Early Careers of Dropouts from Vocational Training: Signals, Human Capital Formation, and Training Firms

Abstract

Dropping out of post-secondary education has negative consequences for career progression. However, as human capital theory predicts and as previous studies have shown, having some training still pays off. For a large part of the European workforce who has attended vocational training, however, the theoretical predictions are less clear and empirical studies are scarce. In occupational labour markets, signalling and credentialism theories predict negative effects of dropping out. Furthermore, apprenticeship dropouts learn at different training firms, which differ in their influence on human capital development and the provision of job opportunities. Relying on a unique panel data set from Germany and estimating normalized fixed effects growth curve estimators, our study reveals the following results. First, the timing of dropping out structures career progression, as late dropouts have the highest employment rates and highest wages within the dropout population. However, in an occupational labour market setting, credentials and signals are still highly important for career progression, as the wage advantage of late dropouts within the dropout population is rather small, and late dropouts suffer a wage penalty when we compare their wage profiles to those of graduates. Second, our study emphasizes the importance of training firms, which influence the human capital development of individuals during the course of training and provide dropouts with connections to their first jobs. Thus, in occupational labour markets, the consequences of dropping out depend mainly on different mechanisms, as in other settings.

Long-term scarring from institutional labelling: The risk of NEET of students from schools for learning disability in Germany

“…School certificates are strongly related to NEET risks (OECD, 2016: 24). This might be especially relevant in the highly credentialised German context where school certificates are very decisive for access to VET programmes (Holtmann et al, 2017), which are, in turn, important for successful labour market entry (Patzina and Wydra-Somaggio, 2020).…”

Untitled

“…Både norsk og internasjonal forskning viser til viktigheten av å vaere formelt kvalifisert til deltakelse i arbeidslivet ved å ha vitnemål eller kompetansebevis. Uten dette, kan hindringer på veien mot varig arbeidslivstilknytning vaere spesielt store (NOU 2001: 22;NOU 2018:2;Patzina & Wydra-Somaggio, 2020). Frøseth (2008) og Markussen (2014) har gjort funn som sammenfaller med dette.…”

Health, Personality Disorders, Work Commitment, and Training‐to‐Employment Transitions

“…Human capital theory (e.g., Becker, 1964), signaling theory (e.g., Spence, 1973), and credentialing theory (e.g., Collins, 1979) have provided the main theoretical explanations for differences in short-and long-term labor market outcomes for different educational groups. Empirical findings from the "school-to-work transition" literature have supported these theoretical notions since studies in this area have emphasized the fact that the attainment of signals and credentials is of pivotal importance for successful transitions into the labor market (e.g., Fossati et al, 2020;Jacob & Solga, 2015;Patzina & Wydra-Somaggio, 2020). Additionally, the literature has provided evidence for the notion of human capital and has indicated that school performance (i.e., good grades) in upper-secondary education predicts high wages at the time of labor market entry (e.g., Wydra-Somaggio & Seibert, 2010).…”