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This paper examines two significant educational choices and estimates the corresponding individual wage returns for variously defined marginal learners, i.e.: (1) the returns to staying on in full-time education past the age of 16; (2) the returns to completing any form of higher education (HE) compared to at least level 2 for the marginal entrant in HE who holds at least level 2 qualifications. The study is based on data from the 1970 British Cohort Study (BCS70), which has tracked all individuals born between 5 April and 11 April 1970 since birth and provides detailed information needed for this analysis, for example, ability, family background, education and employment. The study evaluates the wage returns to the two educational choices for variously defined ‘marginal learners’ when they were aged 29-30 in 1999/2000. The following characterisations of ‘marginal learners’ are used: (1) those who have achieved the level of education being looked at; (2) those who could have but did not achieve that level of education; (3) those eligible to undertake the qualification, irrespective of whether they actually achieved it or not; (4) those with low (medium or high) values of the probability of achieving that educational outcome; and (5) those defined as marginal entrants on a policy basis, e.g. high-ability individuals from a low-income family, or individuals from a low social parental class. The general finding is that there are significant returns to both staying on and to HE for all subgroups of the population. Some variation in returns were found, especially for men. Show less

This report provides a detailed analysis of the current economic value of the full range of vocational level 2 and level 3 qualifications held by the English workforce, focusing particularly on the economic return to National Vocational Qualifications (NVQ). The report addresses questions such as: which level 2 and level 3 vocational qualifications give particularly high wage or employment returns? Which sectors or occupations, if any, now see positive returns to NVQ2 and NVQ3 qualifications? The report also considers in general how wage returns to different qualifications vary by age acquired, subject, by region and by mode of acquisition. The report uses pooled quarterly data from the Labour Force Survey (LFS) for the period from 1997 through to 2006. The sample was confined to those aged between 16 and 65, and to those living in England.

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Recent [UK] government policy has focused on helping low-skilled individuals obtain a Level 2 qualification. Previous work using the Labour Force Survey has however found that controlling for other qualifications achieved, individuals holding low-level National Vocational Qualifications (NVQs) have statistically significantly lower wage levels than otherwise similar individuals who lack NVQs. In this paper, we offer an in-depth investigation of NVQ qualifications, trying to shed some light as to why a seemingly beneficial certification of skill appears to hurt labour market prospects. While we focus on wages, we also investigate whether NVQs are a stepping-stone to higher levels of qualifications or serve to boost employment probabilities. Finally, we compare the returns to NVQ2s to the returns for other level 2 vocational qualifications. Although we conclude that overall returns for NVQs at level 2 are extremely poor and remain negative for large segments of the working population, we do find substantial positive returns for some sub-groups and sectors of the labour force. We also find that returns are positive for those who procure their NVQ2 at their place of employment. Finally, NVQ2s appear to represent stepping-stones to higher levels of attainment, with individuals receiving NVQ2s being more likely than similar individuals without NVQ2s to move on and obtain level 3 qualifications. Nevertheless, the great majority of our findings suggest that NVQ2s offer no benefit to most recipients.

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Despite the policy importance of lifelong learning, there is very little hard evidence from the UK [United Kingdom] on: (a) the extent of lifelong learning; (b) who undertakes lifelong learning and why; and (c) the benefits of lifelong learning. This paper attempts to address all three of these questions. Specifically it identifies the factors that determine whether someone undertakes lifelong learning, defined very narrowly for the purposes of this research as learning between the ages of 33 and 42, that results in a qualification. It then models the effect of the different qualifications acquired via lifelong learning on individuals’ economic outcomes, namely wages and the likelihood of being employed. The paper uses a rich longitudinal panel data set of individuals born in 1958, called the National Child Development Study [NCDS]. Our results provide strong evidence that there are employment effects associated with lifelong learning. Our research has highlighted some important research questions. Firstly, we need to improve our understanding of who is undertaking lifelong learning and why. Another point that needs to be borne in mind is that our study focuses on qualification-oriented learning and this is a very particular sub-set of all lifelong learning. Also, the possible differences between short-term and long-term effects of lifelong learning have not been explored in this paper. We intend to consider other potential, non-economic outcomes and to try to understand the motivation behind the extensive amount of lifelong learning that is evident in the NCDS data.

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This paper estimates the rate of return associated with alternative levels and types of qualification in the United Kingdom (UK). The analysis is restricted to males aged between 16 and 59 and uses alternative estimation techniques including ordinary least squares, instrumental variables and a Heckman Selection approach. In addition, the work presented here utilises different information sources, both cross sectional (Labour Force Surveys) and longitudinal (National Child Development Study). This is done in an attempt to compare the findings when using alternative information sources which contain markedly different information relating to the personal characteristics of the individuals being analysed. It is found that there is a statistically significant differential in the earnings premium achieved by the academically and vocationally qualified at every level of qualification within the National Vocational Qualification classification of qualifications. Several reasons are suggested as to why there might exist an earnings differential between the academically and vocationally trained and this is done to highlight possibilities for future research.

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This paper addresses the relationship between education and earnings, particularly the issue of whether a randomly selected person who invests more in education will earn higher wages. Two opposing hypotheses about this relationship have been put forward: (1) that the relationship is ‘causal’, i.e. education raises productivity and higher productivity raises earnings; and (2) that the relationship is ‘spurious’, i.e. more able people (higher ability, more favourable family background) are more productive and get a higher wage, but such people acquire more education to signal their high ability and/or because it is easier for them. The authors report on a study that attempts to control for ability and family background to avoid ability bias in determining returns to education by using a new data set of identical UK twins. This data set provides an opportunity to test the two hypotheses. The ‘within-twin estimator’ is applied where the returns to education are estimated by comparing the difference in the education of the twins in a pair with the difference in their earnings. The study is the first in the UK to apply this method to identical twins. The estimation has been criticised for not taking into account other, unobservable differences between twins that could affect their educational decisions and their wages. Tests were conducted to investigate this criticism. A number of key results are presented. Show less

The role of basic literacy and numeracy skills in the labour market is relatively under-researched in the United Kingdom (UK). The effect of basic literacy and numeracy skills on labour market outcomes was highlighted in ‘Improving literacy and numeracy: a fresh start’, a report by Claus Moser on the basic skills of adults in the United Kingdom (UK) which was published by the Department of Education and Skills (DfES) in 1999. This report revealed the high level of literacy and numeracy difficulties amongst the British population, and suggested that this ‘skill gap’ is one of the worst in Europe generally. The report recommended a National Strategy for Adult Basic Skills to reduce the number of functionally illiterate and innumerate adults. To investigate the possible benefits of such a strategy and to address the lack of research in this field, this paper provides an evaluation of the economic returns to better literacy and numeracy skills. The authors measure UK workers’ basic literacy and numeracy skills using data from the National Child Development Study (NCDS) and the International Adult Literacy Survey (IALS). The impact of these skills are evaluated particularly in relation to wages. The findings indicate better wage and employment returns for those workers with higher level literacy and numeracy skills.

‘Improving literacy and numeracy: a fresh start’ is indexed at TD/IRD 88.175. Show less

When looking at the relationship between individual earnings and schooling, there are potential sources of bias which arise due to individual education choices; individuals of higher unobserved ability or with higher unobserved payoffs from schooling may for instance invest more in education. This paper reviews alternative models and estimation methods meant to overcome these sources of bias and to thus recover the true causal effect of education on earnings. We first provide a methodological comparison of four main estimation methods: least squares, matching methods, instrumental variable methods and control function methods. For the different model specifications, the paper highlights the assumptions needed for the validity of each method and investigates the estimators’ properties. These models and methods are subsequently applied to high quality data - the British 1958 NCDS [National Child Development Study] birth cohort - to estimate the wage returns to different educational investments and to illustrate the sensitivity of the different estimators to model specification and data availability. The overall returns to educational qualifications at each stage of the educational process remain sizeable and significant, even after allowing for selection and heterogeneity in the education response parameters. In particular, we estimate an average return of about 27 per cent for those completing some form of higher education versus anything less. Compared with leaving school at 16 without qualifications, we find that in the population the average return to O levels is around 18 per cent, to A levels 24 per cent and to higher education 48 per cent.

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In this paper we evaluate the labour market value of basic skills in the UK, focusing on the wage and employment returns to having better literacy and numeracy skills. We draw on literacy and numeracy assessments undertaken by all cohort members of the UK 1970 British Cohort Study. The data used are very rich and allow us to account for potential ability bias, including as they do early childhood assessments of ability. We find that the literacy and numeracy effects on earnings are over and above any general effect on earnings from a person being more cognitively able. We also assess whether the value of basic skills, in terms of wage returns, has increased over time, using a cross cohort analysis based on the 1958 National Child Development Study cohort and the 1970 British Cohort Study. Our results show that literacy and numeracy skills retained their high value in the labour market over the period 1995-2004, despite numerous policy attempts to increase the supply of basic skills during this period.

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Over the last 25 years there has been a rapid expansion of UK [United Kingdom] higher education with dramatically increasing graduate numbers. Recent research has shown that a considerable proportion of graduates have attained more education than is required to do their jobs. At the same point in time, employers continue to complain that there is a shortage of highly skilled labour and wage inequality has continued to widen both within as well as between narrowly defined educational groups. The first objective of this paper is to explore the determinants of over-education. In particular, [the authors] examine the graduate labour market using alumni data from one large civic university. Furthermore, [the authors] investigate the impact of over-education on wages. In particular [they] model the process of over-education in first and current job endogenously with the determination of earnings using a variety of estimation techniques (instrumental variables and treatment effects models). The results indicate that 42 per cent of graduates entered non-graduate jobs upon leaving university and, in current employment, 22 per cent are still in jobs for which they are over-educated. The central conclusion of the paper is that earnings and the type of job a graduate enters are simultaneously determined and that simple estimation models of over-education (which ignore this relationship) may systematically underestimate the size of the negative effect of over-education on earnings.

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