What you study vs where you study: how FE choices affect earnings and academic achievement

By Esteban Aucejo, Claudia Hupkau and Jenifer Ruiz-Valenzuela

Following the unprecedented number of job losses and the bleak economic outlook due to the Covid-19 crisis, more people will be considering staying on or returning to education. Vocational education and training (VET) is likely to play a crucial role in providing the skills needed for economic recovery, including 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) finds that when it comes to vocational education and training (VET), what you study is very important for future earnings.  Whereas where you study can also matter for younger people but less so for adults.

We used data from more than one 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 socio-economic 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 percent of the college value-added distribution to one ranked in the top 15% implies a fairly modest 3% 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%. The fact that college quality seems to matter more for young learners is likely due to young learners spending more time in FE colleges (i.e. 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 enrol in just under 600 learning hours, but only achieve about 413 (or 69% of them), around 42% achieve a Level 3 qualification, and 38% progress to higher education.

But were we to move a learner from a college ranked in the bottom 15% by value-added to one ranked in the top 15%, they would, on average, achieve 6.5% more learning hours (from 69% to 73.4%). They would be almost 11% more likely to achieve a Level 3 qualification (from 42% to 46.5%) and the likelihood of attending higher education would increase by 10% (from 38% to 42%). 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 is 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.  

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 18-20 and so had been working for up to two years’ prior to study. Table 1 below shows the 3 most popular fields (in terms of learners doing most of their guided learning hours in that particular field, i.e. specialising in them) by gender and age group.

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% more five years after finishing education when compared to earnings before attending FE college, after adjusting for inflation.  For adult male learners specialising in this field, earnings rise by 1.5% 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 to fields of study for women than for men, this does not mean that overall, they have higher earnings post FE-college attendance. It means that compared to 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 policy makers should be extremely cautious about evaluating colleges in terms of the labour market performance of their students.

Our findings also have relevant practical implications for students since they could help them to get a better understanding of the variation in FE college quality and to compare the returns to different fields of study. This information is likely to be particularly important considering the evidence suggesting that students tend to be misinformed about the labour market returns of VET qualifications.

Table 1. Top 3 Fields of study by proportion of learners who specialise in them

	Mean GLH	Estimated Return		Share specialising
	main field	1 year post-FE	5 years post-FE	in the field
Young male learners
Engineering and Manufacturing Technology	632	0.04	0.068	20.60%
Construction, Planning & Built Environment	621	-0.001	0.023	16.60%
Arts, Media and Publishing	942	-0.064	-0.003	10.70%
Adult male learners
Health, Public Services and Care	77	-0.006	0.004	19.00%
Engineering and Manufacturing Technology	206	-0.008	0.015	18.90%
Business Administration and Law	131	0.003	0.009	14.20%
Young female learners
Health, Public Services and Care	525	-0.002	0.045	25.20%
Retail and Commercial Enterprise	597	0.036	0.115	23.40%
Business Administration and Law	430	0.040	0.118	13.60%
Adult female learners
Health, Public Services and Care	142	-0.008	0.020	34.30%
Business Administration and Law	189	0.004	0.019	14.80%
Education and Training	143	-0.007	0.027	12.70%

Note. The estimated returns reported are the marginal effects, one and five years after leaving the college, respectively, of choosing the field as the main field. This is a summary table. The complete tables can be found in Tables 9 to 12 of CVER DP 030

This blog post appeared first on TES and is republished here with permission.