This paper shows that young men who completed an apprenticeship education plus a tertiary vocational education have considerably higher earnings during the first half of their career than those who obtained an academic education in addition to their apprenticeship education.
We match individuals who are as similar as possible during their formative first labour market years, i.e. during their apprenticeship training. We therefore compare earnings of foremen with selected academics who have the same earnings capacity and career intentions during the period in which they decide whether to choose a tertiary vocational or academic education. The rich information about daily earnings plus the high quality matching results during the apprenticeship period allow us to interpret differences in the earnings developments during the tertiary education phase and after the first employment as foreman or academic as causal earnings effects of a tertiary level vocational vs. an academic education for employees in our sample.
This paper shows that employees with a tertiary vocational education earn more during the first years of their career than comparable academics. This is a strong result because it demonstrates that a vocational tertiary education is an attractive alternative to a more general academic education for comparable groups of employees. Our calculation includes the earnings advantages of tertiary vocational education obtained from better earnings opportunities during education and the shorter education period in comparison to an academic education. Our approach therefore deviates from many studies on returns to education that compare earnings levels after the completion of an education track, for example on the basis of the classical Mincer earnings equation. We however think that a life time earnings approach better depicts the relevant individual decision situation of young people who have both options, vocational and academic tertiary education. The vocational career options at the tertiary level also may increase the attractiveness of vocational training at the upper-secondary level given the path dependence in educational choices and advantages (Böckerman et al. 2018). Education options at the tertiary level with a strong vocational content could therefore help to avoid that vocational training at the upper secondary level is seen as a dead-end for low achievers such as is frequently the case for example in France, the USA or the UK (Ryan 2001). An apprenticeship instead may be attractive for young people who are uncertain whether a vocational or academic track is the right choice for them because they can use it as a career phase in which they can learn about their skills and preferences without giving up the option to get into an academic track (Ryan 2001). Tertiary vocational education also could be an efficient alternative for academic training in countries without a developed vocational education system at the level. Vocational tertiary education is relatively cheap in comparison to academic tertiary education (see the Tables B1 in OECD 2008) and it nevertheless produces comparable individual returns on the labour market and a comparable productive value on the labour market in the first half of the career. Especially in countries with a weak labour market performance of tertiary educated academics and/or strongly increasing tuition costs and the accumulation of large student debts, tertiary vocational education may be a good education option (Reyes et al. 2016).
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