The Effects of Life-long Learning on Earnings and Employment

1. The Effects of Life-long Learning on Earnings and Employment Richard Dorsett, Silvia Lui and Martin Weale

2. The Role of Life-long Learning • Educational attainment is strongly dependent on socio-economic background. • It is unlikely that capacity to benefit from education is as dependent on background as is attainment • It follows that there is plenty of scope for making up for lost time

3. The Spread of Life-long Learning • 1994. 31% of 451,000 UK students starting undergraduate courses aged twenty-five or over. • 2007, 43% of 706,000 UK students A similar pattern elsewhere • Forty per cent of those starting university in Sweden were had left school at least five years earlier • Thirty-five per cent of male school leavers in the United States between 1979 and 1988 resumed their education by 1989. • What are the benefits of qualifications gained through life-long learning

4. Doubts about the Benefits • Jenkins et al. (2002). Wage growth after life-long learning was not significantly faster than for those who did not do it. • Egerton and Parry (2001). Substantial penalties for late learners. • Purcell et al (2007). Case studies suggest mature graduates have difficulty finding appropriate employment. • Blanden et al. (2008). Little benefit for men; some for women aged thirty-five to forty-nine

5. A Mover-stayer Framework • People have to take a wage from a stationary distribution (Movers) OR • The wage rate is closely related to the wage in the previous period (Stayers) • Expected earnings depend on • i) the nature of the stationary distribution • ii) the speed with which people move up the ladder • iii) the chance of falling off • Contrast this with a model estimated in first differences to remove individual fixed effects in levels.

6. Employment Prospects • People have to be employed to have earnings. • Previous unemployment may damage earnings potential at least in the short run. • These effects need to be allowed for along with earnings dynamics.

7. Life-long Learning • Consider qualifications acquired when age 25 or older. • BHPS provides information on qualification level (NVQ) from 1991 or when subject joins survey. • And each year on i)whether qualifications have been obtained and ii) whether educational status has been upgraded. • Separate effects of qualifications in each of last five years from ever acquiring qualifications.

8. Five-year Transitions

9. Non-employment Rates

10. Earnings

11. Sample structure • Consider only men aged 25-60. • Leave out self-employed (who may have negative earnings) and drop from sample if people become self-employed.

12. Equation Structure

13. Estimation Strategy • Consider covariance structure of residuals • Note that for identification

14. Estimation Strategy • Apply a Cholesky decomposition to the co-variance matrix with the life-long learning equation at the top of the diagonal. • Estimate the life-long learning equation as an ordered probit • Compute the generalised residuals from this and introduce these as extra variables into the other four equations estimated as a system. • Include dummies for people who undertake life-long learning and those who upgrade at some time so as to distinguish the characteristics of people who study from the effects of study.

15. Movers: Men: Selected Coefficients

16. OLS Regression: Selected Coefficients

17. Restricted Model Parameters: Selected Coefficients

18. Marginal Probabilities(Reference Age 30)

19. Average Returns to Life-long Learning: Men

20. Conclusions • In common with other related work, we find little benefit from life-long learning when studied with the standard fixed-effects model. • A richer mover-stayer model in which employment is endogenous finds that life-long learning has statistically significant effects • Upgrading raises the long-term employment rate by around 5% and also incurs wage benefits for stayers after one year

21. Acquisition of qualifications, with or without upgrading raises earnings of movers permanently by around 6% • The effects point to a return of around 4% for qualifications without upgrading and from 12-22% with upgrading. • The effects of upgrading are much enhanced by the effect on employment