Returns to Vocational Education in Portugal

In a context of increasing investment in vocational education, it is highly relevant to investigate the impact of this type of education over labor market outcomes. Following a panel of individuals with upper secondary attainment born between January 1974 and December 1990, this study assesses the wage returns to vocational education and general education, between 1993 and 2009. The sample was drawn from Quadros de Pessoal, a matched employer-employee dataset covering all firms with at least one wage earner. The econometric model used in this empirical study is an adaptation of the Mincer earnings function, which was estimated by ordinary least squares, fixed effects and random effects. After conducting the relevant statistical tests, a random effects method was revealed to be the appropriate one. Results point to a wage advantage for workers with vocational education vis-à-vis workers with general education, in the beginning of the career. In particular, accounting for both workers’ and firms’ characteristics, the former group earns on average about 2% more than the latter, when they enter in the labor market. However, the earnings of vocationally educated workers grow at a slower rate and are surpassed by the earnings of generally educated workers at around eight years of experience. Additionally, when comparing between different vocational tracks, estimates suggest that workers with vocational courses of level III face a higher gain initially as well as a larger disadvantage later in life, than workers from other job-oriented streams.