Post-school Labour-market Outcomes
- Emma Anderson
Author
David Scott, Tertiary Sector Performance Analysis, Ministry of Education.
Summary
Every year around 60,000 young people leave school and face choices about what to do next.
Around 55% choose tertiary study as their main activity in the year after school while 28% choose work, and 6% head overseas. Seven years later 56% are working, 17% are still in study, and 17% have gone overseas. Not being in employment or further education or training (NEET) is the main activity for between 15%-17% of school leavers.
It is important to complete a qualification.
There are significant and persistent disadvantages for those that don’t achieve any school qualifications. Over 40% never engage in employment or any further education or training. One in three will gain a tertiary qualification but mostly at Level 1-4. Their employment rates just exceed 40% after 7 years, and as a group, their average earnings after 7 years at $18,000, are 40% less than those of the NCEA 1 group. Further analysis is needed to assess the extent to which this still holds once adjusted for differences in underlying demographic- or study-related characteristics, but in actual unadjusted terms, this is the average picture today for over 1 in 10 (or 6,000-7,000) young people leaving school each year.
NCEA 1 still provides some benefits as a direct pathway to the labour market.
A one-year upper secondary qualification (such as NCEA 1) is rare amongst OECD countries. While the number leaving with this level has been reducing, it still represents around one in 10 school leavers annually. Leavers with NCEA 1 have just as much chance finding work and earning as much as their non-UE NCEA 2 or 3 peers, at least initially. However, after 7 years a clear differentiation is re-established, and NCEA 1 leavers are 10% less likely to be employed, and their earnings are about 15% less than their peers with NECA 2. Leavers with NCEA 1, while half as likely to be in NEET as those with no school achievement, are nearly twice as likely to be in NEET as their NCEA 2 or 3 peers.
But NCEA 2 is better.
Around 16,000 people (or 26%) leave school with NCEA 2 or equivalent, and a further 7,500 (12%) leave with NCEA 3 or equivalent but without University Entrance (UE). Level 2 leavers are slightly more likely to go direct to work than their Level 3 peers who are slightly more likely to enrol in a tertiary institution. Non-UE NCEA 3 leavers on average have higher (5% more) earnings than their NCEA 2 peers after 7 years. However, this NCEA 3 group as a whole is more tertiary qualified. When non-UE NCEA 2 and NCEA 3 people with the same tertiary qualifications are compared, NCEA Level 2 leavers earn more than their NCEA 3 peers, at every level of tertiary attainment, and particularly so at vocational Levels 3-4, and at diploma level. At least over the 7 year post-school window of data available.
NCEA 3 with UE.
Around 25,000 people (40%) each year leave with University Entrance. Most (over 80%) go on to institution-based tertiary study. The earnings of those with UE who forgo employment initially for tertiary study, will overtake the earnings of all their less-qualified peer groups five years after leaving school. By year 7, the average earnings for the UE group is 28% higher than those of the NCEA 2 group. However, the average total earnings accumulated by the UE group over 7 years ($172,000) is still below that of the non-UE Level 2 or 3 groups who have accumulated on average $180,000 of earnings. Though, at their current growth rate these are likely to be overtaken by the UE group within one more year.
Education has a stronger effect on employment rates than on earnings, consistent with previous research suggesting a relatively compressed earnings dispersion by education level in New Zealand.
For those leaving school with less than UE, there is evidence to support the message that even low levels of tertiary achievement can significantly help reduce the effects of low school achievement on employment and earnings. However, with the exception of the Level 3 (no UE) group, the association between higher school achievement and higher earnings still remains, for people with the same level of tertiary attainment.