There is a very strong relationship between starting an apprenticeship and earnings at age 23 compared to classroom-based learning at the same level. For men, apprenticeships raise earnings by 30% and 40% for those educated up to Levels 2 and 3 respectively. For women, they raise earnings by 9% to 20% for the respective groups. Thus, apprenticeship seems to be a good investment although the extent of this varies markedly by gender.
These are among the findings of research by Sandra McNally and colleagues, to be presented at the Royal Economic Society's annual conference at the University of Warwick in April 2019. The evidence also reveals that whether apprenticeships 'add value' depends on the sector, gender and circumstances of the people who take them on.
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 (hairdressing, beauty), Child Development, and Health and Social Care are very important for women.
The researchers note that in recent times, there has been a policy drive to increase the number of people undertaking apprenticeships in England and there are plans to change dramatically 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.
Their study uses administrative data 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.
The authors study the return to starting an apprenticeship for young people in England who undertook their GCSE exams between 2003 and 2008. They consider the group of people who achieved a vocational education (at Level 2 or Level 3) as their highest qualification.
Within this group, they compare those who started an apprenticeship at some point to those who only pursued a classroom-based qualification. Their methodological design enables them to identify the causal influence of starting an apprenticeship on employment and earnings at the age of 23.
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 in which men specialise. 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 Wellbeing at Level 3 and Business Management at Level 2.
It is possible to consider the earnings differential at age 28 for one cohort (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% for women. For those educated up to Level 3, the earnings estimate stays very high for men but declines very significantly for women.
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.
Do Apprenticeships Pay? Evidence for England by Chiara Cavaglia, Sandra McNally and Guglielmo Ventura
Notes:
Level 2 is the vocational equivalent of GCSE and intermediate apprenticeships.
Level 3 is the vocational equivalent of A-levels (such as many BTECs) and advanced apprenticeships.
Most apprenticeships are either intermediate or advanced. Higher and degree apprenticeships have only become popular in recent years and it is too soon to evaluate their impact in the labour market.
