In recent times, there has been a policy drive to increase the number of people undertaking apprenticeships in England and there are plans to dramatically change the post-16 system, which would include making apprenticeships a more important part of it. This raises the question as to how beneficial apprenticeships are to young people currently.
In our paper, we use administrative data (the Longitudinal Educational Outcomes database) to track students through their schooling and into the labour market. This is a more detailed analysis of the returns to apprenticeships for young people than has been previously possible in England. We ask whether starting an apprenticeship leads to better employment and earnings outcomes in the future, particularly focusing at earnings at age 23 (after which they have all finished their education and/or apprenticeship) and age 28 (the last point at which we can observe them).
We study the return to starting an apprenticeship for young people in England who undertook their general certificate of secondary education (GCSE) exams between 2003 and 2008. Amongst these cohorts about 19 per cent started an apprenticeship at some stage between the age of 16 and 22 (with no new starts subsequently). Amongst those who start an apprenticeship, almost all are only educated up to Level 2 (GCSE or equivalent) or Level 3 (A-level or equivalent). Almost all apprenticeships are either intermediate (Level 2) or advanced (Level 3). Higher and degree apprenticeships are a much more recent initiative and it is too early to assess their labour market impact.
We compare labour market outcomes for those who start an apprenticeship to those with a similar level of highest vocational education (Level 2 or Level 3). The latter group obtained their education wholly within a classroom environment (typically in a college of further education). We are able to follow all these individuals up to the age of 28 (in 2015).
Our methodological design enables us to control for many of the reasons why those who start an apprenticeship differ from those who do not (e.g. for demographics, school and exam results). We also devise a strategy for causal identification based on peer characteristics at school (which is based on a proxy for exposure to information about apprenticeships from peers).
The findings suggest a very strong relationship between starting an apprenticeship and earnings at age 23. For men, apprenticeships raise earnings by 30 per cent and 40 per cent for those educated up to Levels 2 and 3 respectively. For women, they raise earnings by 9 to 20 per cent for the respective groups. A major part of the explanation for the gender difference is that men specialise in vocational areas where having an apprenticeship is more important. For example, building and construction and engineering are very important for men; service enterprises (i.e. hairdressing, beauty), child development and health and social care are very important for women.
The pattern of estimates suggests that although there is a positive earnings differential from undertaking an apprenticeship within most sectors (at this age), the differential is often much larger within sectors that men specialise in. Indeed there are a number of popular sectors for women where the earnings differential is either low or non-existent. These include child development and well-being at Level 3 and business management at Level 2. There is relatively little overlap in the most popular ten sectors for men and women. Where there is overlap, the earnings premium to having started an apprenticeship tends to be higher for men. Using survey data, we show that part of the explanation for the gender gap is also higher hours of work by men (although there is still a residual gap that we cannot account for).
We can consider the earnings differential at age 28 for one cohort (i.e. those who did their GCSE exams in 2003). For those educated up to Level 2, this shows that the earnings estimate stays very similar for men but declines by about 50 per cent for women. For those educated up to Level 3, the earnings estimate stays very high for men but declines very significantly for women.
Overall, the results in this paper should give cause for optimism that apprenticeships really do generate a positive return in the labour market for young people. Increasing opportunities for young people to access apprenticeships does seem to be a worthwhile policy, especially since these returns are experienced by individuals who leave school with low-medium qualifications. However, our work also illustrates huge variability in the returns to apprenticeships. This is largely driven by the sectors in which people specialise and is a particularly important source of the gender earnings gap for those educated up to Level 3 (i.e. upper secondary education). A practical implication is that careers information to students should pay careful attention to the type of apprenticeships available rather than to encourage students to take any type of apprenticeship at all.
- This blog post is based on the author’s paper Do Apprenticeships Pay? Evidence for England, Research Discussion Paper 015 of the Centre for Vocational Education Research (CVER), a DfE-funded research centre led by LSE. September 2018.
- This work was funded under the CVER programme of research and is also closely related to work the authors have done for the Sutton Trust.
- The post gives the views of its authors, not the position of LSE Business Review or the London School of Economics.
- Featured image by IFA teched, under a CC-BY-2.0 licence
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Chiara Cavaglia is a research economist at LSE’s Centre for Economic Performance (CEP) and Centre for Vocational Education Research (CVER). Chiara is primarily interested in labour economics, with a focus on the economics of education, and family economics.
Sandra McNally is a professor of economics at the University of Surrey. She is director of LSE’s CVER and the education and skills programme at CEP. Sandra is part of the Mayor’s Skills for Londoners Stakeholder Advisory Group (2017 – ) and is affiliated with a number of other institutions.
Guglielmo Ventura is a research assistant at CVER, and CEP’s education and skills programme. His research interests include education, labour markets and policy evaluation.