January 24, 2022

Career training

What are the long-run impacts of vocational education on labor market outcomes?

Chris Fleisher

Students who went through vocational training enjoyed a wage premium into their thirties.

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Not every job requires a general secondary education. Sometimes high school students prefer the skills-based curriculum of a vocational school.

Some researchers have argued that career and technical education (CTE) is an important option for students, providing them with practical and soft skills needed to improve career opportunities.  

Still, there have been concerns that the benefits of vocational education may be short-lived and that the initial wage advantages of CTE graduates are erased after a decade.

In a paper in the American Economic Journal: Applied Economics, authors Mikko Silliman and Hanna Virtanen investigate the long-run returns from CTE. Their findings offer important insights as policymakers around the world weigh investments in these programs.

“If we care about the school-to-work transition, especially for the group of people who are most at risk of being in low-income jobs or being unemployed, then we need to think about how to change our conception of high school so that it provides these people the skills they need to enter the workforce,” Silliman said in an interview.

There is little solid research on the effects of vocational education on labor market outcomes and wide variation in how individual countries approach it. Enrollment in vocational secondary school in OECD countries ranges from 10 percent in New Zealand to nearly 70 percent in the Czech Republic.

Silliman and Virtanen found the data they needed in Finland, where around half of all secondary students pursue vocational education. When Finnish students apply to high school, they rank their preferences for institutions that are either general education or vocational. Many students include a mix of both among their top five.

Students are sorted into schools in order of their preferences, based on middle school GPA and other selection criteria. 

Using a regression discontinuity design, the authors focused on students who applied to both tracks. Most of these—90 percent—preferred a general education school, but had a vocational school as a backup. 

The authors homed in on students right at the cutoff—those who barely got their top choice and those who barely missed—in order to compare kids of comparable academic performance so they could isolate the impacts of vocational education on their labor market outcomes. 

The authors found substantial advantages for the vocational students. They earned more than their general education counterparts not only immediately after graduation, but through their mid-thirties. By age 33, vocational students earned 6 percent more than those who were admitted to the general track.

“We don't see any indication that this premium is going to disappear over time,” Silliman said.

We don't see any indication that this premium is going to disappear over time.

Mikko Silliman

The impacts were especially significant for the 10 percent of the sample who preferred vocational education. For these individuals, being pushed into an academic rather than vocational high school meant that they were 20 percent more likely to be unemployed at age 33.

Less clear is how technology changes or sudden sustained shocks like the COVID-19 pandemic may affect the demand for skills being taught in vocational schools. 

Though drawn from data specific to Finland, these findings highlight the broad importance of vocational programs in workforce development.

“As countries all around the world are reconsidering the role of vocational education in their national education strategies, our main takeaway is that vocational secondary education provides an important pathway from school to work,” Silliman said. “And we don’t think cutting those opportunities will help people who are most disadvantaged in the labor market.”

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“Labor Market Returns to Vocational Secondary Education” appears in the January 2022 issue of the American Economic Journal: Applied Economics.