Thursday, September 24, 2009

Working While In College: New Research

By Richard Vedder

I have a young colleague, Charlene Kalenkoski, who I am high on, partly because she does research that actually is meaningful --it looks at real world issues and provides insights into the consequences of various dimensions of human behavior.

Charlene and Sabrina Wulff Pabilonia, a Bureau of Labor Statistics scholar, have a neat paper that is forthcoming in the Journal of Population Economics. They look at the financial and academic implications of students working. They use data from the highly regarded National Longitudinal Survey of Youth and use all the contempoary econometric gimmicks to get as many insights as possible from the data.

A few interesting observations:

1. It is noteworthy that a majority of students at four year colleges in the NLSY sample did not work at all while in school, and only about 20 percent worked a lot (over 20 years per week). A much larger proportion --nearly 50 percent -- of two year college students worked at least 20 hours per week.

2. For four year students, the relationship between the net price of schooling and the amount of student working is statistically insignificant --the notion that students work hard at jobs to pay college bills is not supported by the evidence.

3. As expected, the higher the price of schooling, the greater parental transfers are to cover costs, and bigger parental transfers mean students work less at a job.

4. The overall picture that I get, and Charlene seems to confirm in conversation, is that students do not work to pay the bills, but to finance other things --call it beer money.

5. There is a negative correlation between working and student performance, but it is not overwhelmingly large. Working 10 hours a week might lower GPA by 12 basis points (e.g., from a 3.30 to a 3.18).

If I am interpreting the results right, every dollar that the net price of college rises, parental contributions also rise, but typically less than a dollar. Since work effort and net price is not significantly related, this implies to me that students finance increases in tuition fees (net price) beyond some low base level in significant part by non-parental, non-work income sources --almost certainly student loans. And, if the above is correct, student loans both are one of the means by which colleges can raise the net price a lot, and allow the students to use work income more to finance personal consumption (beer drinking) than to cover colege costs. I may be going too far here, but, as the authors state, the results certainly provide enough evidence to justify more research on the topic.

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