Youth employment, academic performance and labour market outcomes: Production functions and policy effects

We use instrumental variables for teenage employment opportunities to identify the causal effects of part-time work during compulsory education in England on educational performance at age 16 and labour market outcomes to age 25. We identify the total ‘policy effect’, partly driven by resulting changes in other inputs, and the direct effect or ‘production function parameter’, which holds these constant. The total effects of an additional hour of part-time work per week at age 15 include reducing educational performance in school-leaving qualifications by males by 2.5% and females by 6.7% of a standard deviation, and increasing duration of unemployment experience before age 25 by two months. Direct effects on long-run outcomes are generally beneficial for women and less so for men. What human capital or signalling benefits there are to teenage part-time work are substantially offset by the effects of reduced educational investments.