The Returns to Academic and Vocational Qualifications in Britain

Abstract

Executive SummaryPrevious work looking at the returns to qualifications in Britain has generally focussed on the return to the highest qualification obtained by that individual. Almost all of this work has also grouped together 'similar' vocational and academic qualifications. From the small number of studies that have distinguished between academic and vocational qualifications, the evidence is mixed. It is therefore still unclear whether there are significant differences in the returns to academic and vocational qualifications. The only study that we are aware of for Britain, does, however argue that the returns to academic qualifications are higher than vocational qualifications at 'equivalent' levels. The paucity of evidence on this issue is a prime motivation behind this research.In this research we measure the impact of each qualification held by an individual on their earnings, as opposed to simply including the individual's highest qualification in the equation. For example, if an individual has both O levels and A levels, we include both sets of qualifications in the wage equation. We also use the most disaggregated qualification level possible. For instance, we do not group all the City and Guilds qualifications into one category but rather separate them into three. This approach is advantageous for two reasons. Firstly, we can add substantially to the economic literature on the returns to education by measuring the returns to particular qualifications that have not yet been evaluated, especially some vocational qualifications. Secondly, this approach means we can investigate the financial gain associated with different qualification profiles. In other words we can determine whether previous estimates of the average return to a particular qualification, such as a degree, hide differing returns depending on the route taken to acquire that qualification. For example, we can determine whether non-traditional HE students who do not have A levels earn a different return to their degree than those who enter HE via the A level system. The key findings are: •The additional returns associated with academic qualifications, taking no account of the time taken to acquire such qualifications, are typically higher than those associated with vocational qualifications at the same level.• When consideration is given to the time required to obtain the various qualifications, the returns per year of study for vocational qualifications move closer on average to those accruing to academic qualifications, although the extent of the variation in the former is higher.• Gender differences exist. With respect to academic qualifications, women tend to earn a higher return than men do, particularly to degrees. For vocational qualifications, men and women earn their highest returns with different types of qualifications. The vocational qualifications with the highest returns for men are HNC/HNDs, ONC/ONDs and higher level City and Guilds qualifications. For women, the vocational qualifications with the highest returns are teaching...

The effects of vocational education on adult skills, employment and wages: What can we learn from PIAAC?

“…In contrast, Bishop and Mane (2004), find that students who take a certain percentage of vocational subjects in secondary school are more likely to earn higher wages and display higher participation rates compared with academic education students. Meer (2007), also find positive wage effects, but smaller than in Bishop and Mane. In the UK, Dearden et al (2002), find that academic education leads to higher returns, but also document that the majority of vocational education programs increase earnings relative to no vocational qualification, especially for low achieving school leavers. One exception is the NVQ2, a VET course often undertaken during employment, which seems to have a negative impact on the wages of individuals, even relative to those with no other qualification (Dearden et al 2004).…”

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“…The full report on which this paper is based can be obtained from the DfEE (Dearden et al, 2000). The authors would like to thank Lorraine Dearden (IFS) and Richard Layard (CEP) for their help and advice.…”

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“…There is one exception of which we are aware [i]: Dearden et al (2002) demonstrate that a purely academic curriculum is associated with a higher wage premium than a purely vocational curriculum. It should, however, be noted that, once the authors take into account the years of study, an educational path leading to higher-level vocational qualifications compares favorably to a purely academic curriculum.…”