General Education, Vocational

Education, and Labor-Market

Outcomes over the Lifecycle

Eric A. Hanushek
Guido Schwerdt
Ludger Woessmann
Lei Zhang

ABSTRACT
Policy proposals promoting vocational education focus on the school-to-work
transition. But with technological change, gains in youth employment may be
offset by less adaptability and diminished employment later in life. To test for
this tradeoff, we employ a difference-in-differences approach that compares
employment rates across different ages for people with general and vocational
education. Using microdata for 11 countries from IALS, we find strong and
robust support for such a tradeoff, especially in countries emphasizing
apprenticeship programs. German Microcensus data and Austrian
administrative data confirm the results for within-occupational-group
analysis and for exogenous variation from plant closures, respectively.

Eric Hanushek is the Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University,
Stanford, California. Guido Schwerdt is a professor of economics at the University of Konstanz, Konstanz,
Germany. Ludger Woessmann is a professor of economics at the University of Munich, Munich, Germany, and
Director of the Center for the Economics of Education at the Ifo Institute. Lei Zhang is an associate professor of
economics at Shanghai Jiao Tong University, Shanghai, China. The authors thank participants at the CESifo
area meeting in the Economics of Education in Munich, in particular Stefan Wolter, Sue Dynarski, Lance
Lochner, and Holger Sieg, seminar participants at the NBER Labor Studies Program Meeting, the universities
of Warwick, St. Gallen, Freiburg, Federal Armed Forces Munich, and Chicago, New York University, the
German Federal Institute for Vocational Education and Training, the annual meetings of the Society of Labor
Economists, the European Association of Labour Economists, and the German Economic Association for
valuable discussion and comments, and two anonymous reviewers for insightful suggestions. Paul Ryan, Tim
Kautz, and Jim Heckman provided useful comments on an earlier draft. Hanushek was supported by the
Packard Humanity Institute. Woessmann gratefully acknowledges support from the Pact for Research and
Innovation of the Leibniz Association. Lei Zhang acknowledges financial support from the Shanghai Pujiang
Talent Grant No. 14PJC072. The data used in this article can be obtained beginning six months after
publication through three years hence from Lei Zhang, Shanghai Jiao Tong University, Shanghai, China;
[email protected].
[Submitted April 2015; accepted October 2015]; doi:10.3368/jhr.52.1.0415-7074R
ISSN 0022-166X E-ISSN 1548-8004 ª 2017 by the Board of Regents of the University of Wisconsin System
Supplementary materials are freely available online at: http://uwpress.wisc.edu/journals/journals/
jhr-supplementary.html
THE JOURNAL OF HUMAN RESOURCES  52  1
 Hanushek, Schwerdt, Woessmann, and Zhang 49

I. Introduction

Most advanced economies are concerned about the ease with which
young workers can make the transition from school to work. The unemployment rate for
youth invariably exceeds that for the economy as a whole, contributing to a variety of
social problems. In addition, many young workers struggle to find their place in the
labor force, changing not only employers but also occupations multiple times before
they settle down to stable jobs. One appealing way to deal with these transition problems
is to link students more closely to jobs through vocational education programs and
through apprenticeships with firms. (See Ryan 2001; Zimmermann et al. 2013.)
Moreover, the potential for improving youth labor markets in this manner has consid-
erable political support around the world—with even President Obama suggesting that
the United States might reinvigorate its vocational training to get youth into jobs.1 In
contrast to previous research that has focused almost entirely on the school-to-work
transition of youth, this paper studies the difference in lifecycle work outcomes—
employment, wages, and career-related training—between individuals receiving vo-
cational and general education.
Countries actually have adopted very different schooling structures that differ fun-
damentally in their focus on the job transition. Some stress vocational education that
develops specific job-related skills in order to prepare students to work in specific
occupations while others emphasize general education that provides students with
broad knowledge and basic skills in mathematics and communication and serves as
the foundation for further learning and on-the-job training. The United States, for
example, has largely eliminated vocational education as a separate track in secondary
schools on the argument that specific skills become obsolete too quickly and that it is
necessary to give people the ability to adapt to new technologies. On the other hand,
many European and developing countries, led by Germany’s “dual system,” provide
extensive vocational education and training at the secondary level including direct
involvement of industry through apprenticeships. The underlying rationale is that by
concentrating on specific vocational skills, it is possible to improve the entry of workers
into the economy and to make them productive at an earlier point.2
These differing perspectives suggest a possible tradeoff between short-term and long-
term costs and benefits for both individuals and the entire society: The skills generated
by vocational education may facilitate the transition into the labor market but may
become obsolete at a faster rate. Our main hypothesis is thus that any initial labor-market
advantage of vocational relative to general education decreases with age.3

1. See http://www.ed.gov/blog/topic/career-and-technical-education/ [accessed June 28, 2014].

2. A different rationale common in the United States is that the practical focus of vocational courses can
motivate some students who might otherwise drop out of formal schooling to stay in school. Our analysis,
which is restricted to people who have finished at least secondary schooling, does not provide any insights into
this rationale.
3. This argument is related to the macroeconomic perspective of Krueger and Kumar (2004a, 2004b) who have
argued that the propensity to use vocational rather than general education may be an underlying cause of
growth-rate differentials between the United States and Europe. Their argument is that vocational (“skill-
based”) as opposed to general (“concept-based”) education leads to slower adoption of new technologies.
While similar notions underlie our work here, we are really interested in the other side of the relationship: If
there is rapid technological and structural change, what does this mean for hiring workers with vocational and
50 The Journal of Human Resources

The existing empirical analysis of the impact of educational type on individuals is

fairly limited and provides mixed information about either the existence or magnitude of
our hypothesized tradeoff. The general-vocational education debate has centered on
whether vocational education is effective in facilitating youth school-to-work transi-
tion.4 However, even at job entry, existing studies have not found a universal advantage
of vocational over academic education for youth’s labor-market outcomes although the
analysis has been problematic.5 As Paul Ryan (2001) states: “The merits of vocational
curricula and work-based preparation are particularly difficult to evaluate statistically,
given the potential importance of selection around unobservables, the near-absence of
experimental evidence, and the paucity of prior labor market experience to use in
econometric modeling” (p. 73).
The main analysis of this paper employs an international sample of labor-market
outcomes for workers across the age spectrum, using microdata from the International
Adult Literacy Survey (IALS). The database is unique because it provides detailed
information about the education and skills of workers across the lifecycle in countries
with varying structures of vocational schooling and training. To address the concern
of selection into different types of education, we propose a difference-in-differences
framework, comparing labor-market outcomes across different ages for people with
general and vocational education. Under the assumption that conditional selectivity into
education types does not vary over time, this approach allows us to identify how relative
labor-market outcomes of different education types vary with age cohorts. While it is
difficult to remove all concerns about unobserved changes over time in selectivity into
education types, we pursue a variety of specification and robustness tests that signifi-
cantly reduce the potential threats to identification. Larger concerns about identification
still remain about estimates of the initial employment advantage from vocational edu-
cation but our attention throughout most of the analysis is on relative skill obsolescence
with age.
Pooling individuals from the 11 countries with sizeable vocational education systems,
we find that individuals with general education initially face worse employment out-
comes but experience improved employment probability as they become older relative
to individuals with vocational education. The pattern is most pronounced in the ap-
prenticeship countries of Denmark, Germany, and Switzerland. In these countries, the
easier entry into the labor market is balanced by noticeably greater withdrawal at
older ages.

general education? The pattern we study is also in line with the model by Gould, Moav, and Weinberg (2001),
where technological progress leads to a higher depreciation of technology-specific skills vs. general skills. See
also Bertocchi and Spagat (2004) for a model of how the different education systems developed in a historical
perspective.
4. Another larger literature focuses on the firm side of the market and their incentives to invest in general or
specific education; see the initial work by Becker (1964) and more recent analysis by Acemoglu and Pischke
(1998, 1999).
5. For examples, see Arum and Shavit (1995); Malamud and Pop-Eleches (2010); and the reviews and
discussions in Ryan (2001), Müller (2009), Wolter and Ryan (2011), and Zimmermann et al. (2013). Meer
(2007), Oosterbeek and Webbink (2007), and Fersterer, Pischke, and Winter-Ebmer (2008) are recent examples
studying the labor-market outcomes of vocational education. Cörvers et al. (2011), Hall (2016), Weber (2014),
Stenberg and Westerlund (2014), and Golsteyn and Stenberg (2014) are recent examples of labor market
analyses beyond the entry phase that are in line with our interpretation here.
 Hanushek, Schwerdt, Woessmann, and Zhang 51

Two additional sets of analyses strengthen the interpretation that the distinct age
pattern reflects depreciated skills rather than other forces inducing retirement. First,
using data from the German Microcensus, we show that the same pattern holds in much
larger and more recent samples and in estimation within occupational groups that
excludes occupations where brawn is important. This indicates that the differential
movement out of employment is not simply a matter of physical wear and tear of people
in specific vocationally intensive occupations. Second, using Austrian Social Security
data, we show that after a plant closure, the relative employment rates of displaced blue-
collar workers (with more vocational training) are above those of white-collar workers at
younger ages but below them at ages above 50. The exogenous nature of the employ-
ment shock removes concerns about unobserved retirement preferences that could
threaten identification.
The decrease in the relative labor-market advantage of vocational education with age
is apparent not only in employment but also in income. One reason underlying the
estimated labor-market patterns in the apprenticeship countries seems to be adult
training. With increasing age, individuals with general education are more likely to
receive career-related training relative to those with vocational education.

II. Data
Our primary data source, the International Adult Literacy Survey
(IALS),6 provides a unique opportunity to investigate the impact of education type.7
Conducted in the participating countries between 1994 and 1998, IALS provides us
with data for 18 countries: 15 European countries plus the United States, New Zealand,
and Chile.8 The IALS contains information about respondents’ years of schooling and
whether they completed a vocational program or general program in secondary and
postsecondary education for a representative sample of adults between 16 and 65 years
of age in each country. Obviously, average educational attainment varies across coun-
tries and over time, which is the topic of an extensive literature already, but what we are
most interested in here is the distinction between general and vocational programs.
Although other data sets also may record employment patterns for different age
cohorts, a key element of the IALS is its extensive data on other individual employment-
related characteristics including age, gender, years of schooling, employment status,
earnings, adult training, parents’ educational attainment, and, for a subset of countries,
father’s occupation. Additionally, each individual was given a series of assessments of
cognitive skills (called “literacies”) that are comparable within and across countries. The
literacy tests in prose, document, and quantitative domains are designed to measure
basic skills needed to participate fully in modern society. The development of these

6. The IALS survey was developed by the Organisation for Economic Co-operation and Development
(OECD). A followup– the Programme for the International Assessment of Adult Competencies (PIAAC) –
recently has been conducted.
7. For an overview of economic studies using the IALS data, see Section V in Hanushek and Woessmann
(2011).
8. Another country with IALS data is Canada but it could not be included in the analysis because it only
provided bracketed age information.
52 The Journal of Human Resources

assessments was innovative because no prior attempts had been made to assess the adult
competencies on a comparable basis across nations. One of the key issues was developing
questions that could cover a broad range of adult contexts and that would not advantage or
disadvantage particular groups or countries (Kirsch 2001). Test items were scaled using
procedures of Item Response Theory. As discussed in Hanushek and Zhang (2009), the
test scores appear to be a reasonable index of general levels of cognitive skills as valued
in the labor market.9 These detailed individual measures are important in investigating
any changes across time in the selectivity of general and vocational programs.
For the empirical analysis, we restrict our sample to individuals who completed at
least secondary education and who are currently not students. This is the sample on
which general and vocational education types can be defined for individuals’ final
schooling level. We also restrict our analysis to males because of their historically stable
aggregate labor-force participation patterns in prime-age groups across most countries
in our sample. This circumvents concerns about cohort-specific selection into work by
females that would be problematic when we compare younger and older workers.
For individuals who finished secondary education, a general education is defined if
their education program is academic or college preparatory; a vocational education is
defined if their education program is business, trade, or vocational. Some individuals
report their education type as secondary-level equivalency or simply as “other”; because
it is not clear what exactly these programs entail, we classify this as a separate cate-
gory.10 For individuals who finished the first stage of tertiary education, a general
program is one that leads to a university degree (BA/BS), and a vocational program is
one that does not lead to a university degree.11
We concentrate on institutional differences in the degree to which programs are linked
to jobs and vocations but clearly schooling systems across countries differ in other ways
including the scope and quality of the curriculum in both vocational and general edu-
cation programs. For example, Germany takes pride in the quality of classroom in-
struction in its vocational schooling, and this quality could even be greater than seen in
general education programs of other countries. Nonetheless, all of our subsequent
analysis considers just within-country variation. Vocational programs necessarily in-
volve less time and attention to developing general skills compared to general education
within any country, and this difference—which is presumed to show up directly in
differences in general skills—is what drives our analytical results.12

9. Hanushek and Zhang (2009) also show that the scores on the IALS assessments are highly correlated with
the more academic international tests (i.e., TIMSS) used in school-based testing as opposed to labor-force
testing. No clear measures of noncognitive dimensions of skills are available in the IALS data.
10. According to the Organisation for Economic Co-operation and Development (2010), at the secondary
level, general programs are programs that are not designed explicitly to prepare participants for a specific class
of occupations or trades or for entry into further vocational or technical education programs while vocational
education prepares participants for direct entry, without further training, into specific occupations.
11. We essentially define the tertiary type-A programs as general education and tertiary type-B programs as
vocational. The former are largely theory-based and are designed to provide sufficient qualifications for entry to
advanced research programs and professions with high skill requirements, such as medicine, dentistry, or
architecture. The latter are typically shorter and focus on practical, technical, or occupational skills for direct
entry into the labor market (Organisation for Economic Co-operation and Development 2010).
12. Vocational education, particularly when it is firm-based, undoubtedly includes more firm- and industry-
specific training for individuals but this is not well-measured. Our presumption is that these specific skills
depreciate more rapidly than general skills, particularly with rapid technological change.
 Hanushek, Schwerdt, Woessmann, and Zhang 53

A. Descriptive Patterns
Table 1 shows the overall distribution of education types by country.13 On average, 35
percent of males in our sample completed a general education and 47 percent completed
a vocational education (the remainder being in the residual “other” category). Of the 73
percent of individuals in our sample whose final education is at the secondary level, about
one-quarter completed a general education and one-half a vocational education. More
than half of those completing a tertiary education finished with a bachelor’s degree.
The variation across countries is striking, especially at the secondary level. The share
of individuals completing a general secondary education ranges from less than 5 percent
in the Czech Republic to 72 percent in Italy. Most European countries heavily em-
phasize vocational programs at the secondary level with less than one-third completing a
general secondary education while Chile reports a majority completing a general sec-
ondary education.14 At the tertiary level, the variation across countries is smaller. For all
but a few countries, between one-third and two-thirds of individuals completing a
tertiary education received a university degree, and the United States and Chile fall
right in the middle. Overall, the United States has the largest share completing tertiary
education.
The clear picture from Table 1 is the significant differences in how school systems
around the world are organized. These institutional differences represent distinct policy
choices that presumably affect the labor-market outcomes across countries.15
An important issue, particularly when looking across time within countries, is
whether the relative skills of those in general and vocational programs are changing.
The battery of literacy tests in IALS permits direct observations of cognitive skills by
age and schooling type. The literacy score we use is the average of the three test scores
in prose, document, and quantitative literacy, normalized to have mean zero and
standard deviation one within each country.16 Figure A1 in the online appendix shows
that individuals with general education have on average higher scores than those with
vocational education.17 But there is substantial overlap in literacy scores between the
two types, suggesting that individuals completing general and vocational education
share a common support in this important characteristic. Detailed inspection in
Hanushek, Woessmann, and Zhang (2011) suggests that, with few exceptions, in each
country the literacy scores for each education type follow a similar pattern over
age cohorts, providing some general evidence that the relative selectivity between

13. Note that the samples in Ireland and Sweden are particularly small because they include only individuals
with tertiary education, as information on the secondary education types is unavailable.
14. Inaccurate reporting of education type at the secondary level is a substantial problem for the United States.;
60 percent report “secondary-school equivalency” and do not distinguish general and vocational schooling.
The problem is also quite severe for the Czech Republic and Norway, and, to a lesser extent, for Finland.
15. See the working-paper version (Hanushek, Woessmann, and Zhang 2011) for details on the distribution of
educational attainment by country and age group.
16. Results are virtually identical when using any of the three subdomains separately instead of their average in
our analyses, which is not particularly surprising since the pairwise correlations of the separate components are
all above 0.9. Although scores differ across countries, the normalization has no impact on the results, which are
based on just within-country variation through inclusion of country fixed effects
17. The online appendix can be found at http://jhr.uwpress.org.
 54
Table 1
Educational Attainment and Type by Country

Secondary and Tertiary Secondary Tertiary

Percent Beyond Percent Completing Percent Completing Percent Completing Percent Completing Percent Completing
N Secondary General Vocational General Vocational General
Country (1) (2) (3) (4) (5) (6) (7)

Belgium 680 26.6 34.0 64.9 27.8 70.7 49.2

Chile 722 23.3 51.4 46.1 49.1 47.5 57.7
Czech Republic 917 2.8 4.8 71.8 4.4 71.6 19.8
Denmark 1,006 23.1 23.4 60.1 14.3 63.8 51.0
Finland 1,021 22.7 42.8 56.1 36.5 61.9 60.2
Germany 748 16.0 25.6 66.7 15.0 75.7 81.0
Great Britain 639 15.6 58.2 41.8 — — 58.2
Hungary 1,022 25.1 34.3 64.4 26.1 72.3 79.5
Ireland 119 18.6 41.1 58.9 — — 41.1
Italy 809 10.7 75.2 21.0 72.2 23.3 91.8
Netherlands 1,111 24.6 46.8 53.2 29.3 70.7 100.0
New Zealand 1,229 25.7 25.6 65.9 23.0 64.5 31.0
Norway 897 19.0 17.8 57.8 8.3 59.0 45.9
Poland 919 15.5 14.3 85.7 4.4 95.6 68.0
Slovenia 1,097 13.7 47.2 47.7 45.7 48.4 56.9
Sweden 245 29.0 58.1 41.9 — — 58.1
Switzerland 1,228 27.7 7.7 91.8 9.1 90.3 2.2
USA 809 40.6 34.4 32.5 17.9 19.8 53.1
All countries 15,218 26.6 35.2 47.2 23.2 50.4 59.2

Note: Data source: International Adult Literacy Survey (IALS). Sample includes all males who finished secondary education or the first stage of tertiary education and are not currently
enrolled in school. Secondary education is classified as one of three types: general for academic or college preparatory programs; vocational for business, trade, or vocational programs;
and other for secondary level equivalency or other programs. First stage of tertiary education is classified as general or vocational. A general program is one that leads to a university degree
(BA/BS); a vocational program is one that does not lead to a university degree, which is typically shorter and focuses on practical, technical, or occupational skills for direct entry into the
labor market. For Great Britain, Ireland, and Sweden, information on the secondary education types is unavailable. The difference between 100 and the sum of Columns 3 and 4
(respectively Columns 5 and 6) provides the percentage attributed to the “other” category.
 Hanushek, Schwerdt, Woessmann, and Zhang 55

vocational and general education programs has not changed substantially over time.
We return to these issues below.
The focus of our analysis is employment patterns over the lifecycle. In the IALS data,
employment is defined by the current work situation at the time of the interview, where
not being employed includes the unemployed, the retired, and homemaking at the
time of the survey.18 Figure A2 in the online appendix shows the percentage employed
of males with different education types across age cohorts in each country. In the
figure, each line is smoothed by locally weighted regressions using Cleveland (1979)’s
tricube weighting function for each year of age. Many countries show a distinct age-
employment profile by education type: Individuals with vocational education tend to
have a higher employment rate than individuals with general education for the youngest
cohorts. For older cohorts, though, individuals with general education are more likely to
be employed than those with vocational education, and this is most pronounced at the
end of the work lifecycle. The employment pattern is not, however, uniform across
countries, with some countries like the United States having almost identical employ-
ment patterns by education type and others like Germany displaying widely different
patterns. Our analysis flows from these differences.

B. Defining Country Groups by Institutional Variations

There is substantial variation across countries in the relative size of the general and
vocational programs and in the specific organization of the vocational programs. The
United States has virtually no vocational program at the secondary level by the official
definitions (although some community colleges may fit closer). In contrast, a number of
the European countries such as Belgium, Finland, and the Netherlands have most of
their vocational students in school-based programs. Finally, Germany, Denmark, and
Switzerland stand out by having large combined school and work-based vocational
programs that emphasize apprenticeships.
We thus classify countries into different categories based on both information from
the IALS sample and the statistics from OECD’s Education at a Glance (EAG).19 We
define “vocational” countries as those countries whose vocational share is at least 40
percent in IALS data and is at least 50 percent in 1996 EAG or 2007 EAG. Eleven
countries belong to this category: Belgium, Czech Republic, Denmark, Finland, Ger-
many, Hungary, the Netherlands, Norway, Poland, Switzerland, and Slovenia. Of these
11 vocational countries, six (Czech Republic, Denmark, Germany, Hungary, Poland,
and Switzerland) have a vocational sector with at least 25 percent in combined school
and work-based programs. We dub these six countries as “non-school based ” voca-
tional countries.

18. Results are very similar when using the additional information on whether individuals worked at any time
in the past 12 months.
19. See Organisation for Economic Co-operation and Development (2010)). Each year, EAG provides ad-
ministrative information on the distribution of upper-secondary-school students between general and voca-
tional programs. Furthermore, it provides the percentage of students in the vocational program that are in
“combined school and work-based” programs. In these latter programs, instruction is shared between school
and the workplace and may even take place primarily in the workplace. A good example of the latter is the “dual
system” in Germany where at least 25 percent of the instruction takes place in the work place. For descriptive
details, see Hanushek, Woessmann, and Zhang (2011).
56 The Journal of Human Resources

Figure 1
Education Type and Lifecycle Employment in Country Groups
Note: Top panels: Smoothed scatterplots using locally weighted regressions (Stata command “lowess,” Cle-
veland 1979). Bottom panels: Difference of two graphs in top panels. Left panel: 11 vocational countries. Right
panel: 3 “apprenticeship” countries (Denmark, Germany, and Switzerland). Sample includes all males who
finished secondary education or the first stage of tertiary education and are not currently enrolled in school. See
note to Table 1 for definition of education types and notes to Table 3 for details of country groups. Individuals
employed are those who are employed at the time of the survey; individuals not employed include retired,
unemployed who are looking for work, homemakers, and others. Data source: International Adult Literacy
Survey (IALS).

Additionally, in a finer look at the mix of school and work programs, we classify
Denmark, Germany, and Switzerland as “apprenticeship” countries, signifying that the
share in combined school and work-based programs exceeded 40 percent in both 1996
and 2007. Earlier literature suggests that the apprenticeship vocational programs are the
most effective in facilitating youths’ school-to-work transition. (See, for example,
Lerman 2009 and the larger review in Wolter and Ryan 2011.) Therefore, the lifetime
employment experience of individuals completing general or vocation education in
these countries is particularly interesting from a policy perspective. Four countries—
 Hanushek, Schwerdt, Woessmann, and Zhang 57

Chile, Italy, New Zealand, and the United States—are “non-vocational” countries based
on these criteria.20
We generally interpret the aggregate institutional differences, moving from nonvoca-
tional to apprenticeship countries, as treatment intensity. The apprenticeship programs
with their substantial industry-based education receive more vocational experience and
necessarily less general education. Countries choose the portfolio of specific vocational
offerings, possibly based on projections of where future skill demand will lie. While the
specifics of the portfolio may change over time, the broad pattern of the mix of general
and occupation-specific skills does not.
The top panel of Figure 1 reproduces the age-employment profiles of Figure A2 in the
online appendix for the groups of 11 vocational countries and three apprenticeship
countries. The descriptive pattern that a relative labor-market advantage of vocational
education decreases with age is clearly visible in the vocational countries and is more
pronounced in the apprenticeship countries. Given that the definition of general vs.
vocational education types is clearest for these groups of countries, most of our sub-
sequent analysis will focus on them.21

III. Identification of the Impact of Education Type

We are interested in the impact of education types on labor-market
outcomes over the lifecycle. To test our main hypothesis that the relative labor-market
advantage of vocational over general education decreases with age, we compare the age-
employment patterns of workers of the two education types within each country. In the
simplest difference-in-differences form, we permit the age pattern of employment for
those with a general education to diverge linearly from the pattern for the remainder of
workers:

(1) empi = a0 + a1 agei + a2 age2i + b1 geni + b2 geni
agei + Xi c + ei

In Equation 1, empi = 1 if individual i is currently employed and 0 otherwise; age and age
squared capture the normal age-employment pattern in the economy; geni is an indicator
equaling 1 if individual i has a general education type and 0 otherwise;22 and X is a
vector of control variables for other factors that might affect employment patterns
including, importantly, country fixed effects to eliminate overall country differences and
various measures of individual labor-market skills (other than education type). The

20. Although Italy has a significant share in vocational programs from EAG, in the IALS data the share is very
small, at 15.7 percent. Our classification does not apply to Great Britain, Ireland, and Sweden, because
information about education programs for individuals completing secondary school for these countries is
missing in the IALS.
21. As an indication of the vagueness of the definition of education types in nonvocational countries, the National
Center for Education Statistics (1996) classifies only 8 percent of secondary degrees in the U.S. as vocational
(IALS: 20 percent), 32 percent as college preparatory (IALS: 18 percent academic/college preparatory), and 60
percent as other (IALS: 62 percent). Thus, some of the NCES “other” category seem to be classified as vocational
in IALS and some of the NCES college preparatory category seem to be classified as other in IALS.
22. This stripped-down presentation considers schooling type as dichotomous. The sample for the empirical
analysis includes those who reported completing secondary-school equivalency or other programs. In the
estimation, they are treated as a separate category (“other” type), and its interaction with age is also included.
58 The Journal of Human Resources

coefficient b1 measures the initial employment probability of those with general edu-
cation relative to those with vocational education (normalized to age 16 in the empirical
application) while b2 measures the differential impact of a general relative to a voca-
tional education on employment with each year of age.
The simple linear-in-age functional form of the interaction in our basic specification
follows the descriptive pattern observed in the bottom panel of Figure 1, which suggests
a rather continuous impact of education type on employment by age at least starting at
age 30. In our IALS analyses, we do look at nonlinearities but the analysis does not have
much power to detect them.23 The Microcensus analysis reported in Section V below,
which has considerably more power to detect nonlinear differences, provides additional
evidence supporting the basic linear specification.
The overall difference in employment probabilities between general education and
vocational education reflected in b1 does not adequately identify the impact of general
education. This parameter implicitly includes any elements of selectivity in the com-
pletion of different types of schooling not captured in X, and we doubt that the measured
influences on employment found in our data (and most other surveys) fully capture the
systematic differences across schooling groups. (Note that this is precisely the challenge
for attempts to estimate the impact of vocational education on the school-to-work
transition, and highlights the existing uncertainty about the efficacy of common voca-
tional education policies.)
The key parameter for our analysis, however, is b2. In this difference-in-differences
formulation, this reflects the divergence in employment patterns by education type over
age cohorts. The crucial assumption for identifying the causal impact of education type
on changes in employment patterns over the lifecycle is that the selectivity of people into
general and vocational education (conditional on the X) does not vary over time. In other
words, we assume that today’s old people (in each education category) are a good proxy
for today’s young people in thirty years,24 allowing us to estimate the impact of edu-
cation type by the divergence in age-employment patterns across the lifecycle.
If general education becomes less selective relative to vocational education over
time in ways that are not captured by the X, then the changes in the labor market may
reflect simply the varying ability of young and old workers in the different education
categories (for example, Caucutt and Kumar 2003). Descriptive inspection shows that
there was no systematic or significant overall change in the differences in parental
education and occupation between individuals with different types of education over
age cohorts. There was, however, some decline in the difference in literacy scores of
individuals with general and vocational education from older to younger ages. (See

23. An interaction term between the general-education indicator and age squared is not statistically significant
in our main specification; additionally, several spline estimates that allow the interaction effect to differ at
different age ranges never produced estimates that differed statistically significantly from one another. In
robustness analyses below, we report results of a model that allows the impact of general education on
employment to differ for each age cohort defined by ten-year age intervals.
24. This assumption of comparability of age cohorts is of course identical to the normal assumption in
estimating Mincer earnings functions and other applications that make cohort comparisons with cross-sectional
data; see the specific earnings analysis in Hanushek and Zhang (2009). Heckman, Lochner, and Todd (2006)
directly compare synthetic cohort information (using a single cross-section) with repeated cross-section ana-
lyses and find that the synthetic cohort analysis of Mincer earnings models provides inaccurate estimates of ex-
post rates of return to schooling.
 Hanushek, Schwerdt, Woessmann, and Zhang 59

Hanushek, Woessmann, and Zhang 2011.) But, in the estimation we explicitly condition
on individual school attainment and literacy scores along with a series of alternative
proxies for selectivity of education within each country.25 In particular, we provide
standardization across the age groups by conditioning on country-specific changes in
the size and ability composition of the different education types over cohorts. We also
employ propensity-score matching estimators that match each individual with voca-
tional education to an observationally comparable individual with general education,
and we consider the potential role of selection on unobservables.

IV. The Impact of Education Type on Employment

Our investigation begins with basic estimates of how employment
patterns over the lifecycle are affected by general and vocational education in the group
of 11 “vocational countries.” We then pursue a series of alternative specifications,
samples, and robustness checks.

A. Basic Results
Table 2 reports OLS regression results of Equation 1 for males, in which the impact of
education type on employment status changes linearly with each year of age.26 The
sample pools individuals from all 11 vocational countries in IALS but all specifications
control for country fixed effects so that the employment impacts are estimated by just the
within-country variation. Column 1 is the most basic specification, where employment
status is a function of age, age squared, years of schooling, as well as whether one’s
highest level of education is general education and its interaction with age. Ceteris
paribus, employment rates generally increase with age, reach the peak at age 36, and
then start to decline, consistent with the description in Figure 1. They also increase with
years of schooling: One more year of schooling increases the employment rate by 1.2
percentage points.
Most important to our purpose, while individuals with a general education are initially
(normalized to an age of 16 years) 6.9 percentage points less likely to be employed than
those with a vocational education, the gap in employment rates narrows by 2.1 per-
centage points every ten years. This implies that by age 49, on average, individuals
completing a general education are more likely to be employed than individuals com-
pleting a vocational education. Individuals completing a secondary-school equivalency
or other program (the “other” category) have a virtually identical employment trajectory
as those completing a vocational education.
As noted in the previous section, the coefficient on the general education-age in-
teraction (b2) can be interpreted as the causal impact of general education on the

25. The choice of level of attainment is typically made simultaneously with type of education. There is the
possibility that, as argued in the United States, an advantage of vocational training is getting some students who
are not motivated by more abstract academic material to complete secondary school by altering their moti-
vation. If generally true, conditioning on school attainment would lead to understating the impact of vocational
education. This does not appear to be the motivation of vocational education in the vocational countries.
26. Estimates from a probit model of employment are substantively the same.
 60

Table 2
The Effect of General vs. Vocational Education on Employment over the Lifecycle

Control for
Mother’s Base 20+ Age 30+ Age
Education Specification Sample Sample
(1) (2) (3) (4) (5) (6) (7)

General education type -0.069 -0.072 -0.066 -0.083 -0.095 -0.084 -0.083
(0.019)*** (0.019)*** (0.019)*** (0.037)** (0.021)*** (0.021)*** (0.030)***
General education type * age/10 0.021 0.019 0.018 0.024 0.022 0.019 0.018
(0.007)*** (0.007)*** (0.007)** (0.013)* (0.007)*** (0.007)*** (0.010)*
Other education type -0.002 -0.003 -0.001 0.068 0.024 -0.001 -0.020
(0.032) (0.032) (0.033) (0.050) (0.033) (0.034) (0.054)
Other education type * age/10 -0.019 -0.016 -0.019 -0.039 -0.021 -0.013 -0.006
(0.012) (0.012) (0.013) (0.019)** (0.012)* (0.013) (0.018)
Age/10 0.381 0.372 0.360 0.411 0.370 0.363 0.637
(0.013)*** (0.014)*** (0.023)*** (0.024)*** (0.014)*** (0.014)*** (0.028)***
(Age/10)2 -0.094 -0.091 -0.089 -0.101 -0.088 -0.087 -0.127
(0.003)*** (0.003)*** (0.003)*** (0.004)*** (0.003)*** (0.003)*** (0.005)***
Years of schooling 0.012 0.005 0.005 0.012 0.004 0.004 0.005
(0.001)*** (0.001)*** (0.001)*** (0.003)*** (0.001)*** (0.001)*** (0.002)***
Literacy score 0.021 0.024 0.056 0.020 0.025 0.030
(0.010)** (0.010)** (0.018)*** (0.010)** (0.010)** (0.016)*
Literacy score * age/10 0.014 0.012 -0.0001 0.013 0.012 0.009
(0.004)*** (0.004)*** (0.006) (0.004)*** (0.004)*** (0.005)*
Father has professional occupation 0.034
(0.034)
Father has professional occupation * age/10 -0.014
(0.014)
Average lit. score, country-cohort- 0.065 0.065 0.090
education type (0.024)** (0.024)*** (0.026)***
Percent with general education, -0.070 -0.097 -0.262
country-cohort (0.169) (0.171) (0.234)
Percent with vocation education, 0.244 0.200 0.240
country-cohort (0.161) (0.162) (0.211)
Constant 0.444 0.532 0.527 0.366 0.396 0.442 -0.080
(0.026)*** (0.027)*** (0.059)*** (0.044)*** (0.159)** (0.161)*** (0.203)*
Observations 10,615 10,615 10,472 3,532 10,615 10,368 7,892
Countries 11 11 11 4 11 11 11
Adjusted R2 0.24 0.26 0.26 0.26 0.26 0.26 0.31

Note: Linear probability models. Dependent variable: Individual is employed. Sample includes males aged 16 to 65 with secondary or first stage of tertiary education in the 11 vocational
countries. All specifications control for country fixed effects. Omitted education type is vocational. Age variable subtracted by 16 throughout. Column 3 controls for indicators for
mother’s education and their interaction with age (which turn out insignificant, not shown). Data source: International Adult Literacy Survey (IALS). Robust standard errors in
parentheses. Significant at ***1 percent, **5 percent, *10 percent.
61
62 The Journal of Human Resources

employment change over the lifecycle as long as any selectivity into education type has
not changed over time. In the subsequent columns, we employ varying strategies to account
for potential biases from unmeasured ability or other possible influences on employ-
ment (that might vary over time for people in the different education-type categories).

B. Addressing Time-Varying Selectivity into Education Types

A prime concern is that the ability level of individuals completing a general education
may have changed over time with the expansion of education systems around the world,
implying that the coefficient on education type and its interaction with age also would
capture the impact of unmeasured ability on employment at different ages. For example,
more able people may adapt more readily to a changed environment regardless of
schooling, making them more likely to be employed at older age. Because of the
centrality of possible selection effects to our estimation, we pursue a range of formal and
informal tests for age-varying selection into education types.
We begin by adding the literacy score and its interaction with age (Column 2 of Table
2). The coefficient on the literacy score is already positive at the age of 16, and the
coefficient on its interaction with age is also significantly positive—implying that more
able workers continue their employment at higher rates with age. The time pattern of
literacy skills on employment underscores exactly the concern with identification of the
impact of education types (and shows the importance of the IALS data). Note, however,
that the age pattern of employment by type of education is identified entirely by the
portion of the general education system that is orthogonal to realized skills.27 The
coefficient on the interaction of general education type with age becomes slightly
smaller in magnitude—precisely what would be expected with the expansion of general
education and the relatively lower ability of the average young person in general
education. But, importantly, both the general-education indicator and its interaction with
age remain statistically significant.28 In this specification, individuals with general edu-
cation overtake those with vocational education in employment probability at age 54.
In Column 3, in another expansion to allow for time-changing patterns of ability by
school type, we add dummy variables for mother’s education and their interactions with
age. The coefficient estimates on these controls are insignificant in themselves, and they
have little impact on the estimates of other variables relative to Column 2. As a result, we
do not control for mother’s education in later specifications. In Column 4, because
parents may directly influence the educational choices of children, we add a dummy
variable for father’s occupation, taking a value of 1 for professional, and its interaction
with age. However, due to missing information, our sample now only includes four
countries (Czech Republic, Finland, Hungary, and Poland). Estimates on these added

27. The fact that the IALS literacy score is measured at the time of labor market observation, rather than when
the initial decision between entering a general or vocational program is made, suggests that the measured score
may be affected by both the schooling and the employment history, which includes both occupation-specific
skill obsolescence and continuing adult education. Existing evidence (Ludwig and Pfeiffer 2006) and our
analysis below suggests that both aspects work against people with vocational education, which introduces bias
against our reported findings and suggests that these may be lower-bound estimates.
28. In a specification that interacts the main effects with individuals’ literacy scores, estimates on these
interactive terms are small in magnitude and statistically insignificant, indicating that the overall pattern that is
general across ability levels.
 Hanushek, Schwerdt, Woessmann, and Zhang 63

controls are insignificant, and again, the estimates on the main variables of interest—
general education type and its interaction with age—are qualitatively the same as in
Columns 1–3.
In Column 5, we return to the full sample and add three control variables at a more
aggregate level: The percentages completing general and vocational education, re-
spectively, in each country for each ten-year age cohort, and the average literacy test
score for individuals completing a particular type of education by country and ten-year
age cohort. These variables reflect variations in labor skills that change over time and
that might distort the selectivity of education choices over time. The aggregate com-
position of the labor force also may affect the market returns to training and skills. A
higher average test score indicates higher overall ability of individuals completing a
particular type of education; a larger share of individuals completing a particular type of
education indicates lower selectivity of that education type. The estimates in Column 5
appear to confirm that, ceteris paribus, the employment probability is positively related
to the average test score. Nonetheless, estimates for the key interaction of general
education with age (and other variables) are again almost identical to those in Column 2.
In subsequent estimations, we take Column 5 as our primary specification.
The relative stability of our main effect of interest to the inclusion of the different
control variables is reassuring. However, rather than only relying on the common
heuristic of looking at the stability of results to adding controls, we additionally can
employ the more formal approach of Oster (2014)’s expansion of the idea suggested by
Altonji, Elder, and Taber (2005) of using coefficient stability as a test for selection on
unobservables. Our treatment effect varies with age, requiring some adaptation in order
to fit our analysis to a homogenous-treatment-effect setup. As shown in Table A1 in the
online appendix, we do this by focusing separately on the direct effect of general
education at early ages (where vocational education is dominant) and at late ages (where
general education is dominant). The test assesses both the stability of the estimated
general education treatment effect with the addition of key observable factors and the
importance of these observables in explaining employment rates.29 In line with our main
specification, general-type education is associated with lower employment for younger
workers but with higher employment for older workers.30 In the case of older workers,
the estimate of the coefficient of proportionality (suggested by Oster 2014) as a
summary of the robustness of results) implies that unobservables would have to be
substantially more important than observables in explaining the treatment effect in
order for the actual treatment effect to be zero. In the case of younger workers, adding
the controls even moves the estimated treatment effect further away from zero in
absolute terms. Thus, while not entirely conclusive in this modified testing, this ex-
ercise does not suggest that selection on unobservables is the main driver of our results
for either young or old individuals.

29. In our context, the further controls are literacy and an indicator for the mother having at least high-school
education. Father’s occupation is only available for four (non-apprenticeship) countries, and the additional
cohort-specific controls in Column 5 of Table 2 are effectively contained in this cohort-specific analysis.
30. This result indicates that despite the fact that the turning point by which employment of those with a general
education overtakes those with a vocational education is only around age 50, there is a considerable age range
(56–65 in this case) over which the probability of employment of those with a general education exceeds those
with a vocational education by a statistically significant amount. For the sample of three apprenticeship
countries, this is in fact true for much wider age ranges, including the 25-year range of those aged 41–65.
64 The Journal of Human Resources

Finally, a straightforward way to assess the degree to which there is varying selection
into education types by cohort is to investigate directly the correlates of education type.
Table A2 in the online appendix indicates that individuals with higher literacy scores
and more favorable family backgrounds (as measured by mother’s education) are indeed
more likely to select into general types of education. Importantly, however, this selec-
tion does not significantly vary with age. Thus, to the extent that this pattern is informative
for the variation in selection on unobservables across cohorts, there is little indication
that cohort-specific selection into education types is a major concern for our analysis.

C. Excluding the Youngest Cohorts from the Sample

An additional concern is the potential impact of missing students who are still in school.
Column 6 therefore reports results of another robustness check, where we restrict the
sample to individuals aged 20 to 65. The concern is that many of the very young people
are still in school, and this may vary with type of education. Hence, when we exclude
current students from the analysis, the young people included in the analysis may not be
representative of the youth who eventually finish school and start the school-to-work
transition. With the youngest of all individuals dropped, the young people remaining in
the sample will more closely represent the overall youth population. Indeed, of the males
aged 16 to 19, two-thirds are still in education, while of those aged 20 to 25, only one-
quarter are currently in education.31 These shares of current students in different age
groups also suggest that we do not want to drop all the 16- to 25-year-old group;
otherwise, we lose too many young people who already are potentially in the labor force,
and we will not be able to obtain the estimate of the relative impact of different education
types on the school-to-work transition. The choice of age cutoff in this column is a
compromise between these two competing forces related to the youngest people.
Regardless, results from the restricted sample are quite similar to the results in Column 5
for the corresponding specification with a larger age range.
Column 7 goes even further and restricts the sample to individuals aged 30 to 65. In
this specification, the change in the effect of education type with age is not affected by
the school-to-work transition but just identified from subsequent employment changes.
In addition, the bottom panel of Figure 1 suggests that the effect may be expected to be
well represented by a linear-in-age specification. Results are again very similar to the
base specification, indicating that they are not just driven by changes over the age range
of young people. The robustness of the results prompts us to focus on the entire 16-to-65
age group in virtually all later analysis.

D. Effects by Treatment Intensity

Table 3 estimates our preferred specification (Column 5 in Table 2) for different country
groupings, representing varying treatment intensities. In the full set of 18 countries
available in IALS (Column 1), we observe the same significant pattern with slightly
reduced point estimates. However, Column 2 reveals that the pattern does not hold at all
for the nonvocational countries: The estimates are insignificant, and there is virtually no

31. Of the males aged 26 to 30, about 3 percent are currently students.
Table 3
The Effect of Education Type on Lifecycle Employment: Country Groups and Vocational Education Countries

Nonschool-based
Nonvocational Vocational Vocational Apprenticeship
All countries Countries Countries Countries Countries Denmark Germany Switzerland
(1) (2) (3) (4) (5) (6) (7) (8)

General education -0.075 0.023 -0.095 -0.121 -0.209 -0.042 -0.403 -0.333
type (0.017)*** (0.034) (0.021)*** (0.033)*** (0.043)*** (0.062) (0.137)*** (0.076)***
General education 0.016 -0.017 0.022 0.032 0.051 0.073 0.055 0.104
type * age/10 (0.006)*** (0.013) (0.007)*** (0.011)*** (0.016)*** (0.028)*** (0.028)* (0.029)***
Observations 15,038 3,421 10,615 5,819 2,970 1,006 744 1,220
Countries 18 4 11 6 3 1 1 1

Note: Linear probability models. Dependent variable: Individual is employed. Sample includes males aged 16 to 65 with secondary or first stage of tertiary education. Each column is a
separate regression with the same controls as in Column 5 of Table 2 (including country fixed effects). Age variable subtracted by 16 throughout. Countries are grouped based on the
shares of upper-secondary-school students in vocational programs, school-based vocational programs, and apprenticeship reported in the OECD Education at a Glance or calculated from
the IALS data. (See text for details.) Nonvocational countries are Chile, Italy, New Zealand, and the United States. Apprenticeship countries are Denmark, Germany, and Switzerland.
Nonschool-based vocational countries are the apprenticeship countries plus the Czech Republic, Hungary, and Poland. Vocational countries are the non-school based vocational countries
plus Belgium, Finland, the Netherlands, Norway, and Slovenia. (Great Britain, Ireland, and Sweden are in the full sample of countries but in no subsample as the information on secondary
school type required for the classification is missing.) Data source: International Adult Literacy Survey (IALS). Robust standard errors in parentheses. Significant at ***1 percent, **5
percent, *10 percent.
65
66 The Journal of Human Resources

difference in employment patterns between individuals completing different education

programs.32 This is in clear contrast to the group of 11 vocational countries (Column 3,
reproduced from Column 5 in Table 2).33
Moving from Columns 3 to 5, the samples of countries have increasingly larger shares
of vocational education in the form of combined school and work-based programs,
which also makes the definition of the vocational education type clearer and more
consistent. Tracing through these groups, the initial employment gap between indi-
viduals finishing vocational and general education becomes larger while the rate at
which this gap narrows with age also becomes higher.
The age-employment pattern is most pronounced in the group of apprenticeship
countries which have large shares of vocational education in the form of combined
school and work-based programs (Denmark, Germany, and Switzerland). In each of the
three apprenticeship countries, the general education-age interaction is significantly
positive (Columns 6 to 8): The employment gains from vocational education early in the
lifecycle are balanced by later employment losses.34,35
In sum, the disaggregation of the IALS sample by intensity of vocational education
shows clear heterogeneity of employment effects. Specifically, countries at the more
vocational end of the spectrum see stronger interactions of the age-employment pattern
with vocational training.36,37

E. Propensity-Score Matching
Figure A1 in the online appendix shows a substantial overlap in literacy test scores
between individuals completing general and vocational education in all countries, even
though there are average skill differences across the groups in most countries. Indeed,
this substantial overlap is also found for age, years of schooling, and family background
between individuals completing different types of education. As a further approach to
limit possible concerns of selection bias, we can estimate our main model using pro-
pensity-score matching to ensure that the sample of individuals with a vocational ed-
ucation is directly comparable to that for general education. Although this procedure
cannot address selection on unobservables, it can guard against having the results be
driven by outliers in the education decisions.

32. This pattern also may reflect the fact that in countries like the United States with few vocational programs,
students may not know what specific course counts as general or vocational (Rosenbaum 1980), introducing
measurement error in the “nonvocational” countries. By contrast, there seems to be little confusion across the
vocational countries about the specific track, particularly because it generally represents separate schools.
33. To ensure that no particular country drives the pooled results in Table 2, we also re-estimated the aggregate
vocational-country model dropping one country at a time. The main results remain in each of the restricted
samples.
34. This is despite the fact that there is mobility across occupations among German apprenticeship graduates
(Fitzenberger and Kunze 2005) and that there is considerable transferability of skills across occupations when
applying a task-based approach (Gathmann and Schönberg 2010).
35. Table A3 in the online appendix reports estimation results separately for all 11 vocational countries.
36. The same result is obtained in a pooled specification that interacts the main effects with countries’ shares of
generally educated individuals.
37. We report robust standard errors throughout. All results that are statistically significant in the different
country groups of Table 3 also reach statistical significance at conventional levels when standard errors are
clustered at the level of the identifying variation, i.e., at the education type-by-age-by-country level.
 Hanushek, Schwerdt, Woessmann, and Zhang 67

Matching allows us to compare observationally similar individuals, providing greater

confidence in our ability to isolate the impact of the education type itself. The sample is
selected by comparing, for each country, the propensity scores of completing a voca-
tional education between those individuals who actually completed a vocational edu-
cation and those individuals who completed a general education. Individuals in the latter
group whose propensity scores are closest to those in the former group are included in
the sample, along with all individuals in the former group who share a common support
in propensity score with the latter group.38 Specifically, in a first stage we estimate a
probit model for each country of vocational education type on age, years of schooling,
literacy test scores, and whether mother or father completed a high school education.
With the predicted propensity score, we use the nearest-neighbor matching algorithm to
match each individual completing a vocational education to one completing general
education. Post-matching tests lend credibility to the matching procedure.39 In the
matched sample, the disparity between the two groups has been reduced in the majority
of countries such that individuals completing the two types of education are statistically
identical in each of the matching variables and the matching variables jointly have no
predictive power for the probability of completing a vocational education.
The first two columns of Table 4 report the results of the matching estimator for the
groups of vocational and apprenticeship countries, respectively. The matched sample is
reduced by 20 to 23 percent in the two samples. Still, results on the matched sample are
very close to the previous results, indicating that the latter are unlikely to be driven by
nonlinearities in the selection on observables into different education types.
Although the reported estimation already imposes a common support by dropping
vocational-education individuals whose propensity score is above the maximum or
below the minimum propensity score of the general-education individuals, our results
are confirmed in additional analyses (not shown) that further improve the common
support by trimming 1 (or even 10) percent of the vocational-education observations for
whom the propensity-score density of the general-education observations is the lowest
or by imposing a tolerance level (caliper) of 5 (or even 0.5) percent on the maximum
propensity score distance between vocational-education and general-education indi-
viduals. Furthermore, results using alternative matching algorithms such as radius or
kernel matching (not shown) also yield qualitatively similar results.

F. Additional Robustness Specifications

Tertiary vocational education is likely more heterogeneous in terms of the mix of general
skills obtained. To ensure that tertiary education is not driving the results, Columns 3
and 4 of Table 4 report results that restrict the sample to individuals completing just
secondary education. We lose about one-quarter of the sample who had tertiary
schooling. The results again are quite similar to those in Table 3.
While there is a general presumption that the vast majority of males not employed—
including those entering early retirement—in the later age groups do so involuntarily, it
is possible that generous early-retirement schemes may be differentially available to

38. In the matched sample, the group with “other” types of education drops out.
39. Detailed results are available from the authors upon request.
 68

Table 4
Employment Probabilities: Propensity-Score Matching and Additional Robustness Specifications

Sample of Individuals with Sample of Individuals

Propensity-score Matching Just Secondary Education in Labor Market

Vocational Apprenticeship Vocational Apprenticeship Vocational Apprenticeship

Countries Countries Countries Countries Countries Countries
(1) (2) (3) (4) (5) (6)

General education type -0.108 -0.215 -0.092 -0.253 -0.057 -0.115

(0.027)*** (0.050)*** (0.026)*** (0.057)*** (0.019)*** (0.036)***
General education 0.027 0.069 0.015 0.065 0.010 0.024
type * age/10 (0.009)*** (0.019)*** (0.009)* (0.021)*** (0.007) (0.011)**
Observations 8,216 2,379 8,092 2,248 9,198 2,617
Countries 11 3 11 3 11 3

Note: Linear probability models (unless noted otherwise). Dependent variable: Individual is employed (unless noted otherwise). Sample includes males aged 16 to 65 with secondary or
first stage of tertiary education (unless noted otherwise). Each column is a separate regression with the same controls as in Column 5 of Table 2 (including country fixed effects). Age
variable subtracted by 16 throughout. Columns 1 and 2 are estimated by nearest-neighbor propensity-score matching, with vocational types matched to general types based on age, years
of schooling, literacy scores, and parental education; see text for details. Columns 5 and 6 consider only the unemployed in the not employed category, i.e., those not in the labor force are
excluded. Data source: International Adult Literacy Survey (IALS). Robust standard errors in parentheses. Significant at ***1 percent, **5 percent, *10 percent.
 Hanushek, Schwerdt, Woessmann, and Zhang 69

workers with vocational and general education. In this case, the detected age-employment
pattern may not necessarily be driven by differential adaptability to changing economic
conditions, but rather by specifics of the existing retirement policies. As another ro-
bustness test to address this possibility, Columns 5 and 6 restrict the sample to those
employed and those unemployed but looking for work, effectively dropping those from
the not employed category who are retired, homemakers, or not employed for other
reasons.40 Results confirm the differential age-employment pattern by education type,
showing that people with vocational education who would like to work are increasingly
becoming more unemployed with age relative to people with general education. (The
interaction term in Column 5 is significant at the 13 percent level.) This pattern of
involuntary unemployment indicates that the main finding is not just driven by vol-
untary early retirement.41
Alternatively, since many in vocational education start careers at a younger age
(because they have less average school attainment), the age pattern simply could reflect
a tendency to retire after a fixed number of years in the labor market. But, estimation of
employment models (not shown) based on potential experience—time since completion
of schooling—and its interaction with type of education yields the same qualitative
pattern.
Finally, we consider a more flexible, nonlinear model that allows the impact of
education type on employment status to vary for different ten-year age cohorts. (Table
A4 in the online appendix.) Both the vocational and the apprenticeship country groups
show the age-employment pattern in a nonlinear way. The pattern is most striking in the
three apprenticeship countries, with the 56–65 age group completing a general educa-
tion having the largest employment advantage over those completing a vocational
education. Results are largely similar in a slightly different nonlinear model, which
restricts the sample to 20–65-year olds and defines the young as 20–30, the middle aged
as 31–50, and the old as 51–65. (See Hanushek, Woessmann, and Zhang 2011.)

V. Evidence from the German Microcensus 2006

Two important topics could not be addressed with the IALS data. First,
because some institutional contexts like early retirement legislation or economic pro-
ductivity regimes have changed since the IALS surveys in the mid-1990s, does a similar

40. We view this specification as a particularly low lower bound, as it selectively drops a large part of those who
leave the labor market at older ages. For example, in the case of Germany it is much documented that older
people who have a significant spell of unemployment simply change over into the status of early retirement (for
example, Brussig 2007; Fitzenberger and Wilke 2010). In fact, as soon as they are eligible for other benefits
such as early retirement benefits, they lose entitlement to unemployment benefits and have to terminate their
unemployment status. And there is an explicit entitlement for early retirement at age 60 (postponed to age 63
recently) after having been in unemployment for 12 months. Our pattern of results also holds when restricting
our analysis of the German Microcensus (see below) to only the unemployed among the nonemployed,
although again with substantially lower effect sizes. There, we can show that much of the reduction comes from
ignoring those who went into early retirement from unemployment.
41. In this regard, it might be indicative to look at the age-employment pattern for blue-collar and white-collar
workers separately. Unfortunately, though, in the IALS data occupational information is available only for the
employed and not for those not working at the time of the survey.
70 The Journal of Human Resources

pattern of declining relative employment of vocational education with age still exist
today? Second, because exit out of employment at later ages will be partly related to
health, is the vocational education effect driven by the greater likelihood that voca-
tionally trained workers are found in brawn-intensive occupations where health-related
concerns are more important?42
Both topics can be addressed with the Microcensus data set in Germany, one of the
apprenticeship countries. The Microcensus is a one percent sample of German house-
holds, 70 percent of which are contained in the scientific use file. We focus on the 2006
wave as the latest wave available before the financial crisis of 2008 in order to ensure
that the results are not driven by peculiarities of the recession. However, as reported
below, results are very similar for the latest available wave in 2012. When applying the
sample restrictions used in the IALS analysis—males aged 16 to 65 who completed at
least secondary education and are not currently in education—the Microcensus 2006
provides 118,604 observations. These observations give us considerably more precision
in our estimates than in the smaller samples of the IALS analysis.
Importantly, the Microcensus records not only the occupation of those currently
employed but also the last occupation of those not currently employed. Using the
standard German occupational classification (Klassifikation der Berufe 1992), we can
subdivide occupations either into 10 one-digit occupation groups or 88 two-digit oc-
cupation groups. This allows us, first, to include fixed effects for occupation groups so
that only within-group variation is used for identification and, second, to exclude oc-
cupation groups that are brawn-intensive and thus particularly prone to health problems
at later ages.
These advantages of the Microcensus are potentially offset by the fact that it does not
have direct measures of ability such as the literacy test that was included in our main
IALS analyses to address potential issues of selectivity into vocational education.
However, based on the IALS estimation, we are not overly concerned about this missing
information. In Germany, there has been no aggregate trend across age groups in literacy
scores (see Hanushek, Woessmann, and Zhang 2011), and including the literacy con-
trols does not significantly alter the estimate of the interaction between education type
and age in the German IALS sample: a coefficient estimate of 0.064 (standard error
0.027) without literacy controls compared to 0.055 (0.028) with literacy controls. (See
Table 3.)43
We limit our analysis to persons who have successfully finished an upper-secondary
or tertiary degree. At the upper-secondary level, we classify apprenticeship degrees as
vocational and baccalaureate degrees (higher education entrance qualification) as
general. At the tertiary level, we classify certified-engineer and master’s degrees as well
as degrees from polytechnics as vocational and university degrees as general.44
As is evident from the first column of Table 5, in a specification mirroring the first
column of Table 2, there is the same pattern in the German data for 2006: People with a

42. Again, an analysis of this latter issue is not possible with the IALS data because IALS does not survey
occupational information for those not currently employed.
43. A cross-equation test indicates that the two estimates are not significantly different (p = 0.29).
44. Note that there is some movement between vocational and general programs, and we use final program
status. Results are qualitatively similar when classifying degrees from polytechnics as general rather than
vocational.
Table 5
Education Type and Lifecycle Employment within Occupation Groups: Evidence from the German Microcensus 2006

Adding Fixed Effects for Dropping Brawn-

Base Model Occupation Groups Intensive Occupations

10 88
One-digit Two-digit Often Often Carrying
Only Secondary Only Tertiary Occupation Occupation Carrying Heavy Loads and
All Education Education All Groups Groups Heavy Loads Often Standing
(1) (2) (3) (4) (5) (6) (7) (8)

General education -0.218 -0.238 -0.129 -0.192 -0.140 -0.147 -0.140 -0.136
type (0.009)*** (0.018)*** (0.011)*** (0.019)*** (0.009)*** (0.009)*** (0.009)*** (0.011)***
General education 0.078 0.064 0.052 0.056 0.054 0.052 0.050 0.051
type * age/10 (0.003)*** (0.008)*** (0.004)*** (0.014)*** (0.003)*** (0.003)*** (0.003)*** (0.004)***
General education 0.0039
type * (age/10)2 (0.0025)
Age/10 0.331 0.328 0.378 0.334 0.306 0.307 0.308 0.338
(0.005)*** (0.005)*** (0.010)*** (0.005)*** (0.005)*** (0.005)*** (0.005)*** (0.007)***

(continued)
71
 72

Table 5 (continued)

Adding Fixed Effects for Dropping Brawn-

Base Model Occupation Groups Intensive Occupations

10 88
One-digit Two-digit Often Often Carrying
Only Secondary Only Tertiary Occupation Occupation Carrying Heavy Loads and
All Education Education All Groups Groups Heavy Loads Often Standing
(1) (2) (3) (4) (5) (6) (7) (8)

(Age/10)2 -0.078 -0.079 -0.083 -0.079 -0.074 -0.075 -0.074 -0.079

(0.001)*** (0.001)*** (0.002)*** (0.001)*** (0.001)*** (0.001)*** (0.001)*** (0.001)***
Tertiary education 0.082 0.083 0.061 0.046 0.041 0.024
(0.003)*** (0.004)*** (0.003)*** (0.003)*** (0.003)*** (0.004)***
One-digit occupation Yes
groups (10)
Two-digit occupation Yes Yes Yes
groups (88)
Observations 118,604 80,686 37,918 118,604 117,906 117,906 110,628 57,188
Adjusted R2 0.165 0.158 0.158 0.165 0.173 0.183 0.181 0.195

Note: Linear probability models. Dependent variable: Individual is employed. Sample includes males aged 16 to 65 with at least secondary education completed (and not currently in
education). All models include a constant. Omitted education type is vocational. Age variable subtracted by 16 throughout. In Columns 4 and 5, occupation groups refer to the German
Classification of Occupations. In Columns 6 and 7, three-digit occupations are classified as brawn-intensive if more than 50 percent of respondents in the German Employment Survey
2005/06 report that they often have to carry heavy loads and often have to stand, respectively. Data source: German Microcensus 2006. Robust standard errors in parentheses. Significant
at ***1 percent, **5 percent, *10 percent.
 Hanushek, Schwerdt, Woessmann, and Zhang 73

general education are initially less likely to be employed but this turns around with
increasing age. The next two columns show that this pattern is evident both within the
secondary level and within the tertiary level of education, with slightly more pro-
nounced estimates at the secondary level.
Table A5 in the online appendix reports equivalent results for the 2012 wave of the
German Microcensus. Whereas the overall pattern has hardly changed, the age pattern
has become even more pronounced at the secondary level and somewhat weaker at the
tertiary level. It seems that at the secondary level, a general type education has proven
even more valuable in adjusting to the changes brought about by the financial crisis.
While the IALS estimates may have lacked statistical power to find significant
nonlinear age interactions, the large Microcensus sample allows for more accurate
testing for nonlinearities. When adding an interaction of general education type with age
squared in Column 4 of Table 5, the estimate on the quadratic interaction is statistically
insignificant, quantitatively very small, and positive. The graphical depiction of this
nonlinear specification by the dark line in Figure 2 indicates that the quadratic inter-
action is not only statistically but also quantitatively insignificant. This validates the
specification of an interaction that is linear in age, as adopted throughout this paper.
Including fixed effects for 10 one-digit occupational groups in Column 5 reduces the
point estimates slightly but leaves the overall pattern perfectly intact. This also holds
when fixed effects for all 88 two-digit occupational groups are included in Column 6.45
To classify occupations as brawn-intensive, we use information from the German
Employment Survey 2005/06, a survey conducted by the Federal Institute for Voca-
tional Education and Training (BIBB) and the Federal Institute for Occupational Safety
and Health (BAuA) where employees respond how often they perform certain tasks.
(See DiNardo and Pischke 1997; Spitz-Oener 2006; Gathmann and Schönberg 2010.)
Using responses from 15,871 males in 357 three-digit occupations, we classify occu-
pations as brawn-intensive if 50 percent of respondents of the occupation report that they
“often” “lift and carry loads weighing more than 20 kg” or “often” “stand while
working.”46 As seen in Columns 7 and 8, dropping the 7 percent of the sample who have
occupations where a majority of workers often carry heavy loads47 and even dropping
more than half of the sample who have occupations where a majority of workers often
stands hardly affects the results and if anything makes them stronger.
Interestingly, the magnitude of the estimate of the interaction is quite close to the
IALS estimate for Germany in Column 7 of Table 3. For example, the estimates in
the final column suggest that individuals with a general education are initially 13.6

45. Obviously, some occupations are heavily weighted toward one type of education. To check that results are
not driven by this skewness, we dropped all occupations where one education type made up less than 5 percent.
This leaves qualitative results unaffected, only slightly lowering the point estimate on the general education-age
interaction to 0.043 (standard error 0.003).
46. While building on similar parameters of standing and carrying as used by the U.S. Dictionary of Occu-
pational Titles (DOT) to estimate the overall strength requirement of an occupation in its Physical Demands
Strength Rating, the German Employment Survey classification does not have to rely on expert ratings but
rather uses direct responses from workers on the kind of activities they perform on the job. (See Spitz-Oener
2006).
47. Results are very similar when using alternative cut-offs such as occupations where more than a quarter of
workers often carry heavy loads (32 percent) or occupations where more than a half of the workers often or
sometimes carry heavy loads (28 percent).
74 The Journal of Human Resources

Figure 2
Nonlinear Estimate of Effect of Education Type on Employment and Income: German
Microcensus 2006
Note: Estimate of effect of general education type (compared to vocational education type) on employment and
on log income, respectively, implied in a nonlinear specification that interacts general education type with age
and with age squared. Graphical depiction of Column 4 of Table 5 and of Column 5 of Table 7, respectively.
Data source: German Microcensus 2006

percentage points less likely to be employed but this turns around at age 43, and by the
age of 65 individuals with a general education are 11.5 percentage points more likely to
be employed.
Overall, the results from the German Microcensus indicate that the age-employment
pattern by type of education is evident in more recent years and is robust to using just
variation within occupational groups and to excluding brawn-intensive industries from
the analysis.

VI. Evidence from Austrian Plant Closures

The prior analyses focus on lifecycle comparisons of workers with
different kinds of education. A significant remaining concern with them is that the
workers with vocational education simply prefer to retire earlier for some unmeasured
reason that is not a reflection of their depreciated skills. To address this possibility, we
introduce additional evidence about the impact of education and training on employ-
ment for older workers that comes from Austrian data on plant closures.
 Hanushek, Schwerdt, Woessmann, and Zhang 75

The idea behind the analysis in this section is straightforward. If the closure of a plant is
exogenous to workers’ employment plans and prospects, we can compare the employment
rates of those suffering a plant closure to matched people not suffering a closure to obtain
an estimate of the labor demand for these skills.48 Our central hypothesis is that later in the
work lifecycle, the relative demand for vocationally trained workers falls when compared
to the relative demand for those with general education, leading the vocationally trained
displaced workers to have lower reemployment rates after the plant closure.
We can test this hypothesis with matched employer-employee data from adminis-
trative employment records in the Austrian Social Security Database (ASSD). Austria,
while not included in the IALS database, is particularly appropriate for this analysis
because it operates an apprenticeship system that is very similar to that in Germany and
Switzerland. The longitudinal data from Austria allow us to identify workers who lose
their jobs due to plant closures and to compare subsequent employment patterns to
similar workers who did not lose their jobs as a result of a plant closure. These data have
been used previously to study the overall impacts of displacement on careers but have
not directly addressed relative age patterns and particularly the later life outcomes by
training (for example, Ichino et al. forthcoming; Schwerdt 2011).
These administrative data are not perfect because they lack information on educa-
tional attainment. However, all employees in Austria are obliged by the General Social
Security Act (ASVG) to register to a mandatory social insurance, which classifies
workers as either blue-collar or white-collar workers.49 We then interpret occupational
status as a noisy proxy for the type of education, because the two measures are highly
correlated. Based on independent survey data from the Austrian Microcensus, a simple
cross-tabulation reveals that at least 13.4 percent of workers classified as white-collar
workers obtained a general education whereas virtually no blue-collar workers did.50
The data for our analysis include all private-sector workers in Austria employed
between 1982 and 1988 at risk of a plant closure. We observe male workers’ employ-
ment histories by quarter in the four years prior to potential displacement and up to ten
years afterwards. Workers included in the sample are between 35 and 55 years old at the
time of potential displacement and were employed in firms with more than 5 employees
at least in one quarter during the period 1982–88.51 We further restrict the sample to

48. Other studies using job separations due to mass layoffs or plant closures in administrative data to identify
involuntary job losses include Jacobson, LaLonde, and Sullivan (1993) and von Wachter and Bender (2006).
49. White-collar and blue-collar workers are defined according to administrative rules: White-collar workers
comprise all clerical workers and higher nonclerical occupations, including salespersons (excluding waiters
and salespersons in bakeries, etc.); blue-collar workers are typically manual workers.
50. The fact that there is so little clearly general education in Austria implies that any results based on the white-
collar vs. blue-collar approximation should underestimate the actual impact. The breakdown provided is based
on classifying only the obviously general-type Allgemeinbildende Höhere Schule (AHS) and university
graduates as general education. It is less clear how to classify Berufsbildende Mittlere Schule (BMS) and
Berufsbildende Höhere Schule (BHS), as both types of schools are explicitly meant to convey both general and
vocational content. When classifying the latter two also as general (as opposed to the clearly vocational
apprenticeship degrees), then 46.0 percent of white-collar workers obtained a general education, whereas only
4.9 percent of blue-collar workers did.
51. We exclude the tourism and construction industries because they have high seasonal unemployment and
because they often close down out-of-season only to reopen several months later with the same workers. We
stop at age 55 so that we can observe differences in employment patterns for the ten-year period after any
displacement but ending at normal retirement age.
76 The Journal of Human Resources

workers with at least one year of tenure with a firm because legal probation periods
might make layoff easier for low-tenure workers. We identify plant closures by the
disappearance of an establishment identifier in the ASSD without having more than 50
percent of the employees continue under a new employer identifier (which could in-
dicate a merger or plant relocation).
To increase comparability between displaced and nondisplaced workers, we develop
a matched analytical sample. Our matching is exact between treated and control subjects
on the following criteria: sex, age, location of firm (nine provinces), industry (30 in-
dustries), and employment history in the eight quarters before plant closure.52 We match
by categories on continuous variables: average daily wages in the quarters 8, 9, 10, and
11 before plant closure are matched by decile, and plant size two years before potential
plant closure is matched by quartile. Applying this matching procedure allows us to
identify at least one control subject for 3,417 displaced workers, who are matched to
21,504 nondisplaced workers.53
Our analysis follows a generalized difference-in-differences procedure where we are
interested in how firm closures alter the relative employment patterns of blue-collar and
white-collar workers. We first collapse the raw data into cells defined by quarter of
calendar time for the 1982–88 sample period, by quarter for the four years before
potential closure and ten years after, by age at potential closure, and by occupational
status (blue- or white-collar). Within each cell, we calculate the relative employment rate
for those displaced through plant closure and those in the control group that are not
displaced.
To investigate the age pattern of employment effects, we divide our workers into four
age categories (35–39, 40–44, 45–49, and 50–55) and then separately estimate our basic
difference-in-differences model:
(2) RelEmpct = a + b1 Bluect + b2 Afterct + b3 (Bluect · Afterct ) + ect
where RelEmpct is the average employment of displaced workers relative to average
employment of nondisplaced workers in calendar quarter t and quarter relative to closure
c; Bluect = 1 for blue-collar workers and 0 for white-collar workers; Afterct = 1 for all
quarters after the plant closure and 0 for quarters up to closure; and ect is a stochastic
error.54 If the treatment and control workers are well-matched, we expect that a = 1 (i.e.,
equal employment rates before closure) and b1 = 0 (i.e., match holds for both blue- and
white-collar workers).55

52. The sample selection and matching strategy closely follows Schwerdt et al. (2010) except that we expand
their sample to include workers between 51 and 55 years of age at the time of potential displacement.
53. Descriptive statistics and evidence on the quality of the matching procedure are available from the authors
upon request.
54. We focus on the average employment rates in the ten years following a plant closure, but using just five
years yields very similar results. The employment patterns flatten out over the ten-year period.
55. An alternative model would estimate the absolute impact on employment probabilities for individual
workers instead of the relative loss to the group still employed at each age. Such an analysis could be done either
with cell aggregates or the individual level employment data (in a triple difference-in-differences form). In such
a model, we find the same declining employment with age as in Table 6 but the absolute employment
probabilities are equal for blue- and white-collar workers in the 50–55 age group. (See Table A6 in the online
appendix.)
 Hanushek, Schwerdt, Woessmann, and Zhang 77

Table 6
Relative Employment after Plant Closure by Age and Occupational Category:
Evidence from Austria

Age at potential 35–39 40–44 45–49 50–55

displacement: (1) (2) (3) (4)

Blue * After 0.126 0.097 0.155 -0.067

(0.011)*** (0.012)*** (0.015)*** (0.025)***
After -0.210 -0.187 -0.207 -0.259
(0.008)*** (0.008)*** (0.011)*** (0.017)***
Blue 0.004 0.005 -0.001 0.010
(0.009) (0.010) (0.013) (0.020)
Constant 0.996{ 0.992{ 1.002{ 0.999{
(0.006) (0.007) (0.009) (0.013)
Observations (cells) 14,926 14,005 13,588 11,953
R2 0.076 0.057 0.043 0.045

Note: Linear probability models. Dependent variable: relative employment = (average employment displaced
workers) / (average employment nondisplaced workers) in each cell. A cell is defined by calendar time, relative
distance to potential displacement, age at potential displacement, and occupational status. Employment is
measured quarterly in the four years prior to potential displacement and up to ten years afterward. Blue identifies
blue-collar workers and After identifies quarters after potential displacement. Original samples include male
private-sector workers in Austria employed between 1982 and 1988 at risk of a plant closure. Each actually
displaced worker is matched to similar nondisplaced workers based on an exact matching algorithm. The header
indicates age at potential displacement. Data source: Matched employer-employee data from the Austrian Social
Security Database (ASSD). Clustered standard errors in parentheses. Significantly different from 0 at ***1
percent, **5 percent, *10 percent; {not significantly different from 1 at 1 percent.

The parameter of interest is b3, which indicates how post-closure relative employment
rates for blue-collar workers behave relative to those for white-collar workers. By our
hypothesis, b3 should fall at least for the oldest group—indicating that those with
vocational training are less demanded and that their finding a job is relatively more
difficult after the exogenous layoff that follows the plant closure.
Table 6 displays the results of our estimation by age group. The estimated constant
terms, which are not significantly different from one at the 10 percent level, indicate that
prior to potential displacement employment rates of displaced and nondisplaced white-
collar workers are almost identical. The same is true for blue-collar workers as indicated by
the estimated coefficients on the blue-collar dummy, which are all insignificantly different
from zero. After plant closure, employment losses of white-collar workers amount to
roughly 20 percent for workers below age 50 and 26 percent for workers above age 50.
Looking at the interaction term in the first row, for blue-collar workers—our proxy
for vocational education—we find that the relative employment rates after closure
are above those of white-collar workers below age 50. However, for workers above
age 50, the significant and negative estimate on the interaction term now indicates
78 The Journal of Human Resources

that blue-collar workers indeed suffer more from a reduction in relative employ-
ment probabilities due to displacement.56
The pattern up to age 50 is exactly consistent with the detailed analysis of Austrian
plant closures on employment. While possibly somewhat at odds with U.S. experience
(Podgursky and Swaim 1987), blue-collar workers at younger ages have shown an em-
ployment resiliency in Austria—perhaps reflecting less firm-specific rents (Lazear 1979) or
lower reservation wages. But the impact on older blue-collar workers had not been pre-
viously analyzed, and the pattern in the over-50 age group is entirely consistent with our
hypothesis about depreciated skills and less adaptability for those with vocational training.
Our necessary sample restriction to just employed workers with at least one year of
tenure (caused by labor laws) is likely to bias our results toward finding smaller re-
ductions in employment probabilities induced by plant closure among blue-collar
workers. First, it restricts the analysis to workers with reasonably stable employment
histories. As a consequence, reemployment of blue-collar workers estimated in our
sample is probably more positive than would be the case for the whole population
because those with unstable employment histories are likely to be overrepresented
among blue-collar workers. Second, given that employment probabilities of older blue-
collar workers are lower than those of white-collar workers, the blue-collar workers in
our sample are likely more positively selected based on unobserved favorable charac-
teristics. Both make our findings all the more remarkable.
The advantage of this analysis over that in the prior sections is that the exogenous
plant closures provide a way of focusing on labor demand late in the lifecycle. Thus, for
example, any tendency of blue-collar workers to retire early—say, because of physical
wear and tear—can be eliminated from the analysis of skill effects. The disadvantage of
this analysis is that we have only a noisy measure of vocational education (blue-collar
work). However, the consistency with the prior analyses of the IALS and the German
Microcensus data further strengthens the conclusion that the type of education has
important lifecycle impacts.

VII. The Impact of Education Type on Income

and on Adult Education
So far, the analysis has been restricted to consideration of employment
as the outcome. In this section, we consider two additional outcome variables related to
education type: income and career-related adult education.

A. Income
We start by estimating an earnings equation for individuals who worked full-time in the
12 months before the survey in the IALS data. This is a straightforward extension of a

56. While the pattern presented in Table 6 indicates that the effect is nonlinear in age in this analysis, a model
that pools all age cohorts 35–55 and adds linear age interactions yields a highly significant negative triple
interaction between blue-collar workers, post-closure indicator, and age (coefficient. -0.0069, standard error
0.001). That is, the relative employment advantage of blue-collar workers after displacement declines on
average by 0.7 percentage points per year of age at displacement.
Table 7
The Effect of General vs. Vocational Education on Income over the Lifecycle

IALS Microcensus

Vocational Apprenticeship
Countries Countries Germany Germany Germany
(1) (2) (3) (4) (5)

General education type -0.208 -0.407 -0.426 -0.381 -0.651

(0.097)** (0.151)*** (0.339) (0.242) (0.035)***
General education type * age/10 0.168 0.388 0.576 0.578 0.532
(0.084)** (0.127)*** (0.221)*** (0.221)*** (0.027)***
General education type * (age/10)2 -0.025 -0.081 -0.103 -0.103 -0.071
(0.017) (0.026)*** (0.042)** (0.043)** (0.005)***
Controls for age, age2, and schooling Yes Yes Yes Yes Yes
Controls as in Column 5 of Table 2 Yes Yes Yes No No
Observations 5,885 1,964 395 395 85,680
Countries 10 3 1 1 1

Note: Dependent variable is natural logarithm of annual wage (IALS) and natural logarithm of net income in past month (Microcensus), respectively. Sample includes males aged 16 to 65
with at least secondary education completed who worked full-time during the 12 months prior to the survey (IALS) and who report to normally work at least 30 hours per week
(Microcensus), respectively. Each column is a regression including age, age2, and years of schooling (indicator for tertiary education in the case of Microcensus) as control variables;
columns 1–3 additionally control for all control variables as in Column 5 of Table 2. Age variable subtracted by 16. Data sources: International Adult Literacy Survey (IALS) and German
Microcensus 2006. Robust standard errors in parentheses. Significant at ***1 percent, **5 percent, *10 percent.
79
80 The Journal of Human Resources

Mincer earnings function with an addition of a possible age-related difference in

earnings patterns for those with general and vocational education. The first two columns
of Table 7 report the estimates on the initial wages of general education individuals and
the interactions with age and age squared for the groups of vocational countries57 and of
apprenticeship countries.
Just as in the employment analysis, there is a significant age pattern in earnings:
General-education individuals earn initially less and later more than vocational-
education individuals. In the earnings analysis, there is a negative interaction with age
squared (significant at 14 percent in the first column), indicating that the wage differ-
ential between the two education types flattens off at around age 50.58
The IALS earnings analysis must contend with small samples, particularly when we
go to the apprenticeship countries. In order to corroborate the IALS results, we return to
the German Microcensus. This again allows replicating the analysis on a much richer
and more recent data set with occupation-specific information, although it does lack the
literacy scores. For comparison, Columns 3 and 4 show that the same significant pattern
visible in the two country groups is also visible in the German IALS sample by itself
(the negative coefficient on general type is significant at 12 percent in Column 4),
despite the fact that the sample is quite small. The pattern is hardly affected when
excluding the literacy controls, which are not available in the Microcensus data. Column
5 reveals that the much larger and more recent sample of the German Microcensus yields
very similar results. The same pattern is visible both within secondary education and
within tertiary education, with somewhat stronger effects in secondary education, and it
is again fully robust to including 10 or 88 occupation-group fixed effects and to drop-
ping brawn-intensive occupations (not shown). The nonlinear specification implies that
the earnings advantage turns from vocational to general education around age 30 and
flattens off around age 50 (Figure 2).

B. Adult Education
Adult education may help explain the difference in age-employment trends for indi-
viduals finishing different education programs, as people taking more career-related
education are likely more employable given their updated knowledge and skills. In the
IALS data, about one-third of all males received some career-related adult education
during the 12 months leading to the survey. Individuals with a general education are
somewhat more likely to have had career-related training (37 percent) compared to
individuals with a vocational education (30 percent). In fact, while we think in terms of
the adaptability to technological change of those with general education, it could simply
be that general education makes subsequent educational investments cheaper. By
investing in more skills, these workers have better employment opportunities over time,
independent of any technological change. We cannot, however, distinguish between
these two paths within our analysis.
When using the indicator of receiving career-related adult education as dependent
variable in a linear age-education specification similar to Equation 1 in Table 8, there is

57. Belgium does not have earnings information in the survey.

58. The results in the table include linear interactions with the literacy score and with other education types.
Expanding that to include interactions with quadratic age leaves all results qualitatively the same.
 Hanushek, Schwerdt, Woessmann, and Zhang 81

Table 8
The Effect of General vs. Vocational Education on Adult Education
over the Lifecycle

IALS Microcensus

Vocational Apprenticeship
Countries Countries Germany Germany Germany
(1) (2) (3) (4) (5)

General education 0.024 -0.038 -0.161 0.006 -0.097

type (0.024) (0.061) (0.111) (0.009) (0.015)***
General education -0.002 0.034 0.060 0.019 0.108
type * age/10 (0.007) (0.019)* (0.024)** (0.003)*** (0.012)***
General education -0.016
type * (age/10)2 (0.002)***
Controls for Yes Yes Yes Yes Yes
age, age2,
and schooling
Controls as in Yes Yes Yes No No
Column 5
of Table 2
Observations 9,817 2,170 744 118,604 118,604
Countries 11 3 1 1 1

Note: Linear probability models. Dependent variable is a dummy variable for whether one received any career-
related adult education during the 12 months prior to the survey. Sample includes males aged 16 to 65 with at
least secondary education completed (and not currently in education). Each column is a regression including
age, age2, and years of schooling (indicator for tertiary education in the case of Microcensus) as control
variables; columns 1–3 additionally control for all control variables as in Column 5 of Table 2. Age variable
subtracted by 16. Data sources: International Adult Literacy Survey (IALS) and German Microcensus 2006.
Robust standard errors in parentheses. Significant at ***1 percent, **5 percent, *10 percent.

no significant difference in the full group of vocational countries. But in the group of
apprenticeship countries, individuals completing a general education are more likely to
receive career-related education as they become older. The pattern is particularly pro-
nounced in Germany. Again, the Microcensus data confirm the same pattern. While an
interaction of general type with age squared is never significant in the IALS data, in the
large Microcensus sample, there is an indication in the nonlinear model that the pattern
flattens off at around age 50, with individuals completing a general education having
significantly higher propensity to receive adult education.59

59. While there is a similar pattern in the IALS data for the total number of hours of career-related adult
education received during the past 12 months, the hours do not differ significantly between education types in
the Microcensus data.
82 The Journal of Human Resources

VIII. Lifetime Earnings

Our analysis points to a clear tradeoff between early career employment

and employment later in the lifecycle. In closing, we thus ask the simple question of
whether the early employment gains outweigh the later losses from the viewpoint of
individual labor-market earnings, as observed in the IALS analysis.
Importantly, while we have clear causal estimates of the impact of education type on
the age-employment profile, our estimates of the initial differential in employment are
less well identified. The identification of the initial impact of education type rests on
adequately separating the influence of education type from other market-related factors
correlated with these choices (through the observed skill and background factors).
Nonetheless, using the estimate of the initial employment losses from general education
(b1 in Equation 1), we calculate the present value of lifetime employment for workers
with different schooling types in the three apprenticeship countries for which we found
clearest evidence of the age-employment pattern.60 We weight the employment at each
age by the average earnings for each age cohort by schooling type.61 Future earnings are
discounted back to age 16 at 3 percent.
These calculations produce very interesting results, suggesting that aspects of the
larger labor market are important for evaluating the efficacy of apprenticeship programs.
For Germany and Denmark, the present value of earnings favors those with a general
education. Over the lifetime, the German worker with a general education will have 24
percent higher earnings than the one with a vocational education, while a Dane with
general education will see 6 percent higher earnings. For Switzerland, however, the
higher present value goes to those with vocational education; the early earnings gains
more than make up for the gains in later earnings that accrue to workers with general
training, and vocational workers have 8 percent higher lifetime earnings.62 As an al-
ternative exercise, we can calculate the discount rate at which the present value is the
same for those with vocational and general education. This discount rate at which the
advantage switches over to the other type of education is 0.096 for Germany, 0.054 for
Denmark, and 0.01 in Switzerland, indicating that the relative assessment of the two
education types in Germany and Switzerland is not very sensitive to the choice of any
sensible discount.
An obvious explanation of the country differences follows the motivation for this
analysis. In faster growing societies, with commensurately larger technological change,
we expect the greater adaptability of general education coupled with the added adult
employment to yield advantages to the workers. The Swiss annual growth rate in GDP per
capita from 1970–2000 was just 1.1 percent (Heston, Summers, and Aten 2011). This is
less than half the comparable OECD growth rate (2.4 percent). The Danish growth rate of

60. To the extent that b1 incorporates a combination of the causal impact of general education plus an element
of selection involving other factors, the interpretation would be limited to the impact on the typical worker
observed in general education as opposed to inferences about the impact of bringing a different group into
general education.
61. As an alternative, we also use the estimated earnings functions to provide the age-by-schooling infor-
mation. This approach acts to smooth out cohort jumpiness in the averages, recognizing that some of the age
cohort samples become fairly small. Nonetheless, the qualitative results with this approach do not differ from
using the simple age cohort earnings averages.
62. Detailed results are available from the authors on request.
 Hanushek, Schwerdt, Woessmann, and Zhang 83

2.1 percent and German growth rate of 2.2 percent suggest much more dynamic econ-
omies, where the flexibility of general education has a much greater payoff.63,64
Interestingly, Wolter and Ryan (2011) indicate that, from the viewpoint of the firm,
Swiss apprenticeships are also beneficial while German apprenticeships are not.65 This
raises a small puzzle because lower relative wages of trainees partially contribute to the
net benefits to Swiss firms. Thus, at least during the training period, one might expect
that the worker would see lower net benefits in Switzerland. By our data, this training-
period disadvantage relative to Germany is overcome by smaller reductions in subsequent
employment and wages of workers with vocational education relative to Germany.
The overall employment effects of training are undoubtedly related in part to the social
safety net in the specific country being considered. Without early retirement options, it is
likely that a significant fraction of those leaving the labor force in their mid-fifties would
actually stay employed. Thus, for example, in a developing country without a mature
system for retirement income, we might see a very different pattern of employment across
the lifecycle along with a potentially different wage structure. Moreover, the interaction of
the lifetime incomes with government policies and programs makes it clear that these
calculations do not represent a benefit-cost analysis. Both workers and the government
see a different total economic impact, something that goes beyond our analysis here.

IX. Conclusions
Our estimates of the impact of vocational education on age-employment
profiles indicate that much of the policy discussion about education programs is too
narrow. Vocational education has been promoted largely as a way of improving the
transition from schooling to work but it also appears to have an impact on the adapt-
ability of workers to technological and structural change in the economy. As a result,
the advantages of vocational training in smoothing entry into the labor market have to
be set against disadvantages later in life.
We estimate the impact of education type on employment over the lifecycle in a
difference-in-differences approach, comparing the relative performance of individuals
with different education types at different ages. The results show that in the group of
vocational countries, individuals completing a vocational education are more likely to
be employed when young, but this employment advantage diminishes with age.

63. The very same pattern emerges when looking at total factor productivity (TFP) rather than GDP per capita,
where TFP is defined as output per capita minus physical capital per capita times the capital share (assumed at
0.3) and where the physical capital stock is constructed using a classic perpetual inventory method assuming a
depreciation rate of 6 percent (as, for example, in Hall and Jones 1999; Vandenbussche, Aghion, and Meghir
2006). From 1970–2000, TFP per capita grew by 0.4 percent in Switzerland, 1.3 percent in Denmark, and 1.5
percent in Germany.
64. This may not, however, be the correct comparison. The Swiss economy did suffer a growth slowdown that
is often attributed to the financial sector. It may be more appropriate to compare the vocational employment
results to the rate of innovation in the economies, something that is intrinsically hard to measure.
65. There is a substantial variation across firms, but Wolter and Ryan (2011) report that “in Switzerland 60
percent of all training firms obtain positive net benefits, while in Germany, 93 percent of training firms incur net
costs. A complementary difference between the countries shows up in labor turnover. In Germany more
apprentices remain with their training company after completion than in Switzerland: 50 percent and 36 percent
of apprentices stay put for at least a year afterwards, respectively” (p. 543).
84 The Journal of Human Resources

The estimation of crossover ages is quite imprecise and varies across specifications
but individuals completing a general education start to experience higher probabilities of
employment as early as age 50. While this might seem quite late, it is important to bear in
mind that this analysis refers to employment and to males. Due to breadwinner role
models or other reasons, males may accept substantial employment hardships before
accepting nonemployment during their prime age. Consistent with this interpretation,
the crossover age for incomes comes much earlier. (See Figure 2.) Furthermore, at any
given time skill-specific demand will drop for just some specific vocational skills and it
is difficult to predict which ones will face falling demand over the next several decades.
But, decade by decade, some additional vocational degrees will lose further in em-
ployment even though some will not become obsolete over an entire work life. While
this rolling obsolescence implies that it may take some time for the average employment
effect to cross over, lifetime earnings calculations suggest that the average net effect of
vocational education can well become negative.
The pattern of results is most pronounced in the apprenticeship countries, and it is
robust to adding more control variables, dropping the youngest groups in the sample,
and using a matched sample. Results are also robust when considering only individuals
completing just secondary education and when considering only the unemployed
among the not employed. Thus, the raw employment patterns in Figure 1 cannot be
attributed simply to varying selectivity into general and vocational education but instead
appear to be caused by the different focus of the schools.
We also conclude that the impact of vocational education varies considerably with the
specific institutional structure of schooling and work-based training. While the de-
clining age-employment pattern for those with vocational education relative to those
with general education is found in all vocational education countries, it is most acute in
the three apprenticeship countries in our sample. The balance of early gains against later
losses for vocational relative to general education is, however, not uniform across these
countries: In line with the relative pace of economic change in their economies, the
balance in lifetime earnings appears to be in favor of vocational education in the slower
growing Switzerland but in favor of general education in the more rapidly growing
Denmark and Germany.
It is of course difficult to rule out conclusively that cohort differences, say in terms of
systematic changes over time in education programs, are driving the effects and not
depreciation of skills with age. Nonetheless, the consistency across country groupings
and the relationship to treatment intensity supports our skill depreciation view of the
difference-in-differences results.
Our measured treatment is obviously heterogeneous as vocational programs in all of
the countries cover a range of occupations and skills. They also differ over time as
industries develop and as industries wane and disappear in each country. We interpret our
vocational training indicator as relating to a portfolio of training opportunities relevant at
each time period and chosen by a combination of industry and government projections of
future demands. But in all cases, the first decision involves deciding on the mix of general
education and more occupation-specific education, the subject of this analysis.
We do not view this analysis as an indictment of the school policy regimes of
countries that rely to varying degrees on vocational education but we do believe that
the potential tradeoffs should enter into policy debates on the degree of reliance on
 Hanushek, Schwerdt, Woessmann, and Zhang 85

vocational programs. Most importantly, vocational training should not substitute for
providing strong basic skills because this and other analyses underscore the necessity in
modern economies of developing general cognitive skills. Further, countries might
want to contemplate programs that would ameliorate any later life disadvantages of
vocational programs. For example, a European Commission (2010) communique em-
phasizes the need for enhanced vocational programs, largely to deal with high youth
unemployment in Europe, but also recognizes that there must be a concomitant in-
vestment in “lifelong learning.” The best way to provide incentives to both individuals
and employers so that workers obtain additional education and training throughout the
career is not well understood but this analysis suggests the task should receive the
attention of policymakers, particularly if they contemplate moving school systems
toward more vocational education.

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