Following the unprecedented number of job losses and the bleak economic outlook due to the coronavirus crisis, more people will be considering staying on or returning to education.
Vocational education and training is likely to play a crucial role in providing the skills needed for economic recovery, including in retraining workers who have been made redundant. In this context, it is crucial to have good information on the returns to different fields of study that can be taken at FE colleges, and whether it matters which institution one attends for earnings and employment prospects.
Our new research published by the Centre for Vocational Education Research (CVER) shows that when it comes to vocational education and training (VET), what you study is very important for future earnings, whereas where you study is less so.
We used data from more than 1 million students over 13 years to investigate how much value attending an FE college adds in terms of academic achievement, earnings and employment, taking into account learners’ prior achievements and their socioeconomic background. Our study considers both young learners, who mostly join FE colleges shortly after compulsory education, as well as adult learners, who have often worked for many years before attending FE college.
Our value-added measure indicates that moving a student from a college ranked in the bottom 15 per cent of the college value-added distribution to one ranked in the top 15 per cent implies a fairly modest 3 per cent higher earnings on average, measured at around seven years after leaving FE college. The difference in earnings for adult learners is smaller, at 1.5 per cent.
The fact that college quality seems to matter more for young learners is likely due to young learners spending more time in FE colleges as they enrol in and complete substantially more learning than adults. The results in terms of the likelihood of being employed show even smaller differences across FE colleges.
There is considerably more variation in FE colleges' contributions to the educational attainment of their young learners. On average, the young people in our sample enrolled in just under 600 learning hours, but only achieved about 413 (or 69 per cent of them). Around 42 per cent achieved a level 3 qualification, and 38 per cent progressed to higher education.
But were we to move a learner from a college ranked in the bottom 15 per cent by value-added to one ranked in the top 15 per cent, they would, on average, achieve 6.5 per cent more learning hours (from 69 per cent to 73.4 per cent). They would be almost 11 per cent more likely to achieve a level 3 qualification (from 42 per cent to 46.5 per cent) and the likelihood of attending higher education would increase by 10 per cent (from 38 per cent to 42 per cent). These are large effects. As young people are likely to attend their nearest college, the variability in value-added between institutions is a source of unequal opportunity between geographic areas.
What differentiates high value-added colleges from low value-added ones? Learning characteristics seem to play an important role. Colleges that offer a larger share of their courses in the classroom (as opposed to in the workplace or at a distance) have higher value-added in earnings for young learners. This is particularly relevant in light of the current crisis, where online and distance learning are expected to remain a regular feature, at least in the medium term.
We also find significant correlations between the curriculum offer and value-added measures, with colleges offering more exam-assessed qualifications (as opposed to competency-based) showing higher value-added.
What you study, not where you study
While where you study does not imply large differences in earnings after college, what you study has a much bigger effect, especially for female and young learners.
We carried out a separate analysis looking at students’ earnings before and after attending FE college. In this analysis, the young people were aged between 18 and 20 and so had been working for up to two years prior to study. The two fields of engineering and manufacturing technology, and business administration and law show large levels of enrolment among males and lead to large positive returns. For instance, the typical young male learner who chooses engineering and manufacturing technology as his main field of study will earn, on average, almost 7 per cent more five years after finishing education when compared with earnings before attending FE college, after adjusting for inflation.
For adult male learners specialising in this field, earnings rise by 1.5 per cent five years after leaving college. In contrast, young male learners specialising in retail and commercial enterprise do not see any increase in earnings five years after attending FE college. These results take into account that earnings increase with experience, irrespectively of which field one specialised in. Business administration and law, and health, public services and care are the two fields that show high levels of enrolment and consistent positive returns for women across age groups.
While we find consistently higher returns from fields of study for women than for men, this does not mean that overall they have higher earnings pos- FE college attendance. It means that, compared with before enrolment, they experience steeper increases in earnings after completing their education at FE colleges. We also find that many specialisations present negative returns immediately after leaving college that turn positive five years after graduation, indicating that it takes time for positive returns to be reflected in wages. The fact that timing matters suggests that policymakers should be extremely cautious about evaluating colleges in terms of the labour market performance of their students.
Esteban Aucejo is an associate professor in economics at Arizona State University and the Centre for Economic Performance
Claudia Hupkau is an assistant professor in the Department of Economics, CUNEF, Madrid, and a Centre for Economic Performance associate
Jenifer Ruiz-Valenzuela is a research economist at the Centre for Economic Performance