Putting College First: How Social and Financial Capital Impact Labor Market Participation Among Low‐Income Undergraduates (2011)

Most undergraduates work despite evidence that working while in college is associated with lower rates of degree completion. Prior research indicates that the propensity to work varies by both family income and education, suggesting that both financial and social capital operate to reduce work and preserve educational advantage. We test that hypothesis with a sample of 3,000 low‐income Wisconsin undergraduates enrolled in the state’s 42 public two‐year and four‐year colleges and universities. Leveraging an experiment that distributes financial aid via lottery, we identify effects of financial capital on labor force participation that are comparable in magnitude to the positive benefits of social capital obtained through parental education. Specifically, the allocation of additional financial aid reduces the hours worked by low‐income students with high school‐educated parents to the point that it nearly fully offsets the socioeconomic advantage (in terms of fewer hours worked) that accrues to students from college‐educated families. Need‐based financial aid, it appears, may be an equalizer that promises to reduce labor force participation and enhance college attainment.