More of Britain's young people finish formal schooling earlier than in most other industrialized countries. This lack of formal educational attainment is not offset by higher than average vocational training in later years. The low level of education and training is not primarily the result of supply constrains, but is caused by a low level of demand for post-compulsory education among young people and employers. The demand for skilled labor is rising significantly faster than the demand for unskilled labor. The financial returns to postcompulsory education and training are mixed. Obtaining a degree or high vocational qualification generally enhances lifetime earning, but low-level vocational qualifications provide only a modest return. The role of family background and cultural factors is important. The higher the head of household's educational attainments and occupational status, the more likely a young man is to stay on to the advanced level. Although returns to education are higher for young people from less skilled households than they are for those from more skilled backgrounds, the demand of the less skilled for additional education is low. Policy can assist in increasing the levels of skills acquired. Coordination of the entire postcompulsory education and training system is essential. Young people will pursue training only if employers encourage them through their recruitment and wage policies. Reforms of vocational training should concentrate on skills that are valued in the workplace. Improved career guidance should present the lifetime earnings prospects from acquiring different qualifications. (YLB)