Is vocational education and training (VET) an option to increase education and employment?

Is it possible for Vocational Education and Training (VET) to elevate educational levels and combat youth unemployment effectively?
VET, with its practical approach and focus on specific occupations, can emerge as a compelling option for students at risk of prematurely entering the workforce with limited education. It can promise not just an enhancement in human capital but also a seamless transition from school to work, especially when the training aligns with business demands.

In a recent IZA discussion paper, we empirically test these hypotheses, examining the extensive expansion of upper-secondary VET that began in Portugal in 2005. Utilizing a comprehensive dataset from the Ministry of Education, we tracked the educational journeys of all pre-tertiary students in the country, gaining insights into their course selections and various other attributes. Our study goes a step further than identifying correlations; we delve into causal relationships. We scrutinize the phased rollout of VET courses across different schools, offering a granular view of the program’s impact. Additionally, we investigate the regional availability of VET and uncover gender disparities in enrollment, noting specific courses that attract predominantly male or female students.

Our primary findings reveal a significant increase in upper-secondary graduation rates, by 50 percentage points or more, for students who enrolled in VET due to the reform. This substantial increase is observed even after considering a wide array of factors including demographic, socio-economic, educational, and parental characteristics, as well as regional and cohort variations. The impact of VET becomes even more pronounced when we narrow our focus to students graduating within the standard three-year timeframe of upper-secondary studies, indicating that VET may play a crucial role in significantly reducing grade retention.

Our research reveals that VET is particularly beneficial for students from lower socio-economic backgrounds, those with less educated parents, and those with weaker prior national exam scores. Contrary to previous studies, we observe that the positive effects of VET on graduation rates are equally strong, if not stronger, for girls as compared to boys. These findings point to a notable reduction in educational inequality, particularly in the context of unfavorable socio-economic factors, as a result of the reform.

To further assess whether VET not only facilitates graduation but also enhances graduates’ prospects in the labor market, we delved into an exhaustive analysis of employment, wages, and other pivotal labor market outcomes in the private sector. In the aftermath of the VET establishment, regions and industries witnessed accelerated growth in youth employment. VET graduates not only earned higher wages compared to their peers with lower-secondary education or those with upper-secondary academic-track degrees but also exhibited a trend of securing open-ended contracts over fixed-term ones. This, coupled with increased access to firm-provided training, underscores the enhanced labor market integration experienced by VET graduates.

In conclusion, our findings underscore the significant positive impact of VET on both educational and labor market outcomes, with notable effects observable in the short to medium term. The implication for public policies is important: the introduction or expansion of upper-secondary VET could yield substantial gains, enhancing both the efficiency of the education system and equity for students from diverse backgrounds.

© João R. Ferreira and Pedro Martins

João R. Ferreira is Researcher at Nova School of Business and Economics

Pedro Martins is Professor at Nova School of Business and Economics

Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.

Related IZA World of Labor content:

Foto by PTTI EDU on Unsplash