1. Working While Learning or Learning While Working ? Aviad Tur-Sinai Dmitri Romanov Noam Zussman March 11, 2008

2. Subject Paper investigates empirically whether employment during academic study effects the duration of study and the likelihood of dropping out. Takes advantage of a comperhensive individual- level dataset constructed from administrative files and records – of candidates, students, and recipients of bachelor’s degrees.

3. Main Findings The relationship between the extent of students’ employment and duration of their studies depends on their age: –Among students aged 22-26 at the beginning of their studies, the extent of employment has no effect on the duration of studies. –Among the older students there is a strong positive effect.

4. Motivation for Study (1) Employment is common among first-degree students who come from diverse socioeconomic backgrounds and pursue various academic diciplines. It has considerable implications for the students’ economic situation and on access to the higher-education system and their patterns of study.

5. Motivation for Study (2) Clashing conclusions via the literature: –Brunello and Winter-Ember (2003): Employment of students in Europe had no significant effect on the duration of study. –Ehrenberg and Sherman (1987): Employment of male students during the semester prolonged their degree studies and raised their dropout rates.

6. Motivation for Study (3) Solving an econometric problem: Endogeneity of the students’ employment (resulting from the positive correlation between unobserved personal characteristics: motivation, social connections...) when investigating the effect of employment on the duration of study. Usual IV doesn’t solve the problem of individual heterogeneity in employment and scholastic achievements (Ruhm, 1997; Light, 2001; Hakkinen, 2006). Therefore – we suggest a solution to solve the individual heterogeneity problem.

7. The Data: The Data: Administrative records of first-degree students at higher education institutions in Israel - who began their studies in the 1999/2000 academic year.

8. The Data: Education For each first-degree student (6 years follow-up): –Preferences for institutions. –Fields of study at the time of enrollment. –The progression of studies: institution(s), subjects completed. –Scholastic abilities.

9. The Data: Employment and earning: Matched employee-employer for the years 1999-2005 : –Number of months worked. –Annual gross earnings. –Tenure of employment with employer.

10. The Data: Demographic data: (source: administrative register of residents) –Sex –Date of Birth –Nationality/Religion –Country of birth –Date of immigration –Marital status –Number of children –Locality of residence –Identity of student’s parents Total population: 24,960 students.

11. Progression of Studies

12. Proportion of students who received degree within 6 years from beginning of studies 82.9% 78.9% 69.4%

13. Deviation of duration of degree studies from standard years 3 years 4 years years

14. Proportion of first-degree recipients who began advanced degree studies immediately after first degree (by duration of first-degree studies) %

15. Employment

16. Measuring Rate of employment & Earnings Rate of employment –A work load index. –Represented by the proportion of employee-wage months in the course of the year out of twelve months. Earnings –Annual earnings from all working places. –No. of months worked during the year. Therefore: we can derive the average monthly wage.

17. Employment Rate of Fisrt-Degree students %

18. %

19. % Time preparation for the bar exams

20. First-Degree Students rate of employment (2004-1999) 200420032002200120001999 Year (percent) 65.866.463.860.451.849.4 Total 65.863.961.157.347.645.0 Universities 70.968.166.463.657.255.2 Public Colleges 60.175.171.970.163.761.1 Private Colleges

21. First-Degree Students rate of employment (2004-1999) 200420032002200120001999 Year (percent) 65.866.463.860.451.849.4 Total 65.863.961.157.347.645.0 Universities 70.968.166.463.657.255.2 Public Colleges 60.175.171.970.163.761.1 Private Colleges

22. Mean Annual Months Worked by First-Degree Students (by year of employment and Major) months

23. Earnings

24. Monthly Earnings of First-Degree Students (NIS, current prices)

27. Average monthly earnings of (graduated) first-degree students (NIS, current prices)

28. 200420032002200120001999 6,2954,3753,6113,0502,7642,902 all students Universities 6,1134,1233,0162,4612,2502,646 Students younger than 25 6,4615,7544,8644,1543,7483,789 all students Colleges 5,8835,0413,9263,2222,8363,043 Students younger than 25

29. Average monthly earnings distribution of students who received degree within 6 years Students without prior employers %

30. Average monthly earnings distribution of students who received degree within 6 years Students without prior employers %

31. Occupation

32. Occupations of 20-29 age group, by standing in academic studies (year 2006) NeitherStudying for first degree Holds first degree Occupation 2.716.341.0 Academic professionals 14.821.825.0 Associate professionals and technicians 21.619.816.6 Clerical workers 32.134.611.0 Agents, sales workers, and service workers 19.24.83.5 Agricultural, industrial, construction, and other skilled workers 8.32.30.6 Unskilled workers Source: Central Bureau of Statistics, Household Expenditure survey 2006, data processed by the authors.

33. Occupations of 20-29 age group, by standing in academic studies (year 2006) NeitherStudying for first degree Holds first degree Occupation 2.716.341.0 Academic professionals 14.821.825.0 Associate professionals and technicians 21.619.816.6 Clerical workers 32.134.611.0 Agents, sales workers, and service workers 19.24.83.5 Agricultural, industrial, construction, and other skilled workers 8.32.30.6 Unskilled workers Source: Central Bureau of Statistics, Household Expenditure survey 2006, data processed by the authors.

34. Occupations of 20-29 age group, by standing in academic studies (year 2004) NeitherStudying for first degree Holds first degree Occupation 2.716.341.0 Academic professionals 14.821.825.0 Associate professionals and technicians 21.619.816.6 Clerical workers 32.134.611.0 Agents, sales workers, and service workers 19.24.83.5 Agricultural, industrial, construction, and other skilled workers 8.32.30.6 Unskilled workers Source: Central Bureau of Statistics, Household Expenditure survey 2006, data processed by the authors.

35. Occupations of 20-29 age group, by standing in academic studies (year 2004) NeitherStudying for first degree Holds first degree Occupation 2.716.341.0 Academic professionals 14.821.825.0 Associate professionals and technicians 21.619.816.6 Clerical workers 32.134.611.0 Agents, sales workers, and service workers 19.24.83.5 Agricultural, industrial, construction, and other skilled workers 8.32.30.6 Unskilled workers Source: Central Bureau of Statistics, Household Expenditure survey 2006, data processed by the authors.

36. Econometric Model & Results

37. The aim: Estimating the correlation of employment during study and patterns of study (duration of study, likelihood of dropping out, likelihood of going on to advanced studies).

38. The econometric difficulty The need to contend with unobserved heterogeneity in the traits of those who choose to work and the others, traits that correspond both on the decision to work and the likelihood of scholastic success (scholastic abilities, diligence, motivation, etc.).

39. Let assume: - Duration of study Described by the following model: (1) An array of exogenous controlling variables (sex, ages, ethnic origin, scholastic ability, …) Employment during studies Unobserved personal traits "white noise"

40. (2) where: An array of variables associated with employment but not with duration of studies Unobserved personal traits that affect labor supply (social connections, job- hunting ability, etc.) "white noise"

41. However… A positive correlation between and causes the unobserved-heterogeneity problem – which makes the employment variable in eq. (1) endogenous. Therefore… Using the Instrumental Variable Method as correlated with employment during study and not correlated with the variables which influence the likelihood of scholastic success.

42. What kind of Instrument Variable ? First Suggestion The regional unemployment rate during the term of studies (Ruhm, 1997; Light, 2001; Hakkinen, 2006). Second suggestion A predetermined variable: employment in 1999 Explanation: reflects the individual’s propensity to labor and should not be correlated with the duration of first- degree studies.

43. Estimates of Controlling Variables OLS model Explained variable: Deviation of Duration of degree studies from standard years Explanatory variable 0.020Male 0.011-***Age (in 2000) 0.224***Arab 0.263***Recent Immigrant 0.096-***Married (in 2000) 0.108-***No. Children (in 2000) 0.001***Scholastic abilities 0.044**Private academic college 0.359***Switched schools 0.055*** Took dual-major program 0.062-***Accepted for most-preferred major at enrollment 0.227***Switched majors

44. Effect of students’ employment on standard deviation of years of study until award of first degree OLSTSLS with regional unemployment rate as IV TSLS with regional unemployment rate and employment before beginning of studies as IV Annual months worked Log annual earnings Annual months worked Log annual earnings Annual months worked Log annual earnings 2000 0.003-***0.003-**0.179-***0.026-*0.063*0.010*** 2001 0.005-***0.007-***0.205-***0.027-***0.0630.011** 2002 0.008-***0.014-***0.201-***0.025-***0.0690.012** 2003 0.006-***0.008-***0.0610.0090.1050.011 Year of study Effect of students’ employment denote 10%, 5% and 1% significance, respectivety. ***,**, *

45. Effect of students’ employment on standard deviation of years of study until award of first degree OLSTSLS with regional unemployment rate as IV TSLS with regional unemployment rate and employment before beginning of studies as IV Annual months worked Log annual earnings Annual months worked Log annual earnings Annual months worked Log annual earnings 2000 0.003-***0.003-**0.179-***0.026-*0.063*0.010*** 2001 0.005-***0.007-***0.205-***0.027-***0.0630.011** 2002 0.008-***0.014-***0.201-***0.025-***0.0690.012** 2003 0.006-***0.008-***0.0610.0090.1050.011 Year of study Effect of students’ employment denote 10%, 5% and 1% significance, respectivety. ***,**, *

46. Effect of students’ employment on standard deviation of years of study until award of first degree OLSTSLS with regional unemployment rate as IV TSLS with regional unemployment rate and employment before beginning of studies as IV Annual months worked Log annual earnings Annual months worked Log annual earnings Annual months worked Log annual earnings 2000 0.003-***0.003-**0.179-***0.026-*0.063*0.010*** 2001 0.005-***0.007-***0.205-***0.027-***0.0630.011** 2002 0.008-***0.014-***0.201-***0.025-***0.0690.012** 2003 0.006-***0.008-***0.0610.0090.1050.011 Year of study Effect of students’ employment denote 10%, 5% and 1% significance, respectivety. ***,**, *

47. Effect of students’ employment on standard deviation of years of study until award of first degree Age 22-26 (in 2000) vs. All students All studentsAge 22-26 Annual months worked Log annual earnings Annual months worked Log annual earnings 2000 0.063*0.010***0.0160.005 2001 0.0630.011**0.0030.004 2002 0.0690.012**0.001-0.005 2003 0.1050.0110.261**0.030** denote 10%, 5% and 1% significance, respectivety. ***,**, *

48. All studentsAge 22-26 Annual months worked Log annual earnings Annual months worked Log annual earnings 2000 0.063*0.010***0.0160.005 2001 0.0630.011**0.0030.004 2002 0.0690.012**0.001-0.005 2003 0.1050.0110.261**0.030** denote 10%, 5% and 1% significance, respectivety. ***,**, * Effect of students’ employment on standard deviation of years of study until award of first degree Age 22-26 (in 2000) vs. All students

49. Effect of students’ employment on likelihood of … Award of first degree within standard years Variable -Male -Age (in 2000), years -Arab -Immigrant (1995 or later) +Married (in 2000) Married in 2001-2006 +No. of children (in 2000) Children added in 2001-2006 +Scholastic abilities

50. Effect of students’ employment on likelihood of … Award of degree within 6 years Award of first degree within standard years Variable --Male --Age (in 2000), years --Arab --Immigrant (1995 or later) ++Married (in 2000) +Married in 2001-2006 +No. of children (in 2000) -Children added in 2001-2006 +Scholastic abilities

51. Effect of students’ employment on likelihood of … Continuing to advanced studies Award of degree within 6 years Award of first degree within standard years Variable +--Male ---Age (in 2000), years ---Arab ---Immigrant (1995 or later) +++Married (in 2000) +Married in 2001-2006 -+No. of children (in 2000) --Children added in 2001-2006 ++Scholastic abilities

52. Effect of students’ employment on likelihood of … Continuing to advanced studies Award of first degree within standard years Variable - Switched schools - Switched majors - Earned dual-major first degree - S.D. of years of study for first degree

53. Effect of students’ employment on likelihood of … Continuing to advanced studies Award of degree within 6 years Award of first degree within standard years Variable Worked at higher education institution during first-degree studies, by year: No effect First year + Second year ++Third year (Log) earnings during year: +-- First year No effect- Second year No effect++Third year

54. Conclusions In Israel, 52 percent of first-degree students work during their first year of studies, as do 64 percent of those in their third year. During their three years of studies, the Israeli students’ average earnings climb from 46 percent of the national average wage to 57 percent.

55. Conclusions – Cont. Among students aged 22-26 at the beginning of their studies, the extent of employment has no effect on the duration of studies. It means that for then: learning are prior for working. Among older students at the beginning of their studies, the extent of employment has a positive effect on the duration of studies. It means that for then: working are prior for learning.

56. Thank you