How Norway reduced the rich-poor earnings gap

Dwyer Gunn | Sep 24, 2019

Sections Economics Public Policy

Collections Education

In the United States, vocational and technical education at the high-school level has long been controversial. Critics argue that vocational schools serve as warehouses for disadvantaged students, depriving them of the opportunity to attend college. Advocates maintain that vocational schools provide valuable labor-market skills and may better serve students who struggle with traditional academics or who can’t or don’t wish to attend college.

In recent years, however, a new vision has emerged, one that emphasizes increasing access to alternative educational models while ensuring that students who choose these pathways can still ultimately pursue higher education. Many states are exploring or have launched high-school apprenticeship programs, and there’s been renewed interest in the Career Academies education model, a 35-year-old approach aimed at restructuring high schools to create alternative pathways that lead to higher education or the workplace. 

American reformers may find further inspiration in the results of a 25-year-old overhaul of vocational education in Norway. Research by Chicago Booth’s Marianne Bertrand and Jack Mountjoy, along with University of Chicago’s Magne Mogstad, suggests the reforms helped reduce the eventual earnings gap experienced by poor students, particularly boys, although not without some unintended consequences. 

The sweeping changes, known as Reform 94, increased access to apprenticeships and altered the country’s vocational-track high-school degrees to allow graduates to attend college after a semester of supplemental academic courses. Before the changes, students in Norway who obtained vocational-track degrees had to restart high school and secure an academic diploma if they wanted to attend college.

Bertrand, Mogstad, and Mountjoy explored how this restructuring affected educational attainment, labor-market results, and social outcomes. Using data from Norway’s Central Population Register and several supplementary sources, the researchers compared two groups of students―those born just after the January 1, 1978, cutoff date for eligibility and those born just before. 

The researchers find that Reform 94 increased initial enrollment in vocational-track high-school programs by more than 20 percent. While enrollment in academic-track programs decreased slightly, the reform nonetheless raised overall high-school matriculation. Disadvantaged male students—those in the bottom third of the predicted grade-point-average distribution among all males—were particularly affected: after the reform, they were 50 percent more likely to be enrolled in high school at the age of 16.

The effects of the intervention differed significantly by gender. Among disadvantaged men, the reform increased earnings by 5 percent and reduced the likelihood of criminal charges during the teenage years. At the same time, the increase in the percentage of male students who gained a vocational degree was offset by a decline in the percentage who completed an academic degree―the reform did not reduce the overall high-school dropout rate. Despite the shift to vocational degrees, the change did not decrease the likelihood of a man attending college before age 30 or completing an academic degree. The researchers conclude that men “simply swapped terminal academic high school degrees for terminal degrees from the newly reformed vocational track.” 

Among women, however, Reform 94 did increase high-school completion rates, by 20 percent for disadvantaged female students. The effect was driven by an increase in the percentage of female students who completed both vocational and academic high-school programs. Most of these women, the researchers find, completed vocational degrees first, followed by six months of supplementary coursework to obtain an academic degree under the new system. Interestingly, given the increase in the share of female students who completed both vocational and academic degrees, the researchers do not find that the reform had a statistically significant effect on college attendance or completion rates for women.

The researchers also find only a small, statistically insignificant effect on adult earnings for women, which they attribute to occupational choices. The bulk of the additional vocational degrees earned by women as a result of Reform 94 were in lower-paid service fields. Men, by contrast, were more likely to obtain degrees in skilled trades paying higher wages. A similar finding holds for apprenticeships. While both men and women completed more apprenticeships as a result of Reform 94, women tended to focus on apprenticeships in lower-paying fields. As a result, the reform had the perverse effect of worsening the earnings gender gap by about 8 percent.

Nonetheless, Reform 94 notched some notable victories. “Overall, the reform reduced the gap in adult earnings between disadvantaged and less disadvantaged children by about 20 percent, and it was particularly effective at improving social mobility among men, with the gap in adult earnings between disadvantaged and less disadvantaged men decreasing by close to 30 percent,” the researchers find.