Policy proposals promoting vocational education focus on the school-to-work transition. But with technological change, gains in youth employment may be offset by less adaptability and diminished employment later in life. To test for this trade-off, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education.
Using micro data for 11 countries from IALS, we find strong and robust support for such a trade-off, especially in countries emphasizing apprenticeship programs. German Microcensus data and Austrian administrative data confirm the results for within-occupational-group analysis and for exogenous variation from plant closures, respectively.
Our estimates of the impact of vocational education on age-employment profiles indicate that much of the policy discussion about education programs is too narrow. Vocational education has been promoted largely as a way of improving the transition from schooling to work, but it also appears to have an impact on the adaptability of workers to technological and structural change in the economy. As a result, the advantages of vocational training in smoothing entry into the labor market have to be set against disadvantages later in life.
We estimate the impact of education type on employment over the life-cycle in a difference-in-differences approach, comparing the relative performance of individuals with different education types at different ages. The results show that in the group of vocational countries, individuals completing a vocational education are more likely to be employed when young, but this employment advantage diminishes with age.
The estimation of cross-over ages is quite imprecise and varies across specifications, but individuals completing a general education start to experience higher probabilities of employment as early as age 50. While this might seem quite late, it is important to bear in mind that this analysis refers to employment and to males. Due to breadwinner role models or other reasons, males may accept substantial employment hardships before accepting nonemployment during their prime age. Consistent with this interpretation, the cross-over age for incomes comes much earlier (see Figure 2). Furthermore, at any given time skill-specific demand will drop for just some specific vocational skills and it is difficult to predict which ones will face falling demand over the next several decades. But, decade by decade, some additional vocational degrees will lose further in employment, even though some will not become obsolete over an entire work life. While this rolling obsolescence implies that it may take some time for the average employment effect to cross over, lifetime earnings calculations suggest that the average net effect of vocational education can well become negative.
The pattern of results is most pronounced in the apprenticeship countries, and it is robust to adding more control variables, dropping the youngest groups in the sample, and using a matched sample. Results are also robust when considering only individuals completing just secondary education and when considering only the unemployed among the not employed.
We also conclude that the impact of vocational education varies considerably with the specific institutional structure of schooling and work-based training. While the declining age-employment pattern for those with vocational education relative to those with general education is found in all vocational education countries, it is most acute in the three apprenticeship countries in our sample. The balance of early gains against later losses for vocational relative to general education is, however, not uniform across these countries: In line with the relative pace of economic change in their economies, the balance in lifetime earnings appears to be in favor of vocational education in the slower growing Switzerland but in favor of general education in the more rapidly growing Denmark and Germany.
It is of course difficult to rule out conclusively that cohort differences, say in terms of systematic changes over time in education programs, are driving the effects and not depreciation of skills with age. Nonetheless, the consistency across country groupings and the relationship to treatment intensity supports our skill depreciation view of the difference-in-differences results.
Our measured treatment is obviously heterogeneous as vocational programs in all of the countries cover a range of occupations and skills. They also differ over time as industries develop and as industries wane and disappear in each country. We interpret our vocational training indicator as relating to a portfolio of training opportunities relevant at each time period and chosen by a combination of industry and government projections of future demands. But in all cases, the first decision involves deciding on the mix of general education and more occupation-specific education, the subject of this analysis.
We do not view this analysis as an indictment of the school policy regimes of countries that rely to varying degrees on vocational education, but we do believe that the potential trade- offs should enter into policy debates on the degree of reliance on vocational programs. Most importantly, vocational training should not substitute for providing strong basic skills, because this and other analyses underscore the necessity in modern economies of developing general cognitive skills. Further, countries might want to contemplate programs that would ameliorate any later life disadvantages of vocational programs. For example, a European Commission (2010) communique emphasizes the need for enhanced vocational programs, largely to deal with high youth unemployment in Europe, but also recognizes that there must be a concomitant investment in “lifelong learning.” The best way to provide incentives to both individuals and employers so that workers obtain additional education and training throughout the career is not well understood, but this analysis suggests the task should receive the attention of policy makers, particularly if they contemplate moving school systems toward more vocational education.