What Do We Know?

• Beyond the average Mincerian returns, all the other metrics of returns utilized in the chapter tell a consistent story of great heterogeneity in the returns to higher education programs in general and SCPs in particular. Returns to bachelor’s programs and SCPs vary greatly depending on the field of study and HEI type; returns to SCPs vary greatly depending on student characteristics and their municipalities; SCPs’ value-added varies greatly even among programs within the same field; and job opportunities for SCP graduates vary greatly by location. • In Chile and Colombia, net lifetime returns to individual SCPs vary widely across fields of study and institution types. Although the average net returns to

SCP degrees are below those for bachelor’s programs, there is large dispersion. In specific fields, SCPs can offer larger net returns than some bachelor’s degrees. • Local availability of SCPs makes students more likely to enroll in them.

Empirical exercises indicate that, when SCPs become available, SCP enrollment increases mostly because some students divert from bachelor’s programs onto an SCP. Those students are mostly male and from middleincome households. The exercises also indicate that those students would benefit from the SCP expansion because the SCP degree would give them higher labor market participation and salaries than a bachelor’s degree.

Hence, a local expansion in SCP supply can allow for better, more productive matches for some students. • Program-level value-added varies across fields, but it varies even more within fields—depending, for instance, on the characteristics of the institution and the program itself (beyond the field). For instance, three-year programs contribute more; that is, they have more value added, than two-year programs to formal employment and wages. • SCP graduates are in high demand relative to graduates from bachelor’s programs. For each degree type, most vacancies are posted in science, technology, engineering, and mathematics (STEM) and business. Although vacancies and

SCP graduates (representing the labor market demand and supply of SCPs, respectively) are concentrated in the most populated areas of each country, supply is more concentrated than demand. This indicates a possible mismatch between where the jobs are located and where the job candidates reside. In particular, many SCP graduates in less populated areas might not be able to find a local job suited to their skills, whereas firms seeking to hire SCP graduates in more populated areas might not be able to find suitable local candidates.

What Do We Know?

Multiple studies have attempted to quantify the effects of SCPs in a variety of countries. However, the nature of these programs varies significantly across countries, a feature reinforced by both country-specific dynamics in demographic and

economic development. This might explain the limited availability of robust and comparable evidence.

One piece of evidence comes from Europe. In several European countries, vocational education lasting from three to four years represents an important step in school-to-work transitions.1 This particular configuration is known as the dual system. It is typically organized as part of the formal educational structure and involves an employment relationship in addition to formal secondary and tertiary education. It often includes technical and vocational education and training (TVET) programs, some of which span just a few months and, as a result, do not constitute SCPs. The literature has documented that countries with dual systems such as Austria, Denmark, Germany, and Switzerland experience lower youth unemployment and larger employment in skilled occupations and highwage sectors.2 This effect may come through better matching of training to labor market demand that results from the human capital accumulation process being contingent on employers offering positions.3

Researchers have also conducted more direct comparisons between “vocational” education at the upper secondary or higher education level (the latter including SCPs), and “general” education such as a bachelor’s program or a college-prepatory, nontechnical high school diploma.4 They have analyzed employment profiles over time for graduates from these various educational options. Using data for 18 countries from the International Adult Literacy Survey studies have found that, after accounting for total years of education, graduates from general programs obtain worse employment outcomes than vocational program graduates at the beginning of their careers but better later on. This pattern is particularly pronounced in countries that are known for their extensive dual systems. The skills generated by vocational programs may facilitate transitions into the labor market but may become obsolete faster than those taught at general education programs. Other studies have found similar patterns for vocational relative to general education,5 including studies for Europe and Central Asian and African countries.6

For LAC countries, evidence from the Skills and Trajectory Survey conducted by the Inter-American Development Bank (IDB) in Argentina and Chile suggests that secondary and postsecondary technical education offers high returns and should therefore receive more attention given its potential to improve labor market outcomes.7 Yet, studies using administrative data for Chile and Colombia estimate the returns to bachelor’s programs and SCPs and find that for a substantial proportion of young people, SCPs bring economic losses.8

There have been efforts to estimate the labor market returns to certificates and associate degrees in community colleges in the United States.9 These studies generally find that such credentials provide higher formal employment and/or earnings than the option of not enrolling in community college. They also find that associate degrees yield larger earnings gains than long-term certificates, with the evidence on short-term certificates being less clear.10 Although this literature

quantifies the gains from attending community college relative to not doing so, for data-related reasons, this chapter focuses on a comparison of the relative gains from attending different SCPs, as discussed in the section entitled “Contribution (Value Added) of SCPs.”

Some of the literature cited above also suggest that, while SCPs have better short-term impacts than bachelor’s programs, the reverse might happen in the long term. To properly understand SCPs’ short- and long-term impact, one must refer to the growing literature documenting skills’ critical role and their development.11 Education, of course, is an essential channel for skills development. Nonetheless, whether education develops general or specific skills is debatable, particularly in the case of higher education. This depends on the specific characteristics of programs and degrees, which vary across and within countries. SCPs are known for providing occupation- and career-specific human capital. In LAC, however, the same is true of bachelor’s programs given their heavy focus on the specific study area since the freshman year (see chapter 5). Moreover, both SCPs and bachelor’s programs in LAC provide general skills because, by providing higher education that lasts at least two years as opposed to mere short-term training, both program types stimulate the development of multiple skills such as critical thinking and problem solving, and of team work and communication. As a result, it becomes extremely difficult—if not impossible—to differentiate between the skill mix fostered by SCPs and bachelor’s programs in LAC.

The skill mix is a critical determinant of the short- and long-term effects of SCPs and bachelor’s programs. While a detailed analysis of the skill mix of specific programs is beyond the scope of this book, two pieces of evidence are worth noting. First, the SCP directors interviewed for the World Bank Short-Cycle Program Survey (WBSCPS) report that their programs aim to develop not only specific but also general skills, including cognitive and interpersonal (chapter 3). Second, other studies have found that graduates from postsecondary programs with a strong labor market orientation exhibit higher socioemotional and interpersonal skills than others.12

Further, general statements about the relative skills and returns of bachelor’s and SCPs must be made subject to qualifications. On the one hand, as the next section shows, there is tremendous variation both among bachelor’s programs and SCPs in their net lifetime returns, with some SCPs surpassing some bachelor’s programs. Looking forward, LAC countries should view higher education as a piece to promote lifelong learning, whereby an individual continues to acquire skills throughout her lifetime (chapter 5). The option of returning to school as needed lessens the emphasis on the skills acquired in any given program as it enables the individual to flexibly acquire the desired mix of skills over time.

On the other hand, the empirical analysis may not adequately account for self-election. In other words, it is not obvious that the same student who selfselects into an SCP would obtain the same average employment profile of a student who self-selects into a bachelor’s program. As the section entitled, “Expanding the Supply of SCPs: Who Would Benefit and Why?” shows, when self-selection is adequately accounted for (a task that is admittedly difficult in