A Higher Calling – higher vocational education can beat degrees when it comes to earning power for some

We know university degrees affect future earnings power, but could higher vocational education actually make your kids better off? New evidence shows it could.

When it comes to planning for the future, young people (and their parents) are under increasing pressure to consider a degree, and not without reason. A recent report by the IFS highlighted the extensive earnings benefits for people graduating from university in England: at age 29, the average male university graduate earns 25% more than someone with similar background characteristics who did not go to university. For women, the earnings effect was found to be even higher, more than 50%.

Although there are clearly many more benefits from university studies than a “graduate wage premium”, young people need to make sure the debt they are taking on is worth it. But with life-course earnings remaining low for some graduates, not all debt will be repaid, which results in additional government spending due to loan write-offs. Higher vocational education offers an alternative – if massively under-explored – choice of programmes of shorter duration, often run by local colleges and resulting in lower debt (or if e.g. within an employer-funded apprenticeship no debt at all).

A NIESR report we just published for the Centre of Vocational Education Research is the first ever comprehensive study on how many young people choose vocational education and how their earnings contrast with those of degree holders. Our analysis using data from hundreds of thousands secondary school leavers in England yielded interesting results.

We find that earnings of degree holders in many subject areas are consistently higher by age 30 than those of people with higher vocational qualifications, which is what you would expect. However, we also find that people achieving Level 4-5 qualifications in STEM (Science, Technology, Engineering and Mathematics) subjects earn more than people with degrees from many universities.

Few people do higher vocational education

Our research shows that higher vocational qualifications are only taken by a tiny fraction of the 600,000+ people leaving secondary schools every year. By age 29/30, just 1.5% (about 9,500) of any cohort achieved higher vocational qualifications as their highest education outcome (i.e. “Level 4” or “Level 5” programmes, equivalent to one or two years of full-time tertiary education). Subject choices are highly unbalanced for male and female students, with STEM and construction subjects taken overwhelmingly (80%+) by male students, and health, education and other subjects mainly by female students.

Earnings trajectories compared to degree holders

Figure 1 describes average earnings of people until the age of thirty years using the new Longitudinal Education Outcomes (LEO) data, focusing on those with higher vocational qualifications (Level 4-5) or degrees (Russell-Group universities or elsewhere. Note: The Russell Group (Russell) refers to an association of 24 universities in the United Kingdom with a focus on world-leading research.). The graphs show initially higher earnings for people with vocational education. Eventually, earnings profiles intersect and degree holders are better off. For men, average earnings for vocational and academic (non-Russell group) graduates converge by the age of 30 whereas for women, earnings of the former group increase at a faster rate. The gender differences largely reflect different subject choices made by men and women, which we discuss below.

Figure 1: Earnings Trajectories*, by type of qualification, 2002/03 School leavers 

Earnings by subjects – the advantages of higher vocational qualifications

Using the LEO data, we can also compare earnings of people when choosing particular subjects in degree programmes (Russell Group university or others) or higher vocational qualifications (Level 4-5). The results are shown in Figure 2. We find that by the age of 30, those achieving higher vocational qualifications in STEM subjects are observed to earn above some degree holders[1]. This finding remains consistent when controlling for a wide range of further characteristics.

Figure 2: Median annual earnings* at age 30, KS4 cohort of 2002/03

It is also worth considering that higher apprenticeships generally involve some form of tertiary education, mainly at Levels 4 and 5, but may even include degrees. With full employer funding through the apprenticeship levy and/or local education in further education colleges, they are low/no costs to students and often of shorter duration.

Therefore for some young people interested in specific professional roles, higher vocational education could indeed be a useful, cheaper and ultimately more lucrative alternative to university.