The Lasting Effects of Working while in School: A Long-Term Follow-Up
Introduction
Since 2012, the work-study program “Yo Estudio y Trabajo” (YET) has provided youth aged 16 to 20 living in Uruguay with a first formal work experience in state-owned companies for up to one year. The program offers part-time jobs of 20 to 30 hours per week, with no overtime allowed. Participants are expected to work during the firm normal operating hours, ensuring their school attendance is not hindered.
All youth aged 16 to 20 in Uruguay are eligible to apply for YET if they meet two key conditions: 1) they are enrolled in an educational institution, and 2) they have not worked formally for more than 90 consecutive days at the time of application. Assignment to the program is done by lottery at the locality level.
Ferrando et al. (2025) combines YET administrative records with social security data, matched at the youth level. To estimate the causal effect of program participation on youth outcomes, the paper uses the lottery-based job offer as an instrument for actual participation, as the lottery provides random assignment.
Pays for Itself
Net Cost
The net costs include two main components: the direct costs during the program year and changes in tax revenues driven by changes in earnings.
The direct costs consist of the average net salary paid to participants ($2,223).
During the program year, the government incurs an additional loss of $258 in tax revenues, as some treated youth would have worked in the absence of the program. Increased participants’ earnings after the program result in higher tax revenues, estimated at $943 in present value terms over seven years, reducing the total net cost to $1,538.
In the long run, projected lifetime earnings effects imply that the present value of additional earnings from ages 27 (eight years after the program) to 65 is $18,316, yielding an additional $7,137 in tax revenues. After accounting for all program costs, the program has a total net fiscal impact of -$5,599, indicating full recovery of the initial investment.
Willingness to Pay
The willingness-to-pay of beneficiaries is measured by changes in net earnings. The discounted increase in gross earnings during the first seven years after the program amounts to $4,841, corresponding to a willingness-to-pay of $3,193 once tax and transfer rates are applied. In the long run, the present value of additional earnings from ages 27 to 65 is $18,316, corresponding to a post-tax and transfer willingness-to-pay of $11,179. Adding both components, the total willingness-to-pay is $14,372.
This willingness-to-pay figure is estimated under the assumption that increased earnings are not solely driven by higher effort. If effort played a role, the willingness-to-pay would be lower. Similarly, if beneficiaries gained non-monetary benefits from work, the willingness-to-pay would be higher.
MVPF Summary
The estimated MVPF is infinite because beneficiaries’ willingness to pay is strictly positive, while the net fiscal cost of the program is negative.
References
Mery Ferrando, Noemi Katzkowicz, Thomas Le Barbanchon, Diego Ubfal (2025). “The Lasting Effects of Working while in School : A Long-Term Follow-Up (English).” World Bank Policy Research Working Paper. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099224008182560038
Hendren, Nathaniel and Ben Sprung-Keyser (2020). “A Unified Welfare Analysis of Government Policies.” The Quarterly Journal of Economics, 135(3): 1209–1318. DOI: https://doi.org/10.1093/qje/qjaa006
Policy Features
- Category
- In Kind Transfers
- Sub-Category
- Child Education
- Beneficiary Type(s)
- Children and Youth
- Average Age
- 19
- Average Income
- 2223
- Country of Implementation
- Uruguay
- Year of Implementation
- 2013-2015
- Empirical Method
- Lottery
- Research Type
- Primary
- Peer Reviewed
- No