Uni v trade: Which pays better?

In less than six months, thousands of young Australians will be finishing Year 12 and moving on to the next stage of their lives, which will begin with making a decision.

Typically, they will choose between obtaining a university degree or undertaking vocational education training (VET).

Most will choose the former.

Recent data from the Australian Bureau of Statistics shows 63% of people aged 15-74 have a post-school qualification, roughly split between bachelor's degrees and TAFE certificates.

In the younger generations, bachelor's degrees are the clear winner.

What's losing out, however, is the trades sector. Australia faces a serious shortage of skilled tradies.

According to the National Skills Commission (NSC), across all technician and trades worker occupations assessed for the 2021 skills priority list (SPL), 42% were found to be in shortage compared with 19% across all occupation groups.

This is despite a projection for high future demand, with the NSC finding 30% of all occupations for technicians and trade workers have strong growth prospects.

According to Jobs and Skills Australia, these shortages have persisted for many years.

"Prior to COVID-19, there was a long-term trend in the labour market where growth in skill level 1 occupations - that is, occupations usually requiring a bachelor's degree or higher educational attainment level - was much stronger than for other occupation types, including technicians and trades workers," a spokesperson says.

Over the past 20 years, in fact, employment in skill level 1 occupations has grown 86%, compared with just 32.7% for technician and trade workers.

The tighter labour market has meant the gap between both is widening.

"The 2022 skills priority list found that 31% of all assessed occupations were in shortage (up from 19% in 2021), while 47% of technician and trades worker occupations were found to be in shortage (up from 42% in 2021)," the spokesperson says.

The figures may slowly be starting to turn, thanks to government support. Between 2018 and 2021, enrolment in VET courses was down from 2017 levels, unlike university enrolment, but this was before new announcements.

The federal government has committed to deliver 480,000 fee-free VET and vocational education places, commencing with 180,000 training places in 2023 to support those areas facing skills shortages.

More tradies needed

Denita Wawn, chief executive of Master Builders Australia, says vocational education and training is critical. "We have estimated that we will need half a million new people entering into the industry, of which at least 250,000 will need to be trade qualified," she says.

Government assistance is vital in bringing people into the industry, particularly for apprentices.

"We saw that once government subsidies ended for apprentices, so too did commencements. We went from 14,000 commencements in June 2022 to 6500 by September," Wawn says.

Many organisations have the spaces open to take on apprentices, but they just aren't getting the numbers.

"When we saw wage subsidies made available to encourage people into training, the employers made a decision that because they were subsidised and the cost of apprentices was covered, it meant that the losses they incurred were met by those subsidies," says Wawn. "Once those subsidies were removed, we saw the halving."

The government commitment is a good start, but Wawn says the industry needs to get better at promoting the benefits of undertaking a trade.

"An apprentice wage is not that high, but nevertheless you are on a wage rather than incurring a debt.

"When you come out of, say, a carpentry apprenticeship, you can be earning around $80,000 a year, a plumber and electrician around $100,000 a year, and there's opportunity for going up into site management once you have those qualifications. So, combine a wage with no debt and a salary post-qualifications, then there are significant financial benefits."

HELP debts on the rise

Student debt, or HELP debt, is indexed to inflation, which will mean student loans increased by 7% on June 1.

Between 2016 and 2020, the average indexation rate was below 2%, but that began to change last year along with inflation, with HELP loans increasing by 3.9% last year.

These debts begin to be paid off, through tax, once annual income hits $48,361 at 1% of income. The repayments go up along with a worker's salary band, so someone with an income of $60,000 would pay 2.5%.

But how much does a HELP debt factor into a student's decision?

Andrew Norton, professor in practice of higher education policy at the Australian National University, says it's probably not a big factor.

"The barriers to get into university are fairly low," he says. "If you get an ATAR of above 70 you are almost certain to get an offer. Participation rates have tripled from what they were when university was free."

Norton says people do rough calculations of the costs and benefits of the options, but it can be hard to gauge it fairly.

"If you do end up in a professional job, then the kind of debt you are looking at is a small price of earnings. Meanwhile, vocational fees are nearly always smaller but then there is the issue of getting a loan."

In most cases, vocational students are unable to get a loan for their fee, and while it may only be a couple of thousand dollars, it usually has to be paid upfront, whereas university students can borrow the full amount and typically now work throughout their degrees, too.

"The rise of integrated learning and internships means that most students do work while studying, so the lived experience is very similar," he says.

A lot of work is being done in career education, but to meet the tradie shortage there needs to be a focus on completion rates.

"Focus on those who started it and for various reasons didn't complete it and push up those completion rates," says Norton.

Wawn agrees, but that's also why Master Builders is focusing a lot of effort on bringing women into the sector.

"We need to find the right individuals for the industry and we are now being inundated by young women at trade expos," she says. "Previously, the industry only encouraged half the population to join and now we are targeting the whole population."

Apprenticeship or uni: how they decide

The financial rewards were certainly part of the attraction for Rohan Grant-Dawes, who undertook an electrician apprenticeship because he saw that it would help him reach his financial goals.

"I want to buy a house by the time I'm 30 and going into university would mean I'd incur a HECS debt and start down the ladder to eventually climb up it," the 21-year-old says.

"Whereas with a trade, once you're qualified you can easily be on $45 an hour and have no HECS debt, so you're already $80,000 ahead of others your age."

Grant-Dawes says there are plenty of fields for people to choose from, with various benefits, but there are sacrifices. "It's early mornings, it's physical and hard labour and a lot of the time working in environments that aren't necessarily great for your health."

He also believes there's a stigma around undertaking vocational training as people sometimes assume those in trades didn't get into university.

"Trades build and run everything that people use daily and yet people look down on it, until they need something," says Grant-Dawes. "The stigma does need to change because there is a massive shortage."

Meanwhile, university student Blake Gladwin says he is playing the long game by getting his Bachelor of Business degree.

"I didn't choose university straight out of high school; instead I wanted to get my real estate license," he says.

"I liked property but decided I wanted to get into the corporate realm one day and the best way to do that would be through a business degree."

Gladwin says he wasn't pressured to do a degree and when it came to the financial aspect, it wasn't something he considered.

"I didn't necessarily think about a HECS debt because it's sort of inevitable - you will be paying for it either way. At least it's a good debt to have because you'll only start paying it once you're earning," he says.

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