Returns to technical and vocational education (TVET) in Malaysia using the salaries and wages survey (SWS), 2018–2023

Abstract

This research aims to measure the earnings premium for higher-level TVET qualifications and to examine how these returns differ by gender and region after accounting for differences in field of study, occupation, industry, and sector of employment. The analysis employs repeated cross-sectional Salaries and Wages Survey (SWS) data from 2018 to 2023. With a sample of 97,792 certificate and diploma graduates, an ordinary least squares (OLS) regression finds a large diploma premium over certificate holders. However, the premium falls from approximately 25.5 percent in the baseline specification to around 8 percent in the fully specified model, suggesting that occupational and sectoral sorting explain part of the observed premium but a significant credential effect remains. Estimates for gender differences indicate diploma premiums of 6.7 percent for men and 12.3 percent for women. Estimates for regions are positive in all regions, from 5.3 percent in East Malaysia to 10.5 percent in the Southern region. Year dummies reflect a wage squeeze in 2020 and 2021, followed by a rebound in 2022 and 2023. The findings suggest that upgrading from certificate to diploma qualifications can lead to significant wage gains, but to maximize these gains, greater alignment of TVET with the TVET industry, regionally differentiated skills policies aligned with local economic structure, and targeted policies to address disparate wage outcomes in different segments of the labor market are needed.