Friday, 11 November 2022

On Track to Success? Returns to Vocational Education against different alternatives

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.

Matthewes and Ventura (2022). On Track to Success? Returns to vocational education against different alternativesCVER Discussion Paper 038. London School of Economics. 

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