Cambridge Econometrics (CE), in collaboration with the Warwick Institute for Employment Research (IER), have developed a model for the Department for Business Innovation and Skills (BIS) to measure the economic impact of the further education (FE) sector.  The economic impact is calculated from assumptions for the qualifications gained by learners and the return to these qualifications in terms of higher wages and employability.

Considerable detail has been included in the model structure, to allow assumptions to be varied across a wide range of categories.  For example, learners achieving a full level 2 qualification in the workplace are distinguished from those achieving the same qualification at an FE college.  This allows the model to incorporate the findings of research that has compared, say, the different impact on wages of achieving such a qualification in the two different environments.  Assumptions for the impact of qualifications on employment rates were also broken down by previous highest qualification achieved, as this is a key factor in such impacts.

The project provided BIS with a model allowing the user to input alternative assumptions for funding provision, which then feed through to determine participation in FE, the qualifications achieved by learners, and ultimately the impact on wages, productivity and employment.  The Net Present Value (NPV) of FE to both individuals and the Exchequer are calculated, taking into account costs (such as funding provision, or wages forgone while studying) and benefits (such as the increased future flow of earnings to the individual, or increased income tax payments received by the Exchequer).

 

Mike May-Gillings
Manager, Local Economy Services