The Labour Market Success of University and University of Applied Sciences Graduates between 2000 – 2016: An Analysis of Higher Education Choices in Finland

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School of Business | Master's thesis
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It is well documented that the average higher education graduate in Finland earns more and has better employment prospects compared to non-graduates. However, information about the labour markets returns in relation to different higher education choices remains scarce. In this thesis, I study the labour market payoffs to different higher education choices when accounting for several observable differences in student composition. All in all, this paper explores university and university of applied sciences (UAS) graduates’ early career earnings and employment figures from 36 different higher education institutions (HEIs), four fields of study and 78 different field of studyinstitution combinations between the years 2000 and 2016. I find that a part of the raw average earnings differences between higher education graduates can be explained by the observable characteristics determined before students enrol in higher education. However, even after accounting for these characteristics, some differences remain when exploring graduates’ early career earnings as well as employment prospects. For example, university graduate earnings differentials vary in the scope of €4,100 per year and UAS graduate around €7,900 per year between the HEIs when examining the variation in returns for different institutions. Furthermore, I find that the variation in returns for different fields of study is more substantial. For instance, studying a university business degree results in over €15,300 more per year compared to a university humanities degree early in a graduate’s working career. The results also indicate that there is variation in returns to studying the same field of study at different institutions. For example, the best UAS institutions from the field of technology have returns that are around €7,000 more per year compared to the lowest yielding technology institution. These results imply that there seems to be variation in graduates’ early career earnings both within HEIs across the different fields of study and within fields of study across HEIs. I also find that the probability of being in employment for graduates from any one of the various HEIs is rather high, well above 84%, which reflects the fact that having a higher education degree in Finland is a good investment against the risk of unemployment. Different field of study choices, however, induce more variation in the employment prospects of graduates. Graduates with business and technology related degrees are more likely to be employed early in their working careers in comparison to graduates with humanities degrees. Overall, the results of this study are dependent on the limitations of the methodology and the provided data and, therefore, should not be interpreted as causal. The differences in earnings and employment prospects may also reflect differences in unobservable characteristics between individuals. Ultimately, this study suggests that there is a considerable scope for improvement in relation to the level and nature of information available to different stakeholders about the actual labour market returns to different higher education degrees.
Thesis advisor
Sarvimäki, Matti
higher education choice, selection on observable, labour markets, earnings, employment
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