1 ANALYSIS: LABOUR MARKET SUCCESS OF VOCATIONAL AND HIGHER EDUCATION GRADUATES Authors: Ingrid Jaggo, Mart Reinhold & Aune Valk, Analysis Department of the Ministry of Education and Research I KEY CONCLUSIONS On its al statistics website the Ministry of Education and Research has published data on the labour market conditions and income from work of graduates of VET and higher as of by al institution and field of study. Educational attainment is valuable as each subsequent level contributes to an increase in income. Work experience provides additional income on the Estonian labour market. The analysis demonstrates a significant difference in the income of school-leavers now and nine years ago. While immediately after finishing school, with a narrow focus (upper secondary VET and professional higher ) proves to be more profitable than that with a general focus (general upper secondary and academic BA studies), the differences recede or even reverse over time. The data confirm the rapid increase of income in the past few years, particularly among recent school-leavers. The income of those who graduated in 2010 increased by 30% on average in the period, while the same figure for 2005 graduates was slightly less than 20%. Engineering and computer sciences provide higher income at all levels, suggesting that the current al policy aiming to raise the number of STEM graduates and encourage young people to enter these fields of study has been appropriate. It is important to continue to prioritise growth areas and fields of study as well as to promote STEM fields. Over 10% of VET or higher graduates are inactive on the Estonian labour market, do not work, are not unemployed and are not in military service or raising young children, with 1/3 of them being abroad according to data from the Population Register. The majority of them are VET graduates.
2 Young people who have not reached at least upper secondary prior to entering the labour market are primarily at risk. Gender gaps in and income are of particular concern. The latter is especially obvious among vocational graduates. II ANALYSIS EVERY SUBSEQUENT EDUCATION LEVEL INCREASES INCOME. HIGHER EDUCATION PROVIDES A 50% HIGHER INCOME THAN VOCATIONAL EDUCATION. Similarly to other studies, this analysis reveals that the higher the level, the higher the income from work (see Table 1). According to current data, the income of those who attained higher in the period (1,176 euros) was approximately 50% higher in 2014 than the income of vocational graduates (772 euros). Table 1. Average income of graduates of vocational or higher in 2014 by level. Year of graduation Education level PhD programmes 1,672 1,653 1,717 1,646 1,707 1,573 1,621 1,578 1,523 1,623 Integrated bachelor and 1,590 1,521 1,357 1,446 1,511 1,480 1,399 1,429 1,339 1,437 master programmes MA (or equivalent) programmes 1,485 1,462 1,361 1,444 1,357 1,354 1,324 1,300 1,215 1,350 BA programmes (4 years) 1,311 1,343 1,322 1,081 1,427 1,378 1,387 1,318 BA programmes (3 years) 1,275 1,203 1,224 1,185 1,105 1,104 1, ,061 Professional higher 1,157 1,164 1,177 1,116 1,095 1,092 1,027 1, ,094 Higher 1,274 1,262 1,258 1,240 1,188 1,189 1,121 1,090 1,025 1,176 Vocational after upper secondary Vocational upper secondary Vocational after lower-secondary Vocational without prior requirement Vocational TOTAL 1,109 1,098 1, ,034 1, ,023
3 The variation between several higher levels is also significant. Compared to the first level of higher (Bachelor s degree and professional higher, ca 1,075 euros), a Master s degree provides ca 25% higher income while those who hold an integrated Bachelor s and Master s degree or a doctoral degree earn 35% and 50% more, respectively. It is interesting to note that immediately after graduation the income of professional higher graduates is slightly higher than that of BA programmes. However, 3-4 years after graduation this difference disappears, and nine years after graduation the BA programme graduates earn more than the professional higher graduates. The data reflects the low income from work of VET graduates. The income of those who have attained vocational upper secondary is 642 euros immediately after leaving school, while those who finished school nine years earlier earn 827 euros. Whereas immediately after finishing school the income of those who attained vocational after upper secondary differs from vocational upper secondary graduates (741 euros), no substantial difference can be seen among those who graduated earlier. The income from work of school-leavers who attained vocational after upper secondary in 2005 amounted to 851 euros in As such, there is no substantial difference in terms of when vocational is attained or whether it is attained together with secondary or thereafter. Meanwhile, the income from work of professional higher graduates is over 300 euros higher immediately after graduation than compared to those who attained vocational after finishing upper secondary school (see Table 1). Compared to general upper secondary, vocational upper secondary provides an income advantage upon entering the labour market, but incomes later equalise due to work experience. At the same time, the decrease in studies being suspended at the (vocational) upper secondary level is important as it provides a significant income advantage compared to basic (lower secondary) (see Figure 1). Previous studies have revealed that the main difference between upper secondary and lower secondary graduates can be attributed to whether the individual is successful in finding a job. According to previous studies conducted in Estonia, upper secondary school leavers are more likely to secure employment than lower secondary school leavers (see e.g. Anspal et al ). The same trend was emphasised by a PIAAC survey 2 demonstrating the difference between the unemployment rate of upper secondary school leavers (ca 8-11%) and those who attained 1 Anspal, S., Järve, J., Kallaste, E., Kraut, L., Räis, M. L., Seppo, I. (2011). The Cost of School Failure in Estonia. Estonian Center for Applied Research CentAR. Research report for the Estonian Ministry of Education and Research. 2 Anspal, S., Järve, J., Jürgenson, A., Masso, M., Seppo, I. (2014). Oskuste kasulikkus tööturul: PIAAC uuringu temaatiline aruanne nr 1. Tartu: Ministry of Education and Research
4 vocational after upper secondary (4-9%). No difference can be discerned between the incomes of these two groups. Figure 1. Average income of graduates of general lower secondary (basic), general upper secondary and vocational upper secondary in Lower secondary Upper secondary Upper secondary VET Lower secondary Upper secondary Upper secondary VET
5 INCOME INCREASED BY 20-30% IN Recent months have seen intense media coverage of the overly rapid rise in incomes. Current data confirm this: the income of graduates of VET and higher has increased by approximately 20-30%. This increase in income is more rapid among later graduates, which is logical considering that they start at a lower income level. See Table 2. On the other hand, looking at the income of vocational graduates, this increase is necessary. It is likely that we cannot and should not presume that cheap subcontracting with low labour costs will last for long. Meanwhile, it is difficult to attract young people to vocational. The nature of work must therefore become smarter and specialist training more comprehensive, which is not at all consistent with the immediate expectations of every employer. One option would be to focus primarily on economic sectors that require high-skilled workers and that allow for paying higher remuneration (see fields of study analysis). Table 2. Income of graduates of vocational and higher in and income growth of graduates in Year of graduat ion Vocational, year of observation Higher, year of observation % , % % 1,040 1,104 1,184 1, % % ,184 1, % % , % % ,095 1, % % , % , , ,025 ENGINEERING AND COMPUTER SCIENCES GRADUATES EARN HIGHER INCOMES. INCOME IS MORE AFFECTED BY FIELD OF STUDY THAN EDUCATION LEVEL. At the higher level, the income from work of graduates varies from 800 to 1,700 euros, i.e. the income of arts graduates whose income is below average earn 53% less than computer science graduates who earn the highest income. At the VET level, incomes vary from
6 620 to 1,130 euros, i.e. those who graduated from personal services earned ca 45% less than those who graduated from security 3 services. See Table 3. Table 3. Average income of graduates of vocational or higher in 2014 by field of study and gender Field of study Higher Vocational Total Male Female Total Male Female Computer sciences 1,713 1,777 1, Security services 1,530 1,600 1,268 1,130 1, Transport services 1,480 1,618 1, Engineering and engineering trades 1,451 1,495 1, Law 1,370 1,507 1,303 Architecture and construction 1,307 1,442 1, Health 1,236 1,641 1, Mathematics and statistics 1,217 1,326 1,184 Business and administration 1,204 1,405 1, Veterinary sciences 1,198 1,428 1, Social and behavioural sciences 1,193 1,391 1,124 TOTAL 1,176 1,425 1, Journalism and information 1,123 1,341 1,082 Physical sciences 1,090 1, Agriculture, forestry and fishery 1,064 1, Manufacturing and processing 1,060 1, Life sciences 1,031 1, Personal services 974 1, Environmental protection 974 1, Teacher training and science 966 1, Humanities 919 1, Social services 901 1, , Arts OVER 10% OF PROFESSIONALLY EDUCATED PEOPLE ARE INACTIVE ON THE ESTONIAN LABOUR MARKET As of 2014, 3.7% (i.e. 5,400 people) of graduates of vocational or higher (a total of 147,000 people) were abroad according to the data of the Population Register. In addition, 8.5% (12,600 people) were inactive on the Estonian labour market, i.e. no data necessary for carrying out this observation were available in the Tax and Customs Board, the Unemployment Insurance Fund or the Estonian Education Information System (EHIS) 4. They 3 Personal services graduates are mostly studying at the Estonian Academy of Security Sciences and the Estonian National Defence College. 4 No study information was available for 2014.
7 were not receiving parental benefits or child care allowance paid to parents raising a child up to three years of age or in military service (see Table 4). Table 4. Status of graduates of vocational or higher in Total Vocational Higher graduates of vocational or higher as at the end of 2013 by highest level 147,266 58,315 88,951 Abroad or unknown 17,941 8,368 9,573 % 12.2% 14.3% 10.8% incl. those abroad 5,399 2,244 3,155 % 3.7% 3.8% 3.5% included in Estonian Population Register, status unknown in current study 11,486 5,751 5,735 % 7.8% 9.9% 6.4% incl. no data available in Population Register 1, % 0.7% 0.6% 0.8% Employers are increasingly warning that Estonia s economic development is being hindered by the lack of qualified labour. This overview shows that notwithstanding the shortage of labour, there are thousands of professionally educated people who are inactive on the Estonian labour market. We know that some of them are abroad, but it is much more complicated to determine the status of those whose data for 2014 was unavailable. Are they also abroad, or still in Estonia but cannot find a place for themselves on the labour market? This question remains unanswered. Given the free movement of labour, the Estonian labour market is strongly influenced by the structural shortage of staff, higher incomes and better working conditions in the Nordic countries. This is also reflected in this analysis. For example, ca 1,100 (15%) of the 7,500 vocational graduates who completed architectural or construction studies from were abroad in 2014 (see Table 5). Many of those who completed health studies in a vocational or higher institution were also inactive on the Estonian labour market. This can also be noted among higher graduates in the fields of transportation and arts and among VET graduates in the fields of manufacturing and processing, as well as personal services. Veterinary higher students and graduates include many Finns, which explains the great loss of students in this field.
8 Table 5. Activity status of graduates of vocational or higher in 2014 by field of study. Field of study Journalism and information Architecture and construction higher graduates as at end of 2013 according to highest level Higher Abroad or unknown % incl. those abroad included in Estonian Populati on Register or no data available vocational graduates as at end of 2013 according to highest level Vocational Abroad or unknown % incl. those abroad included in Estonian Populatio n Register or no data available therein 1, % , % , % 1, Computer sciences 4, % , % Life sciences 1, % Physical sciences 1, % Humanities 5, % % 4 1 Personal services 2, % ,994 1, % 1, Environmental 2, % % protection Arts 4, % , % Mathematics and % statistics Agriculture, forestry and fishery 1, % , % Social and behavioural 5, % sciences Social services 3, % , % Engineering and engineering trades 4, % ,799 1, % 1, Health 7,555 1, % % Manufacturing and 1, % , % processing Transport services 1, % , % Security services 1, % , % Veterinary sciences % % 0 0 Law 4, % Teacher training and science Business and administration 8, % ,830 2, % 639 1,427 6, % Total 88,951 9, % 3,155 5,744 58,315 8, % 5,751 2,617
9 BASIC EDUCATION AND RISK OF IN-WORK POVERTY: 20% OF YOUNG PEOPLE NEVER REACH UPPER SECONDARY EDUCATION. Between 2005 and 2009, the number of basic school (general lower secondary ) leavers in Estonia was 88,000. By the end of 2013, 18,000 (20%) of them had not acquired higher level of. 60,000 people completed general upper secondary from , less than half of whom had not acquired vocational or higher in Estonia by the end of 2013 (see Table 6) Table 6. General (general lower or upper secondary ) graduates from with the same level by the end of Year of graduation General lower secondary incl. those who had not acquired an level higher than basic in Estonia by the end of 2013 % General upper secondary incl. those who had not acquired vocational or higher in Estonia by the end of , % 11, % , % 12, % , % 12, % , % 12, % , % 11, % ,098 18,009 20% 60,151 27,746 46% While the proportion of people who have attained general upper secondary among the Estonian population is high 5, the large number of young people who do not progress beyond basic poses a serious problem. There are too many young people who have not reached at least the upper secondary level and, whereas some of them will certainly achieve this, those who acquire only lower secondary are at high risk of becoming bystanders in the world of work and face in-work poverty (see also Figure 1). % 5 At least upper secondary al attainment among years old in Estonia is notably higher than EU28 average (Estonia 2015: 91,1; EU28: 76,5)
10 GENDER-BASED EDUCATION AND INCOME GAP At the end of 2013, the number of graduates of higher was ca 89,000 and the number of vocational graduates ca 58,000. There are twice as many female as male higher graduates, whereas the gender distribution in vocational is more homogenous (see Figure 2). There are 88,000 professionally educated females and 59,000 males. Figure 2. Highest level among graduates of vocational or higher at the end of % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Higher Vocational Total Male Female According to the analysis data, the income gap between women and men, without counting any additional factors, is 18%. Particularly noticeable is the income gap among vocational graduates: women earn 30% less than men. The income gap among BA and MA graduates was 25% and 23%, respectively, while it was 13% among those who hold an integrated Bachelor s and Master s degree and 15% among doctoral graduates. The total income gap is smaller than the income gap by most individual levels as there are more of them, including women, who have acquired higher and earning higher income. Even more noteworthy is the income of women with vocational : euros, which could partly explain the low rate of participation of women in vocational (see Table 7).
11 Table 7. Average income of graduates of vocational or higher in 2014 by gender. Education level Total Male Female Income disparities Doctoral studies 1,623 1,770 1,507 15% Integrated Bachelor and Master programmes 1,437 1,580 1,368 13% MA programmes 1,350 1,610 1,236 23% BA programmes (4 years) 1,318 1,576 1,161 26% Professional higher 1,094 1, % BA programmes (3 years) 1,061 1, % Vocational after upper secondary % Vocational upper secondary % Vocational after basic % Vocational without prior requirement % Total 1,023 1, % III METHODOLOGY The data of the Estonian Education Information System are linked to the data of the Tax and Customs Board, the Social Insurance Board, the National Defence Obligation Register, the Population Register and the Unemployment Insurance Fund. The data reflects the highest level (vocational or higher ) of an individual attained in Estonia as at the end of This level was attained between the beginning of 2005 and the end of The average income from work was calculated according to the Tax and Customs Board data containing three types of income: remuneration; remuneration payable to a member of a management board; and remuneration received on the basis of a contract under the law of obligations. The income is presented in a gross amount. The average monthly income from work was obtained by dividing the annual income by the number of months during which the income was received. A parent or conscript is an individual who did not receive parental benefits or child care allowance paid to parents raising a child up to three years of age or in military service in Unknown or abroad means an individual who, according to Population Register data, was abroad in 2014 or whose data is not available in the registers. Difference from previous methodology: This analysis excludes 1% of those receiving the lowest and the highest incomes. Every individual has only one status in the analysis. The average or median income is marked with an X in HaridusSilm if the number of people whose income was calculated was less than three. Compared to previous studies, it should be borne in mind that this analysis focused mainly on young people.
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