Work in Progress
Private returns to vocational education and training qualifications
Summary
- Item:
- 10371
- Title:
- Private returns to vocational education and training qualifications
- Type:
- Managed research project
- Project no:
- NR6008
- Status:
- Finished
- Date commenced:
- 1 June 2006
- Contact:
- Michael Long
- phone: +61 3 9905 9956
- email: michael.long@education.monash.edu.au
Purpose
Comparison of the rates of return to VET graduates (classified by qualifications, occupations and sex) and persons with other or no qualifications (similarly classified by qualifications, occupations and sex).
Rates of return can be calculated for investment in education and training by identifying the financial costs and benefits of that investment and observing the way in which they are distributed over time.
Approach
Rate of return calculation and secondary data analysis
Research questions
The main question that this project will attempt to answer is:
* What is the expected private return from undertaking vocational education and training?
The calculation of private rates of return in VET is complicated by the variation in courses and students. It is therefore not meaningful to talk about a generic expected private rate of return to VET. Instead the report will describe how the expected private rate of return varies:
* Across types of qualification (AQF1 to AQF 6);
* Across occupations (to the extent permitted by the data);
* Across fields of study (to the level of specificity permitted by the data); and
* Across types of students (especially males and females, but perhaps also other salient categories).
The research will consider various modes of course delivery, including the apprenticeship/traineeship model and full and part-time study as well as rate of return to mature-age students.
Methodology
The standard formula (or a variant of it) underlying the calculation of rates of return is:
Where
Ct = cost of educational qualification in year t
Bt = benefit of educational qualification in year t
n = years of education
m - n = years after education
r = rate of return
Equation [1] says that the sum of the costs discounted over time equals the sum of the benefits discounted over time where r, the rate of return, is given a value that makes the equation true.
The task is to estimate the flow of costs and benefits of education and training over time.
An estimation of the benefits and some of the costs will be undertaken by secondary analyses of two existing data sets:
(a) The ABS 2005 Survey of Education and Training. The survey includes estimates of individual income (not just earnings).
(b) The Household, Income and Labour Dynamics in Australia (HILDA) survey. This national panel provides extensive information on educational qualifications, labour force participation, earnings and income.
Some of the costs can be estimated from these surveys, particularly in terms of income foregone. Supplementary information will be obtained on other costs (such as course fees) from other sources.
Organisations
The Centre for the Economics of Education and Training (CEET) is a joint venture of Monash University - Faculty of Education and Faculty of Business and Economics - and the Australian Council for Educational Research (ACER). CEET reports to an Advisory Board comprising members of Monash University and ACER. It also seeks advice from a Vocational Education and Training (VET) Advisory Committee. CEET has undertaken research and dissemination activities for a range of bodies on the economy, education and training. The work is mainly in Australia but includes international studies. Further information can be viewed on the Monash University website www.education.monash.edu.au
