University-to-work transition and work placements: evidence of heterogeneous pay dynamics

Abstract

ABSTRACT This study contributes theoretically and empirically to our understanding of students’ transition from work placement to the graduate labour market, by exploring earning differentials due to heterogeneous job transitions. We developed a theoretical framework that underpins the relationships between work placement, job transition and graduate earnings. Based on this framework, we established three hypotheses of pay dynamics: the gain of a pay premium for graduates who remained with their placement employer (‘foot-in-the-door’ effect); the persistence of low pay as students transition from work placement to graduate employment (low-pay persistence effect), and the pay progression as students transition from low-pay work placement to higher-paid graduate employment (low-pay stepping-stone effect). We tested these hypotheses by performing regression analysis on matched data from students’ records, work placements and graduate surveys, for a sample of economics graduates who completed a work placement. The results confirmed our hypotheses, providing evidence that graduates stand to benefit from remaining with their placement employer. In addition, our theoretical framework and empirical analysis can inspire further research into a largely unexplored area, the dynamics of transition from university to work.