Key messages - Qualifications and earnings

Introduction

In our Key Messages series we try to keep things simple and concentrate on the key messages. We’ve used evidence from official sources to back up those messages but have tried not to overburden the reader with information. More information on the issues presented in the series can be found throughout the reports written by Futureskills Scotland and available from their website.

This note presents some key messages from the labour market in relation to qualifications and earnings.

We’ve used the latest official data to highlight the links between levels of qualification, average earnings and unemployment.

Key messages

Those with higher levels of qualification will generally earn more than those with no qualifications.
For those with no qualifications wages will usually start low and stay low.
The unemployment rate is twice as high for those with no qualifications compared to those with the highest level of qualification.
Job opportunities for those with higher qualification levels will increase in the future while opportunities to find employment requiring lower levels of qualification will decrease.

What difference do qualifications make to earnings?

Figure 1. Average weekly wage by qualification level (GB)

There’s a clear link between qualifications and earnings and those with the highest level of qualification earned, on average, more than twice the wage of employees with no qualifications.
The average employee in Scotland in full-time work earned about £300 a week before deductions in 2005.
Those with no qualifications at all earned a little more than £200 per week.

Those with NVQ level 4+ as their highest qualification earned around £500 per week.

Will those differences last across a lifetime of earnings?

Figure 2. Average weekly wage by qualification level (GB)

Those with the highest level of qualifications will see their earnings increase steadily over the course of their working life, peaking at around 50-54 years of age.
The evidence shows that people with higher qualifications have more earning power – they start their careers on higher wages, and they enjoy bigger wage increases as they get older

By contrast, people with no qualifications have very little difference in their earnings by age. There seems to be little opportunity to make significant pay gains over a career for this group and their earnings are fairly static from the start to the end of their careers.

Does having qualifications increase the likelihood of having a job?

Figure 4. Unemployment rate by qualification level (Scotland)

Those with the highest level of qualifications are least likely to be unemployed. The unemployment rate for those with NVQ level 4 and above is just 3 per cent.
For those with no qualifications the unemployment rate is more than twice as high.
The highest rate of unemployment is found among those with below NVQ level 2 qualifications. This is slightly misleading as it suggests that in terms of not being unemployed it is better to have no qualifications than those at below level 2. This is not true and there are complicating factors related to the higher levels of economic inactivity for those with no qualifications.
The key message is that the more qualified an individual is the less likely they are to be out of work.

Will jobs in the future require higher levels of qualification?

Figure 3. Number of jobs by qualification level 2004 and 2009

There are currently a greater number of job opportunities in Scotland for those with higher levels of qualifications.
In addition, job opportunities for those qualified at NVQ level 4 and above will increase in the future. The number of jobs requiring qualifications at this level is projected to increase by one-fifth between 2004 and 2009.
In contrast, job opportunities for those with no qualifications will decline by around 40 per cent between 2004 and 2009.
Projections can only ever provide an indication of future trends. There will always be opportunities for employment no matter what an individuals level of skills and qualifications but the key message is that the more qualified you are the more opportunities you will have in the future.

What do we mean by NVQ level?

NVQs are National Vocational Qualifications (called SVQs or Scottish Vocational Qualifications in Scotland) and they are work-related, competence-based qualifications. They measure the skills and knowledge needed to do a job effectively, and represent national standards recognised by employers throughout the country.

NVQ Level	Comparable qualifications
5	Higher degree (postgraduate)
4	First degree; Sub degree higher education (HND, DipHE)
3	Higher; Advanced Higher; SVQ 3
2	Credit Standard Grades; Intermediate 2; SVQ 2
1	General Standard Grades; Intermediate 1; SVQ 1