial crisis years for Australia).

Our estimation strategy consists of two major estimation parts. The first describes the incidence of mobility by level of VET qualification. It also examines how well vocational education and training fits the expectations of the student and the job the student obtains after the VET course. The second set of estimations examines the association between each of the four specific types of mobility and our selection of labour market outcomes, which we interpret as job-quality indicators, in order to distinguish between good and bad mobility.

The first set of estimations involving the examination of the incidence of different types of mobility suggests that VET completion at certificate III level and above is linked to higher levels of all types of labour mobility, especially with both occupation and sector mobility. Estimation results and descriptive data also suggest that mobility of all types decreased before and increased somewhat after the onset of the financial crisis, indicating that, following the slowdown of the economy in 2008—09, people who wanted to stay in employment after a VET course were more likely to have to change occupation and/or sector in order to achieve this, or that lack of opportunities restricted the mobility of the least able. However, the composition of those who moved remained largely unchanged, suggesting that the financial crisis simply accelerated mobility but did not change its structure.

The second set of estimations produces three main messages. First, occupational mobility has been shown to be the main route for VET-trained workers to improve their labour market position. Our estimation results are in line with international evidence which suggests that occupation changes are the manifestation of workers ‘improving their technology’, and that workers who change occupation are rewarded for their improved productivity. Our results show this to occur in all of the dimensions of labour market outcomes investigated. This is the side of mobility where the market appears to work well, in that it encourages change that also benefits the worker.

Second, our research results extend to sector mobility. We show that sector mobility is rarely beneficial to the worker. The intuition is that the worker who changes sector leaves behind all the valuable networks that are physically anchored in their original sector and cannot be of use in their destination sector. Moreover, our research shows that occupational mobility can confer fewer benefits when it is combined with sector mobility. This result is present in all the dimensions of labour market outcomes we investigated.

Finally, we show that the financial crisis has had a negative effect on the outcomes of mobility. Occupational mobility, which improves the technology of the worker, confers fewer benefits after the financial crisis. Sector mobility, which deprives the worker of their past networks, results in greater losses. The results surrounding the financial crisis period are in line with the view that the cyclical downturn has intensified the labour market stresses generated from the longer-term structural changes in the Australian economy.