Sönke Matthewes and Guglielmo Ventura explore the labour market consequences of students’ enrolment in FE colleges in England
In the wake of Brexit and the global pandemic, skills shortages across the UK economy risk hampering efforts to reverse a decade of languishing productivity and festering inequality. Reinvigorating the long-neglected British vocational (or technical) education system is often hailed as a solution to this problem.
Arguments in favour of vocational
education are familiar: it caters for more than just academic talents, while
equipping the future workforce with essential skills for the well-functioning
of the economy. It can aid the transition from school to work and enhance
productivity, thanks to closer links between what is taught and the skills
employers need. Critics worry this may come at the expense of general skills - reducing
future workers’ adaptability to ever changing patterns of work. In practice, whether
students benefit from vocational education will depend on what is their
alternative: those who would otherwise leave education altogether might well
benefit from gaining extra skills, even if the qualifications gained are at a
low level. The picture is less clear for those who would otherwise complete
academic schooling and possibly go on to obtain a university degree. Empirical
evidence from the UK has not yet provided a convincing answer.
In a recent study we contribute to this debate with new evidence about the payoffs to vocational education
in England. A new empirical approach allows us to estimate these payoffs
separately for two groups of students facing separate alternatives: (1) those
who would otherwise enrol in an academic sixth form and (2) those who would
otherwise take no post-16 courses.
We follow the education and
labour market careers of three cohorts of state-educated students who sat their
GCSEs between 2002 and 2004. At the time, the school-leaving age was still 16
and it was not uncommon for students not to take any course after their GCSEs
(14 percent). Those 86 percent continuing their studies were evenly split between
academic institutions (sixth form schools or sixth form colleges) and more
vocational institutions (mostly Further Education colleges). Unsurprisingly, the
three groups of students (vocational, academic and no further education) do not
look alike in terms of their previous academic achievement or socio-economic
status. Any simple comparison of their labour market careers would thus be
misleading.
To overcome this problem and
ensure we compare the education choices of otherwise similar students, we exploit
the role of students’ geographic proximity to academic and vocational providers
as a driver of students’ post-16 education choices. For this, we focus on
students from schools without sixth form provision who move institution after
GCSEs. Intuitively, students living further away from a Sixth Form college are
more likely to enrol in an FE college. Similarly, living further away from an
FE college increases students’ probability to choose an academic provider or,
to a lesser extent, leave education entirely. We also take account of a vast
range of student-, school- and neighbourhood-level characteristics to make sure
students’ proximity to post-16 institutions does not reflect better labour
market opportunities or residential sorting. Under this approach, the estimated
payoffs relate to students whose education choices are influenced by distance
to the different institutional types (‘marginal’ students).
Our analysis paints a rather
different picture depending on the group of marginal students considered. Let’s focus first on those who enrol in FE
colleges as an alternative to Sixth Form Colleges. For these students,
enrolling in vocational institutions leads to a loss in annual earnings at age
29-30 of £2,900 (or 11 percent) for males and £1,700 (or 8 percent) for
females. These gaps open up very early in students’ careers (in their
mid-twenties). They are not explained by differences in labour market participation
as vocational and academic graduates are equally likely to be employed, but are
due to vocational students being more likely to move into lower-paid jobs with
worse wage progression.
But what drives this difference? We
find that male vocational students are 5 percentage points less likely to
achieve qualifications at Level 3 (A-Levels or equivalent) and about 5
percentage points less likely to obtain a university degree than if they had
studied in a Sixth Form College. Additionally, vocational education almost
halves students’ chances to enrol in more selective universities. The weaker
academic progression is not compensated by a higher probability of starting an
apprenticeship. Overall, differences in educational attainment and progression
explain at least 20 per cent of the earnings penalty we found.
Our approach also allows us to
unpack average payoffs and explore how they vary based on students’ underlying
preferences for the academic and vocational options. They do so considerably:
students with a stronger motivation to pursue academic education in Sixth Form
Colleges (they are willing to travel longer distances to enrol) are penalised
to a much greater extent if diverted to FE Colleges. But while payoffs to
vocational education are negative for most marginal students, we find some
tentative evidence that the least academically-inclined students benefit from
it. Perhaps unsurprisingly, students who enrol in vocational education as an
alternative to leaving education at age 16, seem to increase their annual
earnings - although results are less conclusive as students’ choice to enrol in
vocational education rather than dropping out is not strongly driven by whether
there is an FE college in reach.
In light of these results, policy
efforts should focus on improving the quality of the vocational track by
tackling some of its well documented problems. After all, recent
economic studies from Nordic countries support the idea that vocational
programmes can benefit students even compared to academic ones under certain
conditions. First, vocational programmes must have well-signposted progression
pathways to tertiary level education and have better career guidance and
financial support for students. In this respect, the recent roll-out of
Institutes of Technologies and the announcement of more comprehensive post-18
funding may improve vocational students’ progression through the system. Second,
internationally, vocational programmes appear to work better when they are
closely linked with workplace-based training. In the UK, apprenticeships have
become less common for 16-19-year-olds than for older people over the years.
Without strong incentives for firms’ involvement, recent reforms, such as the
introduction of T-Levels with mandatory work placements and the consolidation
of employer-designed apprenticeship standards, risk being futile.
Overall, if we are to be serious in
this country about promoting growth and reducing inequality by improving and
diversifying skills, there needs to be much more policy attention towards the
Further Education sector and the challenges its students face.
