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University as a portfolio investment: part-time work isn’t just about beer money

By Sarah Jewell, Jim Pemberton, Alessandra Faggian, and Zella King


“When I was at university 25 years ago, I was lucky enough not to need a job. My student grant covered the costs of living in halls, just about, so that what I saved by buying the virtually fat free milk that never went off, I was able to spend on pints of Guinness. If I thought at all about how to spend my time, it was a choice between another game of pool, a third slice of toast in someone’s room, or perhaps – once in a while – a trip to the library.“ (1980s Graduate)

Gone are the days when all students had to wonder about was how much – or little – effort to put into studying without compromising their chances of getting a degree and walking into a graduate job, thanks to changes in higher education funding and increasing student numbers. The participation rate of young people in higher education in the UK has increased substantially over the past half a century, from 6%, in 1960 to 41% by the 2011/2012 academic year.  Today’s students face fees up of to £9,000 a year, and high levels of debt. So it is not surprising that many choose to take on part-time work alongside their studies. The growth in term time employment is evident over recent decades, as increasingly the costs of higher education are shifted towards the student, with, for example, a TUC report finding a 54% increase in the number of students undertaking term time employment between 1996 and 2006.

But are they taking jobs just to stem the rising tide of debt? There may be other reasons. A Confederation of British Industry survey indicates that both employers and students pay at least as much attention to ‘employability skills’ (e.g., self-management, team working, business awareness, and problem-solving) as to degree results, and hence students need more than just their academic achievement to gain a foothold in the graduate labour market. Although it diverts time from study at a potential cost to academic achievement, term-time employment may be a useful way to demonstrate these employability skills to prospective employers.

In effect, students now have a portfolio of investment decisions to make, not just about how to fund their education, and how much time they invest in academic work, but also about how to invest in skills that give them an edge in the labour market. As well as generating an additional source of income, term time employment might be useful investment in human capital. This idea has been previously considered, especially in a Northern American context, but no prior work captures the interlocking nature of higher education students’ decisions about borrowing, paid employment, studying, employability, and leisure.

We conducted a detailed empirical study of the effects of working while studying on both academic outcomes and early career labour market success. When we looked at choices about loans and about how many hours to work during term-time, we found that students are clustered at one of two extremes in each case. 82% of students choose the maximum loan available to them, with 10% at the other extreme of zero loans. A similar pattern occurs with term time employment, with 51% of students not working during term time and at the other extreme 16% committing to a high intensity of term time employment. These patterns suggest that the incentive structure systematically pushes HE students towards corner solutions for both loans and employment, with only a minority choosing other solutions.

We used these empirical results to develop a model explaining the varying degree of behaviour, which is dominated by student choices at corner solutions. One key feature of our model is that term time employment strengthens and signals ‘soft’ skills such as ambition, propensity to work and employability skills, which are distinguishable from ‘hard ‘skills (academic achievement), although the extent to which term time employment can signal these soft skills may be dependent on the type and the amount of paid employment. Factors that affect students’ decisions include: size of parental transfers, the rate of return they receive from studying and term time employment, borrowing constraints, loan repayment rate, preference for leisure and consumption (both current and future), and level of fees.

Our model raises the question of whether term time employment is a good or bad thing. It may eat into study time, potentially reducing academic achievement, especially for those working out of financial necessity. But at the same time, beyond providing additional income, it brings experience of work and signals motivation and initiative to future employers.

Sarah Jewell is a lecturer at the University of Reading, whose current research interests include UK graduate labour market outcomes. Jim Pemberton is emeritus professor at the University of Reading. Alessandra Faggian is Associate Professor at the Ohio State University, AED Economics Department and co-editor of Papers in Regional Science. Zella King is an Associate Professor at Henley Business School at the University of Reading. They are the authors of the paper ‘Higher education as a portfolio investment: students’ choices about studying, term time employment, leisure, and loans’, recently published in Oxford Economic Papers.

Oxford Economic Papers is a general economics journal, publishing refereed papers in economic theory, applied economics, econometrics, economic development, economic history, and the history of economic thought.

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