When you do the numbers, VET qualifications offer long term benefits?

It’s a common observation today that a post-school qualification is essential for improving individual life chances. As the newsletter indicated a few months ago, Australia is forecast to create a million jobs over the next five years, but only 69,000 of those jobs are likely to be open to people who have only completed secondary school.

It’s also common to spruik the return on investment from post-school education and training. The proposition goes that with a good qualification that is fairly priced, your time will be well spent. You’ll enjoy higher wages over the long term, and recoup your fees, or pay off your HELP debt, in a relatively short period.

Doing the numbers

However, it can be a struggle to put numbers to that return on investment from completing a VET qualification. How much higher are the wages? How long does the positive effect last?

The Melbourne Institute of Applied Economic and Social Research has done the numbers in an Institute Working Paper released in November 2016. Long-term outcomes from Australian vocational education (47 pages) identifies some hefty benefits come with that VET qualification.

But for starters, to get the benefits you need to complete the qualification, not just to start it. As the report puts it, ‘to commence but not complete a qualification tends to represent a bad signal for the labour market, when the comparison is against people who never commenced the qualification.’ In addition, even if you secure a job without completing your qualification, ‘commencing a qualification … does not have the same positive impact on hourly wages.’

A 15-25 per cent income advantage

The researchers, Chris Ryan and Cain Polidano, found that having a completed qualification meant you would earn 15-25 per cent more than someone who had only finished Year 12.

There is a larger effect for female completers than male completers, though it seems that is partly explained by the apprenticeship effect. Males are more likely than females to do an apprenticeship and so are paid before they complete. The rise in wages is smaller after completion. Females are less likely to do an apprenticeship so the wage impact of a completed qualification is higher. (That’s as things stand though we don’t need to let them stand there. We still need to take reforming steps like encouraging more females to do apprenticeships, and widening the range of apprenticed occupations.)

The benefits of higher qualifications persist

It seems the positive effect of a completed VET qualification lasts a good while. Even five years after completion of a VET qualification you still get that 15-25 per cent wage premium, and you are less likely to be unemployed.

The researchers also found that a person in the workforce who completes a second qualification will further improve their income – but only if the second qualification is higher than the first.

Victoria’s Department of Education and Training commissioned the research on which the Institute’s report is based.