April 2016

Commodity prices and their continuing impact on the professional skills pipeline

  • By Gavin Lind MAusIMM (CP), Executive Director, Minerals Tertiary Education Council (MTEC)

Trends in enrolment data for minerals degrees point to a need for higher education reforms to ensure the continued development of highly skilled professionals

Mining relies on a highly skilled workforce that allows industry to innovate readily. The Australian minerals industry employs a diverse professional workforce, including engineers, environmental scientists, geologists, geophysicists, mathematicians and financial professionals. The industry directly employs approximately 200 000 people representing 1.6 per cent of the national workforce (ABS, 2015). Approximately the same number work in the professional services sectors related to the mining industry (including in the mining equipment, technology and services – METS – sector). One in five employees in the industry holds a bachelor’s degree or higher and the share of mining workers with certificate III/IV level qualifications is above the all-industry average.

Through most of the past decade, skills shortages were concentrated among experienced professionals such as engineers (particularly mining engineers), geoscientists, project managers, as well as experienced tradespeople and operators. These skills gaps have softened as the construction phase has tapered off and commodity price falls have necessitated a rationalisation of operational labour forces (DOE, 2015). Most forecasters predict a continuing weaker skilled demand in the next few years (CME, 2014). Despite this, industry will continue to seek specialist skills as it continues to unlock new resources, boost productivity, protect the environment, enhance worker safety and generate additional value for the wider community.

Notwithstanding cyclical activity, innovation is about ensuring that Australia’s long-term advantage in mining continues. Mining is a central part of Australia’s ‘start-up’ economy, with research showing that over the last decade a higher share of mining start-ups went on to grow and flourish than in any other sector, in turn generating large numbers of high-wage, high-skill jobs (Hendrickson, 2015). The mining sector spends nearly $3 billion on research and development (R&D) annually, nearly $1 in $6 of all business R&D spending in Australia (ABS, 2015). The mining sector is a prolific inventor and developer of specialised technologies, with a total of 6539 Australian mining inventions filed for patent between 1994 and 2011 by operating miners, the METS sector, and publicly funded entities like CSIRO (Francis, 2015).

Accordingly, the industry will require professionals to continue to excel in innovation. However, the future supply of core, home grown mining engineering professionals is of concern as mining engineering commencements at Australian universities recede to levels last seen in 2000.

Commodity prices impact university commencements in mining engineering

Enrolments in minerals related tertiary education are very important to the minerals industry and to the Australian economy more generally. Enrolments into mining programs are therefore of strategic importance to Australian universities, particularly given the relationship between many universities and individual mining companies. However, in recent years there has been a notable decline in students enroling into mining engineering programs across Australian universities.

Mining engineering graduates lag the economic cycle by four years (the length of the degree), as evidenced in Figure 1. These fluctuations in graduates, especially when commodity prices are depressed, were identified as a key impediment in the 1998 Back from the Brink report to Australia securing its future home-grown supply of mining engineers: ‘Industry uptake of new graduates is profoundly affected by the business cycle. This has established a “boom or bust” environment for educators, graduates and, ultimately, for industry, which is far from optimum.’

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Figure 2 highlights that commencing first year mining engineering students at Australian universities closely follow the trends in price of a number of commodities. Estimates of 2016 commencing students indicate that enrolments will be at levels last seen in 2000 even though commodity prices and commodity production levels (Figure 3) are higher than at the time of the Back from the Brink report.

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This dramatic drop off in commencements is of great concern. To put this in context, in 2014 mining engineering enrolments represented approximately 1000 of the 91 000 domestic and international students enrolled in all engineering and related technology higher education courses in Australia (DET, 2014). This fraction is exacerbated when further considered in the context of total higher education enrolments in 2014, which exceeded 1.1 million students across Australia.

From Figure 2, one might conclude that student behaviour fundamentally has not changed, with economic sentiment toward the industry (through commodity prices) remaining the dominant factor in their decision to pursue mining engineering degrees. Since the Back from the Brink report production levels of a range of commodities have either increased (almost five-fold in the case of iron ore) or output has remained constant year on year (for example gold and copper). Lower bulk commodity prices, rationalisation at the company level, the rise of anti-mining activism and the way that these issues have been widely covered in news and social media, have likely contributed to a post-boom sentiment that might explain the pronounced drop off in enrolments over the past few years since 2012.

Industry commitment in higher education

The failure by previous governments to index higher education funding, coupled with the regulated caps on fees, has seen many university schools and departments become increasingly unviable under the student numbers-based funding system. This is especially true in minerals-related departments that traditionally have small student numbers and high teaching costs. This has resulted in a need for direct minerals industry investment to secure a future supply of professionals for the industry. Without this industry support many schools and departments would have closed, leaving Australia without the capacity to deliver its own high-quality graduates (and relying on skilled migration as an avenue for these skills).

Through the Minerals Tertiary Education Council (MTEC), established as an outcome of the Back from the Brink report (MCA, 1998), the Minerals Council of Australia (MCA) has built a unique, innovative and powerful model for strategic and purposeful industry investment in minerals related tertiary education (see sidebar). The MCA continues to support collaborative initiatives at 17 universities across Australia through building capacity in higher education in the disciplines of mining engineering, extractive metallurgy and minerals geoscience. MCA members often partner with universities and other providers to address the professional skills requirements in the minerals industry, focused on identified priorities. MCA member companies have invested more than $46 million of unencumbered funds over the past decade in these programs, although this investment does not appear to have a direct effect on enrolments. Over 4300 graduates have benefitted from participation in these industry-funded MTEC programs.

MCA member companies also provide paid vacation work and structured practical experience for undergraduate students and recognise leaders in research by awarding professorial chairs to continue their industry-relevant research. A survey of four MCA members revealed that in FY2014, $16.1 million was invested in supporting universities, in addition to contributions to higher education through MTEC. Of this total, $9.7 million was expended on scholarships.

Higher education reforms

Industry initiatives can support but cannot sustain mining engineering programs at Australian universities alone. Higher education reforms and a shift in university administration behaviour toward how niche programs – such as mining engineering – are funded at the university level is also needed for the longevity of this important profession. The MCA supports reforms that advance innovative pathways to address skills needs of the future (including through para-professional qualifications such as associate degrees). Given current funding arrangements, the MCA believes that fee deregulation alone will not assist students or niche minerals-related disciplines.

Higher education reforms are a necessary step towards securing a sustainable funding outlook for the higher education sector in Australia, in line with market demands. Over the next few years, universities will require an additional $7.6 billion to fund projected student growth under the demand-driven student system (PMC, 2015). The former Minister of Education, The Hon Christopher Pyne MP, argued that students would be the biggest winners from the now-defeated fee deregulation package through increased student access to tertiary studies, and that the overall quality of teaching would improve due to price competition (Pyne, 2014). MCA commissioned modelling found that high course costs, low and volatile enrolments and barriers to market entry mean the federal government’s higher education reform proposals are not likely to advantage, and rather may disadvantage minerals tertiary education, particularly if relative funding for engineering and science disciplines is reduced and enrolment levels continue to decline.

For students to benefit from fee deregulation, it requires not only reform at the federal level, but at the institutional level too. Under current arrangements less than 50 cents in the dollar of Commonwealth Grant Scheme (CGS) funding is allocated to MCA’s MTEC partner schools and departments by their home institutions (and in most cases it is significantly less). These funding level arrangements are not sustainable during times of low student enrolments (as these payments are volume-based) and the MCA questions university administration behaviour in not adapting funding allocations for minerals-related programs that consider market conditions.

A fundamental issue is that research in universities is not funded in the way that teaching is funded, resulting in universities redirecting teaching funds into research. The Grattan Institute estimates that in 2012 at least $2 billion in profits (representing one-fifth) meant for teaching was used to fund research in Australian universities (Norton and Cherastidtham, 2015). Norton (2015) further comments that while universities are not doing anything improper in spending money this way, he does propose a fundamental problem with this arrangement: ‘…the absence of specific teaching funding makes it hard to ensure that any extra money intended to benefit students is actually spent on students.’

The minerals industry supports sensible higher education reform that combines fee deregulation with strong safeguards to ensure the viability of minerals-related disciplines. Safeguards should include stronger accountability mechanisms to ensure increased university fee revenue is devoted to teaching and student services.

MTEC accolades 2001-14

MTEC has been awarded funding and awards to further develop its university-industry relationship as follows:

  • award of a Science Lectureships Initiatives (SLI) grant in to assist in building and delivering collaborative courses in earth science, mining engineering and extractive metallurgy (2001)
  • an Australian Museum Eureka Prize for Industry in the Research and Innovation category, for the creation of the Minerals Tertiary Education program which encourages cooperation between universities and the minerals industry to provide enhanced education opportunities for students and graduates of geoscience, mining engineering and metallurgy (2001)
  • receipt of a Collaboration and Structural Reform (CASR) grant to establish Australia’s first and only four university national undergraduate program in mining engineering – Mining Education Australia (MEA) (2007)
  • a prestigious Australian Teaching and Learning Council (ALTC) award for Educational Partnerships and Collaborations with Other Institutions MTEC’s flagship mining program – Mining Education Australia (MEA) (2010)
  • a Council on Australia and Latin American Relations (COALAR) grant to explore the possibility of taking MEA to a global audience based on the teaching of sustainable mining practices (2011)
  • an Australian Commonwealth Government grant under the Workforce Innovation Program to undertake a feasibility study and prepare for implementation national Associate Degrees in Mining Engineering and Geoscience, known as the Minerals Industry National Associate Degree (MINAD) Project (2012)
  • recognition of leadership in tertiary higher education management with the MTEC Executive Director (Dr Gavin Lind) being awarded the 2013 ATEM/Campus Review LH Martin Award for Excellence in Leadership
  • recipient of the prestigious Business Higher Education Round Table (B/HERT) award for Best Higher Education & Training for the Minerals Geoscience Honours Program (2014).

Conclusion

The minerals industry will continue to require a broad base of talented professionals and is concerned at the dramatic reduction of commencements into mining engineering degrees at Australian universities in recent years. Through MTEC, industry remains committed to four national collaborative programs in mining engineering, extractive metallurgy and minerals geoscience, which continue to deliver an important pipeline of skilled professionals to the industry. Government, through a higher education reform process, should consider fee deregulation with strong safeguards to ensure the sustainability of minerals-related programs such as mining engineering, where associated high teaching costs and traditionally low student numbers place these programs at risk when cyclical changes affect enrolments numbers. For such reforms to be effective, Australian universities must adapt their internal funding policies to reflect the needs of minerals-related programs, especially during periods of low student enrolment. Directing money for teaching where it is needed most is necessary. 

References

Australian Bureau of Statistics (ABS), 2015. Labour Force, Australia, Detailed Quarterly, Nov 2015, ABS catalogue number 6291.0.55.003, released on 17 December 2015, Canberra.

Australian Bureau of Statistics (ABS), 2015. Research and Experimental Development, Businesses, Australia, 2013-14, ABS catalogue number 8104.0, released on 4 September 2015, Canberra.

Chamber of Minerals and Energy of Western Australia (CME), 2014. 2015-2025 Western Australian Resources Outlook, Perth.

Department of Employment (DOE), 2015. Labour Market Research – Resources Sector Professions Australia 2014-15, Canberra.

Department of the Prime Minister and Cabinet (PMC), 2014. Regulation Impact Statement: 2014-15 Budget Higher Education Reforms, Canberra.

Department of Education and Training (DET), 2014. Selected Higher Education Statistics –2014 Student Data, Canberra.

Francis E, 2015. The Australian Mining Industry: More than Just Shovels and Being the Lucky Country, June, Canberra.

Hendrickson L, 2015. Where does employment growth come from?, Department of Industry, Innovation and Science, presentation to the Industry Innovation Workshop, 15 September, Canberra.

Minerals Council of Australia (MCA), 1998. Back from the Brink: Reshaping Minerals Tertiary Education, Canberra.

Minerals Council of Australia (MCA), 2015. Driven by Innovation: the facts, Canberra.

Norton A, 2015. Universities use students’ tuition fees to boost research rather than teaching, data shows. Retrieved 22 January 2015 from https://theconversation.com/universities-use-students-tuition-fees-to-boost-research-rather-than-teaching-data-shows-49813

Norton A, and Cherastidtham I, 2015. The cash nexus: how teaching funds research in Australian universities, Grattan Institute.

Pyne C, 2015. The Hon. Christopher Pyne MP – ‘Spreading opportunity and staying competitive – Why we need the higher education reform package’ retrieved 22 January 2015 from http://www.liberal.org.au/latest-news/2014/08/06/hon-christopher-pyne-mp-spreading-opportunity-and-staying-competitive-%E2%80%93-why

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