Changes across cohorts in wage returns to schooling and early work experiences

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Since the early 1970s, the US labour market has undergone some dramatic changes. The wage premium for college graduates relative to high school graduates has increased from 30% to 55% (Valletta, forthcoming). Over the same period, the rate at which college students work while in school has risen steadily from 30% to 50% (Scott-Clayton 2012), causing college students to take longer to complete their degrees (Bound et al. 2012).

Do these facts present a bleak picture? The answer depends on whether in-school work is a productive use of time for college students. Previous studies (e.g. Stinebrickner and Stinebrickner 2003) have suggested that these increasing rates of in-school work may distract students from their studies, increasing their chances of dropping out of school and harming their later-life labour market prospects. And, to the extent that college students work while in school in part to cover their educational expenses, this may increase their time-to-degree and delay the start of their post-schooling work careers. Alternatively, in-school work may, in fact, represent a human capital investment by students that benefits, rather than harms, their careers. For example, working while in college may give a student a leg up in the labour market upon graduation because she already possesses basic skills for interacting in the workplace. In this light, increased time-to-degree may not be problematic if students use the time to accrue additional skills.