Analysis of Private Returns to Vocational Education and Training. A National Vocational Education and Training Research and Evaluation Program Report

In 2008 as part of a national push to increase Australia's skill levels, the Council of Australian Governments agreed on targets that would see, by 2020, a doubling of diploma and advanced diploma completions and a halving of the proportion of 20 to 64-year-old Australians without at least a certificate III. Such targets assume there is a financial return as a result of undertaking vocational education and training (VET). Using data from the Australian Bureau of Statistics' (ABS) Surveys of Education and Training (1993-2005), this study investigated this assumption by looking at the employment and earnings for individuals who had completed a VET course and how these may have changed over time. This work examines the effect of field of education on the returns from VET for individuals, as well as the returns from VET for mature-age students (defined here as persons between 30 and 64 years). It also compares these with higher educational qualifications. This paper suggests that: (1) Compared with those who have completed Year 12, employment and earnings benefits are only gained by completing a VET course at the diploma level. This result differs from some previous studies (for example, Long & Shah 2008). However, by comparison with individuals who do not complete Year 12, both employment and earnings benefits can be gained from completion of a VET qualification at any level, an outcome which accords with previous research; (2) Undertaking courses in the area of business, engineering, architecture, building and automotive provides the greatest benefits relative to those who did not complete Year 12; (3) For mature-age students, those who have not completed Year 12 and undertake a VET course at the certificate III level or higher gain the greatest employment and earnings benefits. However, there is a lag of several years before these benefits materialise; and (4) The study covers the period 1993 to 2005 to assess whether VET qualifications have continued to attract similar returns relative to Year 12 and non-school completers. The earning benefits from completing a diploma were shown to be relatively stable during this period. At the sub-diploma level there were more fluctuations but, relative to non-school completers, returns from these qualifications were positive. This was not the case when comparisons were made to Year 12 completers. This study makes it clear that people cannot assume VET has a financial return to the individual; it all depends on educational background and the level and field of the qualification being undertaken. Appendices include: (1) How propensity-score matching works; (2) The two-step matching/ regression approach; and (3) Sample sizes of treatment and comparison groups in the 1993, 1997, 2001 and 2005 SET data. (Contains 74 tables and 9 footnotes.) [For the support document, see ED508929.]