Situation: Contrary to myth, bachelors' graduates do not lose out to specialist degree holders in terms of employability and relevant competences. While many graduates require additional on-the-job training, those with bachelors' degrees gain an edge in the labour market.
Facts: Four-year, instead of five-year, degree programmes shave off a year of study, thus saving considerable time and money, and allowing graduates to find employment and build work experience earlier, which eventually translates into a higher salary. This raises the question of whether a fifth year of undergraduate studies brings any returns at all.
According to HSE graduate Stanislav Avdeev, currently studying economics at Tinbergen Institute, Amsterdam, young professionals entering the labour market with either four-year bachelors' or five-year specialist degrees can expect the same employability and starting salary levels, while reducing study duration by a year does not appear to have a negative effect on graduates' competences required by potential employers. Avdeev found that a fifth year of undergraduate study — which in most universities focuses on specialised technical courses — does little to improve undergraduates’ chances in the labour market. A preprint of Avdeev’s paper is available from the HSE website and from the SSRN (Social Science Research Network) repository.
Many employers do not think much of newcomers in the labour market, assuming that recent undergraduates need to spend more time building their practical skills and even, in some cases, basic theoretical knowledge. Some employers prefer job applicants with specialist degrees over bachelors, believing the latter to be 'half-educated specialists'. Assuming this as true for Russia’s labour market in general would mean that the Bologna reform implemented in Russia on a large scale in 2011 to reduce the undergraduate study time from five to four years has negatively affected the graduates' employment prospects.
Available evidence suggests, however, that bachelors' and specialist degree holders enjoy similar career opportunities and starting salaries.
This is good news, because the objective of the Bologna Process was not only to harmonise various systems of European higher education but also to improve the employability of graduates allowing them to enter the labour market and start earning a salary one year earlier.
An important disclaimer: most but not all Russian universities and specialist degree programmes were able to reduce the study time from five to four years: e. g. certain medical and technological specialist courses could not be condensed without undermining the learning outcomes.
The school’s reputation and quality of educational programmes also matter: a degree from a prestigious university automatically sends a signal to potential employers as to the job applicant's capabilities, discipline and productivity.
The main focus of this new study is the short-term effect of the Bologna reform on graduates' employability and salary. Few studies so far have examined a causal relationship between educational attainment, on one hand, and graduates' salary and employability, on the other, in low- and middle-income countries. Avdeev's paper uses the Bologna reform in Russia as a natural experiment to estimate the returns on an additional year of study in terms of graduates' prospects.
Even before Russia joined the Bologna Process, a few forward-looking universities had experimented with introducing a two-tier system of degrees — bachelors' and masters' — as far back as 1992. Between the country's official accession to the Bologna Process in 2003 and 2011, all universities subordinate to the Ministry of Education and Science have switched to four-year degree programmes without any change in enrolment numbers and quality.
Back in 2010, 79% of applicants were enrolled in five-year programmes and 21% in four-year programmes, but the tables turned the next year, with 16% and 84% enrolment, respectively, and 2015 marked a real turning point when the first batch of bachelors' graduates — and the last sizeable contingent of specialist degree holders — entered the labour market.
In an effort to condense their five-year programmes into four years, many universities eliminated a few specialised technical courses. There was a concern that the reduction in time that the learners spend refining their subject-specific and cross-cutting competences might negatively affect the resulting human capital (understood as knowledge and skills).
But it turned out that the real-world market, while it values broader academic achievement, has a high demand for job-specific knowledge and skills which need to be learned in the workplace rather than at university. This may have been the reason why bachelors did not lose out by not taking university-based specialist courses and faired just as well in terms of employment as specialist degree graduates.
The researcher used data from the National Survey of Graduate Employment carried out by the Russian Federal State Statistics Service (Rosstat) between April and September 2016, which reflected the turning-point year 2015 outcomes. The survey provides extensive information on the graduates' educational background and employment situation — immediately following graduation and then again in 2016.
Avdeev used data on more than 18,000 graduates of bachelor's degree (four years), specialist degree (five years) and secondary vocational training (three years on average) programmes. The two latter categories served as control groups.
His aim was to examine any differences in employability between bachelor's degree holders and graduates of degree programmes outside of the Bologna reform, using the difference-in-differences method to assess the impact of a shorter study period on both employability and wages.
The respondents included 42% men and 58% women aged on average 25.8. The vast majority of respondents (95%) had studied at public universities, including 59% in publicly subsidised slots; 15% had completed four-year programmes; 24% had been employed while studying. The average employment history across the sample was 3.8 years.
The question may arise of whether the graduates' first employment upon graduation can indeed be called their starting employment, given that a quarter had already been employed (although perhaps in a different job) during their studies?
According to the researcher, only the respondents' employment following graduation was counted in the study: 'Any job they took up after graduation is defined as "starting employment,” meaning the first employment following graduation'. It makes no difference for this study whether they were employed according to their training.
Similarly, the starting salary defined as 'salary they were receiving after graduation’ averaged 24,400 rubles per month for the respondents in 2016.
‘The respondents were asked if they were employed at the time of the survey and what their salary was in their current job', Avdeev explains.
The study showed lower salaries in younger cohorts of graduates from both five-year-long and four-year-long degree programmes. This, however, should not be interpreted as discrimination by employers or lower competence of the recent graduates.
According to the researcher, 'graduates' salaries reflected their position in the labour market in 2016, when those who graduated in 2010 already had, on average, five years of work experience and, consequently, were paid more than those who graduated in 2015 and only had one or two years of work experience'.
Using linear regression, the researcher found a correlation between the Bologna reform in Russia and graduates' employment and salaries. While the employment rate for bachelors' degree holders was slightly lower compared to specialists, the difference between the two groups was not significant.
The difference may have been due to the fact that specialist degree holders were older with more work experience, which made them more likely to become employed and to earn higher salaries.
There were two other significant findings:
A one-year reduction in the duration of university education correlates with lower salaries. The return on one year of study is 3.8% on average, while being slightly higher at 4.8% for women and only 2.1% for men.
However, graduates' employability does not decrease with a shorter study duration either for the entire sample or when broken down by gender.
In order to measure the direct effect of a shorter duration of education on wages and employment, the researcher used the 'difference-in-differences' study design and found the following.
A wage return to one additional year of university is 2.2%, which is not statistically significant. A bachelor's degree brings a slightly higher wage return for women (+1.9%), but this effect is not statistically significant either.
Employment rates are the same between graduates of four-year bachelors' programmes and five-year specialist programmes.
'I did not find any significant negative effect of a shorter training period on graduates' employability and wages', the researcher comments.
This challenges earlier findings from studies conducted back in the 1960s which indicate that shorter training duration can lead to lower productivity and negatively affect graduates' employment and wages. In addition to this, employers may give preference in hiring and pay more to graduates of certain universities, perceiving a degree earned from a prestigious school as a guarantee of the applicants' ability and skills. While it may not always reflect the actual level of the job applicant’s human capital, being a graduate of an elite university can bring substantial bonuses.
According to Avdeev, the reason why the fifth year at university tends to bring zero added benefits may be that it does not contribute the specific skills which graduates need for success in the labour market. Similar findings have been reported from other levels of education, e.g. from studies of compulsory schooling in Germany and extended basic vocational education in the Netherlands. Both papers explain low returns on additional schooling by the fact that it does not contribute the skills which are most relevant for the labour market.
In other words, the skills learned by undergraduates during the additional year at university do not seem to be relevant for the Russian labour market.
Using the same data sets from Rosstat’s survey, the researchers examined whether bachelors' graduates were more concerned about a lack of skills relevant to the workplace and therefore more likely than specialist graduates to spend some time being trained on the job. However, this does not appear to be the case.
When asked whether they needed additional on-the-job training, a similar share of specialist and bachelors' degree holders answered positively, 29.6% and 33.3%, respectively. It means that the levels of specific skills are comparable between graduates of four- and five-year programmes.
Likewise, when asked about the reasons why they needed on-the-job training, 14.5% of bachelors' and 12.8% of specialist graduates reported a lack of relevant skills. In other words, human capital is about the same between the two groups of graduates.
When asked whether they were employed according to their training, graduates experiencing a lack of relevant technical skills were more likely to be employed in a job which did not match their training, and the share of such graduates was just over one-fourth in both groups: 29.6% bachelors' and 26.2% specialist degree holders.
It is important to keep in mind that the finding indicating zero returns to an additional year of study only applies to specialist degree programmes, but not to the second level of the Bologna system, which is a master's degree.
The latter, alongside a Ph.D. and a second bachelors' degrees, have all been found to bring distinct advantages over a basic bachelor's degree, such as a higher starting salary and a wider career choice.
Thus, a master's degree was found to increase the starting salary by 39% compared to a basic bachelor's degree. Despite the fact that employers did not see much difference between bachelors, specialists and masters, they were intuitively prepared to give preference to holders of master's and Ph.D. degrees and to offer them higher managerial positions.
By reducing the undergraduate study duration, the Bologna reform granted bachelors an additional year in the labour market to build work experience and earn a higher salary, while getting targeted on-the-job training provided by the employer.
Indeed, one can fairly say that the Bologna reform has contributed to graduates' overall wellbeing, and the new study provides a good example of an evidence-based evaluation of the reform outcomes.