Federal government funding for TAFE and training was cut by $326 million last year, a new report says.

The report, released on Wednesday by the National Centre for Vocational Education Research, reveals federal funding of the sector dropped 11 per cent compared to 2017.

Labor education spokesperson Tanya Plibersek said the cut had contributed to a worsening national skills crisis.

"Is it any wonder our nation has a shortage of plumbers, hairdressers, bricklayers, panelbeaters and other critical workers?" she said.

"By locking Australians out of education the Liberals are locking Australians out of jobs."

While the federal government decreased funding to $2.8 billion in 2018, the states and territories increased their funding by $191 million to $3.4 billion.

Combined, TAFE and training funding totalled $6.1 billion in 2018 - a 2.1 per cent decrease in nominal terms compared to 2017.

Ms Plibersek said the $326 million federal cut could pay for an extra 32,000 trainees or apprentices.

She said there are now more people dropping out of training programs than finishing them, and more than two million people out of work or looking for more hours.

"Now we know why Scott Morrison isn't training these people for jobs in industries facing skills shortages: because he's starving TAFEs and training of funding," Ms Plibersek said.