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Vocational education boosts job prospects and earnings, finds new study

Finnish study shows 15-19 vocational education improves income without adverse effects for employment

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The relative value of academic and vocational schooling is an increasingly debated topic worldwide. 

Proponents of vocational schooling argue that it increases individuals’ productivity at an earlier stage in their careers, allowing earlier entry to the labour market, and provides better opportunities for individuals who lack the motivation and skills to pursue higher education. 

Others argue that the benefits are relatively short-lived: vocational schooling may improve the transition into the labour market, but economic transformations overtake the usefulness of the skills they learn there. This being the case, they argue, investing in general education is a better strategy for enabling individuals to adapt to future shifts in the labour market. 

In response, countries such as the United States have reduced the vocational options available in their educational systems.


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As one might expect, previous research has found mixed effects of vocational schooling, especially in the longer-term perspective, but it is not clear whether any of it successfully avoids the selection problem: pupils who choose vocational and general education programmes differ in many ways, which in turn affect their longer-term outcomes.

Vocational education benefits

In a new working paper, which we feature in this month’s CfEE Monthly Research Digest, economists Mikko Sillman and Hanna Virtanen provide new evidence on the effects of vocational education in the context of upper-secondary schools in Finland, using data on all pupils in the period 1996–2000. 

In Finland, pupils are allocated to upper-secondary schools and programmes on the basis of their preferences, with their grades in lower-secondary school being used as a tiebreak device in the case of oversubscription. This means that grade thresholds determine admissions to over-subscribed programmes and schools. 

The authors use these thresholds to study the impact of vocational versus academic education among applicants who apply to both types of programme and whose admission is determined by the cut-offs – that is, applicants who are at the margin of being accepted to either programme.

Positive results

The results show that admission to vocational programmes in upper-secondary school increases annual income by 7 per cent at age 31, while having no effects on the probability of being employed. 

In sharp contrast to the idea that these benefits dissipate as pupils grow older, the authors find that the benefits actually increase with time. 

The idea that general education is better in the longer-term is also countered by the fact that admission to a vocational programme has no impact on the probability of pursuing higher education – and there is no evidence that vocational schooling increases the probability of being employed in occupations deemed to be at risk of automation or offshoring.

Interestingly, the authors find that vocational education has positive labour-market effects both among those who prefer academic programmes and among those who prefer vocational programmes. 

Preferences matter

However, they do find that pupils who prefer vocational education experience the largest benefits, including seeing a positive impact on their employment prospects, therefore supporting the idea of comparative advantage. 

Moreover, while the estimates only pick up effects among applicants near the grade cut-offs, who are in the middle of the ability distribution, the authors’ analysis suggests that the benefits may be even larger among low-achieving pupils who only apply to vocational programmes – while the effects of vocational education among high-achieving pupils who only apply to academic programmes may instead be negative.

Overall, the paper therefore offers fascinating evidence on the effects of vocational schooling in the Finnish context. 

Certainly, it is important to note that the estimates are obtained at the upper-secondary level; the effects cannot necessarily be extrapolated to lower levels. This is important since many countries with an international reputation for their vocational systems, such as Austria and Germany, separate children into academic and vocational streams already in primary and lower-secondary school. 

Nevertheless, the paper indicates that reforms designed to expand access to vocational education at the upper-secondary level may well hold more promise than many previously would have thought.

Gabriel Heller-Sahlgren is lead economist at the Centre for Education Economics (CfEE) and editor of its Monthly Research Digest. This blog is based on his editor’s selection for the April issue of the digest, published today. You can view, download and subscribe to receive it a free of charge here.

 

CfEE is an independent think tank working to improve policy and practice in education through impartial economic research.

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