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The Returns to Academic and Vocational Qualifications Steven McIntosh Department of Economics University of Sheffield.

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Presentation on theme: "The Returns to Academic and Vocational Qualifications Steven McIntosh Department of Economics University of Sheffield."— Presentation transcript:

1 The Returns to Academic and Vocational Qualifications Steven McIntosh Department of Economics University of Sheffield

2 Introduction Work done for the Department for Education and Skills, who wanted: estimates of returns to qualifications to detailed qualifications estimates of how returns vary by prior qualifications estimates of age earnings profiles Published in Oxford Bulletin of Economics and Statistics, 2006.

3 Returns to Education OLS estimation of log-linear earnings function. Data – pooled QLFS producing annual data sets for 1996, 1998, 2000 and 2002.

4 Econometric Issues Coefficient on education can be biased due to: Omitted ability measures Omitted family background measures Measurement error on education variable Sample composition bias. Results suggest biases cancel out, leaving OLS a good estimate of true returns

5 Specification Issues Include all qualifications that individuals hold, not just highest qualification: Estimates based on all people who obtain the qualification Lack of common support with the no qualifications group No need to decide which is the highest qualification

6 Qualification higher degree (0.025)**(0.015)**(0.016)**(0.015)** first degree (0.014)**(0.010)**(0.011)**(0.010)** other HE (0.042)*(0.025)**(0.024)**(0.029)* HE diploma (0.025)**(0.019)**(0.020)** 2+ A levels (0.013)**(0.010)** The Returns to Academic Qualifications – All Full-Time Male Employees

7 Qualification A level (0.024)**(0.014)** (0.015)** A/S levels (0.087)(0.044)(0.035)(0.034) 5+ GCSEs A*-C (0.011)**(0.008)** 1-4 GCSEs A*-C (0.010)**(0.007)**(0.008)** GCSEs D-F (0.015)**(0.010)** (0.011)** The Returns to Academic Qualifications – All Full-Time Male Employees

8 Qualification professional quals (0.022)**(0.017)** (0.019)** teaching qualifications (0.024)*(0.016)**(0.017)**(0.016)** nursing qualifications (0.036)*(0.024)**(0.026)** HNC/HND (0.014)**(0.009)** (0.010)** RSA higher (0.170)(0.069)(0.068)(0.040) ONC/OND (0.013)**(0.010)** City & Guilds Ad. Craft (0.014)**(0.009)** NVQ (0.027)(0.014)**(0.011)* The Returns to Vocational Qualifications – All Full-Time Male Employees

9 Qualification City & Guilds Craft (0.016)(0.014)**(0.017)**(0.016)** BTEC diploma (0.027)**(0.022)(0.023)* NVQ (0.023)**(0.014)**(0.013)**(0.012)** City & Guilds other (0.014)**(0.012)**(0.015)**(0.014)** NVQ (0.041)**(0.025)**(0.019)**(0.020)** RSA lower (0.030)*(0.019)**(0.022)**(0.020)** other (0.007)**(0.005)** The Returns to Vocational Qualifications – All Full-Time Male Employees

10 The Returns to Academic Qualifications – All Full-Time Male Employees, by Highest School Qualification, QualificationNo school quals GCSEs D-F 1-4 GCSEs A*-C 5+ GCSEs A*-C 1 A level2+ A levels higher degree (0.040)**(0.110)*(0.045)**(0.036)**(0.055)**(0.009)** first degree (0.026)**(0.054)*(0.020)**(0.013)**(0.023)**(0.007)** other HE (0.038)**(0.082)**(0.032)**(0.028)**(0.065)(0.021) HE diploma (0.034)**(0.054)**(0.030)*(0.023)**(0.035)(0.014)

11 QualificationNo school quals GCSEs D-F1-4 GCSEs A*-C 5+ GCSEs A*-C 1 A level2+ A levels professional quals (0.036)**(0.059)**(0.032)**(0.020)**(0.032)**(0.012)** teaching quals (0.044)**(0.088)(0.039)(0.025)*(0.029)**(0.010) nursing quals (0.030)**(0.084)(0.030)**(0.026)(0.046)(0.025) HNC/HND (0.015)**(0.031)**(0.010)**(0.008)**(0.017)**(0.010) RSA higher (0.082)(0.150)(0.066)(0.092)(0.061)(0.069)* ONC/OND (0.016)**(0.026)**(0.009)**(0.008)**(0.021)(0.016)** C&G Ad.Craft (0.010)**(0.016)(0.008)**(0.010)**(0.038)(0.027)** NVQ (0.015)**(0.023)*(0.011)**(0.013)**(0.028)(0.020)** The Returns to Vocational Qualifications – All Full-Time Male Employees, by Highest School Qualification,

12 QualificationNo school quals GCSEs D-F 1-4 GCSEs A*-C 5+ GCSEs A*-C 1 A level2+ A levels City & Guilds Craft (0.012)**(0.020)**(0.014)*(0.019)(0.054)(0.038) BTEC diploma (0.031)(0.037)(0.017)**(0.022)(0.050)(0.047) NVQ (0.013)**(0.017)(0.012)**(0.015)**(0.040)**(0.028)** City & Guilds other (0.011)**(0.018)(0.012)(0.016)**(0.039)**(0.025)** NVQ (0.019)**(0.026)**(0.021)**(0.029)**(0.109)(0.042)** RSA lower (0.023)(0.033)(0.018)**(0.022)**(0.048)*(0.026)** other (0.005)**(0.009)(0.006)**(0.007)**(0.015)(0.006)** The Returns to Vocational Qualifications – All Full-Time Male Employees, by Highest School Qualification,

13 Estimating Age Earnings Profiles 1. Assume the wage differential is constant at all ages. 2. With a single cross-section, interact age with qualifications, to determine how differential varies - but cohort effects with age effects. 3. Use cohort data set to isolate pure age effect - but will be based on education received 50 years ago 4. Create pseudo cohorts in repeated cross section data, to follow one cohort for a number of years, while still looking at recent attainment for young people.

14 Estimating Age Earning Profiles – Pseudo Cohorts

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19 TABLE 4 Age and cohort effects in estimated returns Male degreeFemale degreeMale GCSEMale vocational level 3 age0.133 (0.041)*0.042 (0.011)*0.002 (0.007)0.008 (0.030) age 2 / (0.105)* (0.014)* (0.009) (0.077) age 3 / (0.001)* (0.001) cohort (0.026)0.005 (0.025)0.065 (0.019)*0.004 (0.019) cohort (0.036)0.019 (0.036)0.077 (0.028)*0.017 (0.026) cohort (0.046)0.003 (0.045)0.132 (0.035)*0.046 (0.034) cohort (0.057)0.012 (0.052)0.144 (0.041)*0.084 (0.042) cohort (0.065)0.038 (0.062)0.181 (0.047)*0.130 (0.048)* cohort (0.072)0.170 (0.054)*0.180 (0.052)* Constant (0.516)* (0.194)*0.168(0.135)-0.033(0.378) Obs R-squared

20 Conclusion A lot of information in the LFS with which to estimate returns to a detailed list of qualifications. Pseudo cohort approach can be useful in estimating lifetime returns, but only for qualifications that are held by large numbers of people.


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