The true effect of students’ employment on the duration of studies

ABSTRACT

We examine the effect of the first-degree students’ employment on the prolongation of their studies. When employing a popular instrumental variable, the regional unemployment rate, we find a negative impact of students’ employment on duration of studies. Then, adding a predetermined IV – the individual’s employment prior to the beginning of academic studies – turns the estimate positive. Furthermore, we find that the relationship between the extent of students’ employment and duration of their studies depends on their age: among the younger students (aged 22–26), the extent of employment has no effect on the duration of studies, while among the older students, the effect is positive and statistically significant.

KEYWORDS:

• Earnings
• undergraduate studies
• instrumental variable
• employment

JEL CLASSIFICATION:

• I21
• J22

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The psychometric exam results for 15% of the students were unavailable to us. Some students were admitted to academic institutions on the basis of matriculation-exam scores only; others were tested before 1995, the first year in which psychometric-exam results were available for research. The psychometric exam is composed of three parts: verbal thinking, quantitative thinking and English. The scores on each segment are arrayed on a scale of 50–150. The weighted average weights each of the first two tests at 40% and the English exam at 20%. Thus, the scale of weighted scores used in the study ranges from 250 to 750. The Israeli psychometric examination is functionally similar to the American SAT.

² The work load was represented by the proportion of employee-wage months in the course of the year out of12 months.

³ The Euro-Student Survey 2003 embraced thousands of students (classified as ISCED-97 5A/5B) in several European countries and included, among other things, questions about students’ employment and wage patterns in the course of the academic year. The average employment rate of first-degree students in countries in which the average standard duration of study is 5–6 years was 53% in 2003, and among those aged 24–27, it was 62%. In countries where the standard duration of degree studies resembles the Israeli norm (Ireland and the UK), the average rate in 2003 was 64% overall and 77% among those aged 24–27. For details, see Eurostudent Report (2005). The average employment rate of first-degree students in Israel during the academic year in 2000–2004 was 57% overall and 66% among those aged 24–27.

⁴ The NIS/USD exchange rate was NIS 4.077 in 2000 and NIS 4.738 in 2002; the national average wage was NIS 5,846 and NIS 6,534 in the respective years.

⁵ The survey population is a representative sample of the population of Israel, including residents of dormitories at higher education institutions. For details, see http://www.cbs.gov.il/www/publications/expenditure_survey04/pdf/e_intro.pdf.

⁶ The survey also indicates that first-degree students worked on average around 30 h per week: about one-fourth worked fewer than 20 h and 40% worked 40 h or more.