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

Context: This study contributes to the literature that explores university students’ transition from work placement to the graduate labour market. Approach: We developed a theoretical framework that underpins the relationships between work placement, job transition and graduate earnings. Based on this framework, we proposed 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); 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. Findings: The results confirmed our hypotheses, providing evidence that graduates stand to benefit from remaining with their placement employer. Students who remained with their placement employer earned, on average, a salary premium of 10.2%. The low-pay persistence effect was stronger for those who found graduate jobs with a different employer, while the low-pay stepping-stone effect was stronger for those who remained with their placement employer after graduation. Conclusions: This study contributes to a deeper understanding of students’ transition from a university degree with work placement to the graduate labour market. The findings suggest that work placement students can improve their career prospects by securing graduate employment with their placement employer. However, more research is necessary to identify the mechanisms through which work placements enhance graduate employability.