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February 13, 2023

Learning on the job

Does working while in school help students transition into the labor market?

Tyler Smith

Source: Xavier Lorenzo

Over the last several decades, an increasing number of young Americans have been choosing not to work while in school. Instead, they appear to be focusing greater attention on their studies, enrolling in summer school, and getting more education in general.

But according to a paper in the American Economic Journal: Applied Economics, they may be missing out on acquiring some important work-related skills. Authors Thomas Le Barbanchon, Diego Ubfal, and Federico Araya found that working while in school can significantly boost a student's future earnings.

The finding comes from a one-year work-study program in Uruguay that randomized job offers among roughly 90,000 applicants. The program targeted students aged 16 to 20, offering them their first formal work experience by providing them with part-time, clerical jobs or other positions providing support tasks. The jobs lasted between 9 and 12 months.

Figure 1 from the authors’ paper shows how students' earnings evolved before and after the program.

Figure 1 from Le Barbanchon et al. (2023)

The dashed yellow line represents the average quarterly earnings (right y-axis) of students who received job offers through the program, i.e. the treatment group. The solid green line represents the average earnings of students who would have participated if they had won a slot in the program, i.e. the control group. The blue dots report treatment effect estimates (left y-axis) in dollars, along with 95 percent confidence intervals indicated by vertical red lines. 

Before the program began, the earnings of both the control and treatment groups were close to zero. Afterwards, earnings steadily increased for the control group—as individuals gradually entered the labor market—and reached $800 per quarter 2 years after the program ended. In contrast, earnings for the treatment group rose sharply and then converged back to the control, which corresponds to the year of part-time work in the program. However, after the program, the earnings of the students in the treatment group followed an upward trend at a steeper rate. Two years after the program, the treatment group had 8 percent higher earnings than their peers in the control.

The authors argue that the work-study program smoothed students’ transition into the labor market by building soft skills, such as conscientiousness, and better work habits, such as time management.