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Summary: At level 2, for many vocational qualifications such as NVQ2 and RSA the wage return is higher if the person acquired the qualification at a younger age. This is not true of all level 2 qualifications however, such as BTEC and City and Guilds. At level 3, generally wage returns are higher if the qualification is acquired earlier, with the exception of RSA.

Introduction

It is anticipated that both age at acquisition and the length of time since acquisition will affect the wage returns to any given qualification. For this reason an analysis of marginal returns by these factors has been carried out and some key findings are presented here. The purpose of this analysis is to determine whether firstly acquiring vocational qualifications earlier (later) in life yields higher (lower) wage returns. Previous work on this issue has been somewhat pessimistic, suggesting the return to qualifications acquired later in life is generally lower or even nil (Jenkins et al. 2003). Secondly, we want to determine whether the wage return to vocational qualifications occurs only some time after the person actually acquired the qualification. For example, might the low or nil average returns to NVQ2 be down to the fact that it takes a number of years for the benefits of this qualification to accrue in the form of higher wages. We therefore need to separately identify the effect of age when the qualification was acquired and also how long the person has had the qualification. Given data limitations, we have done this in a relatively simple way (as described below) and our results that support the discussion below are presented in Appendix B. However, this is clearly an area for future research.

For this analysis we used LFS data from spring 2001 onwards, since the LFS only started to record the year (or age) of acquisition of the highest qualification held from that date. The highest qualification is determined according to a formula for ranking qualifications embodied in the LFS derived variable “hiqual”. For the vast majority of cases the ordering of this LFS highest qualification variable is consistent with the ranking of highest qualifications used in the rest of the analysis in this report. Therefore, for around 98% of cases we have a year (or age) of acquisition for their highest ranked qualification, and these form the basis of

the regression analysis. For the regressions, where previously we included a dummy variable indicating the highest academic or vocational qualification acquired, here we include two dummy variables per qualification indicating whether the qualification was acquired under or over the age of 25. For all qualifications the set of 2 dummies used is therefore equivalent in scope to a single indicator that the qualification is the sole highest qualification held (Table B1).

For qualifications where numbers allow, these dummies are again split into the following four categories

• Acquired aged < 25 and held for < 10 years (at the date of interview) • Acquired aged < 25 and held 10+ years (at the date of interview) • Acquired aged 25+ and held < 10 years (at the date of interview) • Acquired aged 25+ and held 10+ years (at the date of interview)

Each of these categories is therefore effectively treated like a separate qualification for the purposes of the regression analysis (Table B2). Note that we revert back to using the full sample for this analysis to enable us to explore the influence of age of acquisition and time since qualification acquired for the full range of qualifications available. We are also estimating marginal returns i.e. including only individuals’ highest qualification (we do not have data on time of acquisition for other qualifications).

At level 2, there appears to be little significant variation by age of acquisition or time since acquisition for City and Guilds qualifications. At BTEC level 2 it was not possible to do a full breakdown by time since acquisition, and there is no marked differences in the return for older and younger acquirers. RSA qualifications category at level 2 has too few cases to permit a breakdown by time since acquisition, although the return for individuals who acquired RSA level 2 under age 25 does appear higher (28%) than for those who acquired the qualification over the age of 25 (19%).

For NVQ2 there also appears to be a substantial wage penalty for later acquisition but little significant variation by length of time since acquisition. Thus the return to NVQ2 for those acquiring the qualification under the age of 25 is around 13-14%, whilst the return for those

acquiring it over the age of 25 is 3-4%. Some caution is needed however, as disaggregation by occupation and sector is not possible due to sample sizes. Thus some of the apparent penalty for acquiring these qualifications above the age of 25 may actually be down to differences in the average age such qualifications are acquired across different occupations and sectors.

At level 3 those acquiring City and Guilds, ONC/OND and NVQs under the age of 25 earn a substantially higher wage premium as compared to those who acquire their qualifications later in life. Interestingly the opposite is true for RSA whereby older acquirers actually have higher returns. For BTEC qualifications, the length of time the qualification has been held is important with particularly higher returns (47%) for those who acquired their qualifications under the age of 25 and more than 10 years previously.

Just for completeness, we note that for the level 4 NVQ a full breakdown is possible, but reveals little significant variation by either age of acquisition or time since acquiring.