Apprenticeship training and productivity growth: a case study of the Australian construction industry.

• Author: Chancellor, Will
• Position: Contributed Article - Report

Abstract

This article explores the effect of apprenticeship training on productivity in the Australian construction industry. Using state-level data, the correlation between the level of training and productivity is analysed. The results are then used to build on anecdotal evidence to suggest a firm, pre-existing, positive relationship between training and productivity. In addition, the level of apprenticeship training in Australia is related to the composition and general characteristics of the Australian construction industry.

1. Introduction

   The productivity benefits of education and training have been regularly studied in research on the construction industry. In most cases, these studies have formed a small part of a wider study; they have rarely involved quantifiable evidence. Anecdotal evidence tends to suggest that construction industry education and training promote improvements in skill, quality, and technical efficiency, which lead to long-term sustained productivity growth (McGrath-Champ et al. 2010 Banks 2002). While these studies have reached sensible conclusions, they do not focus on the correlation between training and productivity. Specific analysis is required to ascertain whether a statistical relationship exists between these variables. In this way, it will be possible to determine the degree of influence of education and training on construction-industry productivity. A large intake of apprentices-everything else being equal--will lead to a higher proportion of qualified workers, resulting in an improvement in productivity.

   Construction-industry education and training in Australia has in the past seen a number of changes, particularly since the introduction of the National Apprenticeship Assistance Scheme in 1973 (Knight 2012). This scheme was revised in the 1990s through the use of government incentive payments (Knight 2012). The ability of secondary school students to commence trade apprenticeships in their final years of study is just one example of these revisions (McGrath-Champ et al. 2010). Another significant change occurred after the 2007 election, when a new Australian government policy committed $2.5 billion to improving apprenticeship training, including building new training centres in secondary schools (Rudd 2008). This investment coincided with the Global Financial Crisis, when the Australian government engaged in significant stimulus spending; it suggests that policy makers were generally aware of the economic benefits of training apprentices. Due to the temporary nature of such stimulus spending, benefits from this investment were short-lived with limited indication of sustained future spending (Swan 2013).

   Policy change in the 2014-15 Australian Budget indicates reduced investment in training and apprenticeship schemes, including the cessation of the apprenticeship incentive programme--'Tools for your Trade' (Commonwealth of Australia 2014). Toner (2003) argued that reductions in investment have had an impact on structured construction-industry training in Australia. In addition to reduced investment in training, a proportion of Australian apprentices are, supposedly, being hired to fill labour shortages. They are said to be completing low-skill tasks and are often receiving very limited training (McGrath-Champ et al. 2010).

   Researchers and policy makers appear to support the idea that education and training have long-term implications for productivity; however, the lack of quantitative evidence suggests that there are challenges for policy development. Policy decisions have shifted significantly from substantial funding commitments to apprenticeship training in 2007, to the cessation of a minor subsidy program in 2014. This shift is an indication that the relationship between training and productivity is not completely understood or acknowledged in Australia.

   The purpose of the article is to explore the effect of apprenticeship training on productivity in the Australian construction industry. The correlation between these variables is analysed with state-level data. The results are then used to explore anecdotal evidence to understand better the relationship between construction-industry training and productivity at the state level. The article is structured as follows. The first section provides a general background. This is followed by sections on the methodology, the data used, and the results of the study. Conclusions are discussed the final section.

2. Background

   Australian research specific to the relationship between construction productivity and apprentice training tends to be based on anecdotal evidence. In most instances, productivity research is more broadly focused, with analysis of training and education forming a smaller part of wider studies. Other researchers attempted to measure the drivers of construction productivity at the firm level, but they did not attempt to correlate these findings and productivity estimates. For example Hughes and Thorpe (2014) investigated the drivers of Queensland construction productivity from a microeconomic level by surveying construction-industry project managers and scoring factors likely to affect construction productivity. The factors identified as affecting construction productivity from a construction-industry project manager's perspective include the re-working of tasks, incompetent supervisors, incomplete drawings, and work overload (Hughes and Thorpe 2014). Hughes and Thorpe (2014) suggested that training might mitigate some of these barriers to productivity growth, but they did not focus on this relationship, and they did not specifically attempt to analyse the correlation between these variables.

   Toner et al. (2001) investigated construction productivity levels in an Australian context. However, they focused on the constraints to productivity including firm size, changes to industry composition, reduced investment in training, and the need to comply with occupational health and safety standards. While Toner et al. (2001) highlighted problems with construction training schemes in Australia throughout the 1990s, their relationship to productivity was not empirically analysed. Banks (2002) also accepted a preexisting relationship between training and productivity, and discussed the ability of the Australian education and training system to remain effective in sustaining productivity growth. Construction education and training was discussed by Engineers Australia (2011) in the context of improving construction productivity and overcoming skill shortages. As with other Australian examples, the links between productivity and education, and between productivity and training were discussed anecdotally.

   A quantitative approach was taken by Li and Liu (2010) who provide the most robust example for Australia of state-level construction productivity estimates. They did this by using a Malmquist Data Envelopment Analysis (DEA) based on a total factor productivity (TFP) method and official data from the Australian Bureau of Statistics. As with other Australian research, Li and Liu (2010) considered possible factors that may have influenced construction-industry productivity and efficiency, and they noted weak productivity growth. Training is cited by Li and Liu (2010) as one of several factors that could be used to improve technical efficiency.

   International productivity research using DEA provides some further depth on the estimation of construction-industry productivity growth. Chau (2003) used DEA to analyse the Hong Kong construction industry and found several factors, including education, that affect productive efficiency. Xue et al. (2008) used a DEA-based approach to estimate Chinese construction industry productivity by region; they concluded that future research should investigate the causes of efficiency and inefficiency in construction. Chau (2003) and Xue et al. (2008) used...