Investing in Skill: Expected Returns to Vocational Studies

Abstract

This paper estimates forecast equations and real rates of return for 16–19-year-olds from different vocational qualifications in Britain. The data used for estimation are the individual responses in the General Household Survey for the years 1985–1988. The earnings equations are estimated separately for males and females. The research suggests that, at the minimum school leaving age, the demand for qualifications will be influenced by anticipated earnings. It demonstrates that inadequate returns to low-level vocational qualifications compared with higher qualifications or no qualifications may discourage individuals from engaging in some forms of vocational training. The paper concludes that changes are still required by employers, in matching wages to the achieved level of training, and by government in developing systems of qualifications that truly achieve a ‘parity of esteem’ between different qualifications.