Published by the John Curtin Research Centre
Issue 2, October 2017
The twentieth century saw an explosion in technologies, from aircraft to radio, antibiotics to smartphones. Living standards rose massively. Yet the middle of that century – the 1920s to the 1970s – saw the largest reduction in inequality in Australian history.
Australia today faces two intertwined challenges. First, how do we continue the pace of innovation in the twenty-first century that we saw in the twentieth? Second, how do we ensure that prosperity is broadly shared? As it happens, I will argue that a single policy recommendation offers the greatest promise to make us more entrepreneurial and more equal.
When it comes to the most-cited research in science and engineering, Australia accounts for 5.5 percent of the most-cited papers (around ten times what our share of world population would lead you to expect). Across science fields, Australia does especially well in geology, geochemistry, earth sciences, environmental sciences and veterinary sciences. Australia has more top researchers per person than almost all advanced countries.
However, we do less well when it comes to translating those ideas into businesses. According to former Chief Scientist Ian Chubb, just 1.5 per cent of Australian companies developed new-to-the-world innovations, compared to between 10 to 40 per cent in many other OECD countries. Just 6 percent of ASX300 firms say that Australia is a ‘highly innovative’ nation.
A similar picture emerges when we look at the workforce. Researchers make up 0.85 percent of the Australian workforce – about average for advanced nations. But the share of those researchers in business (32 percent) ranks us the lowest in the OECD. We also have one of the lowest rates of industry–research collaboration in the OECD.
Another indicator is to look at patent filings. Whether or not you think our intellectual property system is perfect, the number of patent filings does say something about the underlying level of innovation in the country. According to the OECD, Australia ranks in the bottom half of advanced countries for patent filings per person. Over the past decade, most advanced countries have increased their rate of patent filings. But the number of patents filed by Australians is down by at least one-fifth over the last decade.
On the labour market side, many worry that innovation will lead to mass unemployment. The Luddites may have used a little too much force to make their point, but they weren’t wrong about the fact that technological change can destroy jobs as well as create them.
One way of looking at the issue is to divide jobs into three categories: low-paid manual jobs, middle-paid routine jobs, and high-paid abstract jobs. Routine jobs are occupations such as bookkeeping, administrative support, and repetitive manufacturing tasks. What makes routine jobs vulnerable to computerisation is that they involve following established rules.
By contrast, abstract jobs involve problem-solving, creativity, and teamwork. When a lawyer advises a client whether to accept a plea bargain or a manager decides how to respond to an employee arriving late for work, they are tackling problems that do not have a closed-form solution.
More interesting is the resilience of manual jobs to computerisation. Thus far, attempts to automate the work of jobs such as cooking, cleaning, security work and personal care have largely failed.
Analysing data since the early-1990s, Roger Wilkins and Mark Wooden look at employment changes across 43 occupations. This shows a U-shaped pattern, with growth in both low-paid manual occupations such as storepersons and carers; and high-paid abstract occupations such as managers, ICT professionals and legal professionals. In the middle, routine jobs such as clerical workers, machine operators and secretaries have shrunk relative to the workforce as a whole.
Similarly, Jeff Borland and Mick Coelli seek to directly address the question by coding jobs according to their degree of routine content. They find a strong pattern: the more routine a job is, the more likely it was to have shrunk since the mid-1960s.  From robo-advisers to crop-dusting drones, jobs that involve following established rules are under threat.
What Should we Do About it?
If you speak with start-up founders, and ask them what would make their business more productive, they invariably point to the need for highly skilled people. Similarly, if you chat with people who do job placement, they’ll tell you about the value of a great education as a platform for lifelong learning. And if you sit down with those who’ve spent time behind bars, they’ll often talk about how much they hated school.
Although school completion rates and tertiary participation rates have risen markedly in recent generations, high school test scores show little sign of improvement. Compared on the same numeracy tests, 13-14 year-olds in 1964 outperformed those in 2003. Similarly, Australian 15 year-olds were better readers in 2000 than 2015.
The most significant schooling reform in recent years – the move towards needs-based school funding – only began with the 2014-15 financial year, so it would be unrealistic to expect it to show up in student results immediately. I strongly support needs-based funding. But I also think getting the funding model right is only part of the answer to building a great education system.
To raise the quality of Australian education, Australia needs a national push to raise teacher effectiveness. In the past, Australian education ministers have noted that ‘teacher quality’ is the single greatest in-school influence on student engagement and achievement. In my view, this means it should be a central priority for Australian schools policy.
The challenge goes back to the fact that in the post-war decades, rampant gender pay discrimination in law, medicine, business and other professions meant that teaching was one of the few professions open to female university graduates. Teaching wasn’t free of discrimination, but it provided considerably better opportunities for talented women than other occupations.
Gender pay discrimination meant that the calibre of many professional occupations was lower in the 1950s and 1960s than it would otherwise have been. For example, as late as 1971, women made up just 13 percent of doctors, 6 percent of lawyers, and 0 percent of members of the House of Representatives.
The reduction in gender pay discrimination was one of the great post-war advances for Australia. Not only did it expand the opportunities available to women, but it raised output, because discriminatory firms are less productive. Gender pay discrimination still exists, but our public services and businesses are more productive now than in the Mad Men era: because they make better use of the talents of women.
Yet as talented women flooded into the professions, they flooded out of occupations such as teaching and nursing, which had been relatively attractive to women. Chris Ryan and I look at the literacy and numeracy of new teachers, relative to those in their age cohort. We estimated that from 1983 to 2003, the average percentile rank of those entering teacher education fell from 74 to 61, while the average rank of new teachers fell from 70 to 62. The share of new teachers who were in the top fifth of their class halved. The share of new teachers who were in the bottom of their class doubled. Similarly, over the period 2005 to 2012, the share of teacher education students with ATAR scores over 80 fell from four in ten to three in ten.
Admittedly, a good player doesn’t always make a good coach. My favourite teachers were inspirational because they loved their subject matter. To hear my English teacher, Judith Anderson, talk about Donne was to be transported back to 17th century England. Once my maths teacher, Mick Canty, taught you why complex numbers existed, you felt you’d known it all your life. Passion, empathy and grit are all elements of terrific teaching. But aptitude matters: great teachers are more commonly those who aced a subject rather than barely passing.
Effective Teachers – Lessons from Finland
In considering how to raise teacher effectiveness, we could do worse than to look to the performance of Finland, a country that routinely ranks high on the international test score league tables.
Now I admit that as an education researcher, I’d always been a bit sceptical of those whose education reform ideas seemed to boil down to ‘be like Finland’. Somehow, they always reminded me of Monty Python’s song ‘Finland, Finland, Finland – Finland has it all’. The problem is that it isn’t clear which bit of Finland’s approach we should replicate. Late school starting ages? Less homework? Long recess breaks? No school uniforms? Low levels of inequality? A logical language, in which words are pronounced as they are written?
What’s far more interesting to me than ‘Finland is great’ is the fact that this is only really the story of the past generation. In the 1960s and 1970s, Finland was an average performer on international tests. Indeed, one study estimates that Australian students outperformed their Finnish counterparts in the mid-1970s. It was only in the late-1970s that Finland embarked on a major push to raise the aptitude of new teachers.
One mark of the success of Finland’s teaching push is that teacher education students are generally drawn from the top fifth of high school graduates. For every position in a teacher education course, there are around ten applicants. Those selected are chosen based not only on academic excellence, but also on an interview. Finnish teachers are highly regarded, with polls placing them as the nation’s most admired profession.
Raising teacher effectiveness involved a suite of changes in Finland. Smaller teacher education providers were closed down. The remaining universities were forced to be more selective and rigorous. The government worked closely with the teacher union in implementing the changes. Teacher pay is comparable with other advanced countries, both for starting and experienced teachers. Finland has no national system of teacher merit pay, though municipalities sometimes pay bonuses to high-performing teachers.
Finland also mandated Masters degrees for all teachers, meaning that those who wanted to teach needed to study for a minimum of five years. Economists have generally been sceptical of the value of Masters degrees, noting that long study periods can act as a barriers to entry, effectively discouraging talented people from entering a profession. Studies in the United States and Australia have failed to find evidence that teachers with a Masters degree do better in the classroom.
Why was Finland’s push for Masters-trained teachers a success? One possibility is that Finnish Masters degrees were more focused on improving teaching than those in other countries. For example, students studying to be a secondary school teacher spend one-third of their time during a Masters degree teaching in schools. Another possibility is that Finland succeeded despite its emphasis on Masters degrees. Once you select teacher education students from among your best high school graduates, it is plausible that what you do with them at university is of secondary importance.
Indeed, this goes to a broader point. Once you select superstar teachers, many of the critical issues in education become less important. I’m a strong supporter of a national curriculum, test score reporting and raising the calibre of school leadership. But I have to admit that all these issues become less critical the more effective our teachers are.
Making teacher effectiveness the leading priority means doing more to celebrate great teachers, and recognising their power to transform lives. In 2006, I encouraged the Australian National University to establish a scheme through which students graduating with their bachelor degree could nominate an influential school teacher. To read the nominating statements is to be reminded of what great teaching involves. One female student wrote of her biology teacher, Lorraine Huxley, that she had ‘inspired me to include science as part of my tertiary studies’. A commerce student wrote of his teacher, David Dorrian: ‘[he] was truly excited about his topic – Mathematics – and imbued this in his students’. An archaeology student wrote of her ancient history teacher, Mary Condon: ‘Mrs Condon had a way of making historical characters and events come alive. I felt like I knew exactly what it was like to grow up in a Spartan village and I felt that Augustus and Agrippina were close friends of mine.’
Imagine how much more innovative and egalitarian our schools could be if every student felt like this about every teacher. Education remains the best productivity-boosting policy – and the best antipoverty vaccine – that we have yet developed. To transform teacher effectiveness would both raise the rate of innovation and entrepreneurship, and reduce joblessness and inequality. If the robots are coming, we’d best ensure we have great teachers to meet them.
 Lawyers data from David Weisbrot (1991), ‘Recent Statistical Trends in Australian Legal Education’, Legal Education Review, vol 2, issue 1, article 11; Doctors data from ABS, ‘Health services: Medical practitioners’, Australian Social Trends, 2003, Cat No 4102.0; Parliamentarian data from Joy McCann and Janet Wilson, 2012, ‘Representation of women in Australian parliaments’, Parliamentary Library.
 For example, Finland was in the middle of the international pack in the 1962-67 IEA First International Mathematics Study, the 1967-73 IEA First International Science Study, the 1967-73 IEA Study of Reading Comprehension, and the 1977-81 IEA Second International Mathematics Study.
 Rockoff, J.E. (2004). The Impact of Individual Teachers on Student Achievement: Evidence from Panel Data. American Economic Review, 94 (2), 247-252; Leigh, A., 2010. Estimating teacher effectiveness from two-year changes in students’ test scores. Economics of Education Review, 29(3), pp.480-488.