The demand for training

This paper was presented in Sydney in September 2008 at a seminar conducted by Skills Australia and the Academy of Social Sciences.

This paper examines the demand for training. It concentrates on the factors that affect individual and employer demand and points out that accredited vocational education and training (VET) needs to be considered in the context of extensive use of non-accredited and on-the-job training.

Key messages

• The demand for training by individuals depends on the premium attached to skill, as well as the costs of the training, which may be split into direct costs - such as tuition fees - and the indirect opportunity costs.
• The demand for training by employers is driven by the need to acquire skilled labour (in the case of apprenticeships), and by business needs in most other cases.
• The demand for training by employers is variable across industries and tends to be much higher for large organisations than for small enterprises. The demand for unaccredited training is also much larger than the demand for accredited training.
• The distortion to the prices that individuals pay for training caused by government intervention means that governments do have to steer the provision of training places. Here, they should be guided by labour market signals, in particular, by vacancies, unemployment and wage rates.

Tom Karmel
Managing Director, NCVER