The Impact of Competence-Based Qualifications on Productivity and Wages

Abstract

This study concerns the impact of competence based qualifications on establishment productivity and individual wages. The data used in the study has been constructed by matching representative register-based data sets available from Statistics Finland. The study includes private sector industries from both manufacturing and the service sector as well as construction.

The results obtained by estimating regression models for sales per person in establishments show that there is a positive association between the share of employees who have obtained a competence based qualification and productivity. Furthermore, the association is stronger for the share of employees who have obtained the qualification while working at the same establishment and of qualified employees under 35 years of age. It proved difficult to establish strict causality between these variables but the results are consistent with the view that the qualifications either improve employee productivity or serve as a screening mechanism that allows the employer to select and commit the most able workers.

The analysis of individual wages indicates that monthly log earnings increase after obtaining a competence based qualification. The wage effect peaks earlier for those who stay with the same employer and for those who change employers the largest effects are observed a few years after the qualification. There are some differences in the wage profiles by age and gender: in some cases qualified employees over the age of 35 and women seem to gain less. This may be due to different selection into training.

• ISSN: 1795-2832 (Print), 2242-6914 (Online)
• ISBN: 978-952-209-123-9 (Print), 978-952-209-124-6 (Online)
• Press Release in Finnish
• Publication in PDF-format