The effects of work experience during higher education on labour market entry: learning by doing or an entry ticket?

Graduates from higher education often enter the labour market with a considerable amount of work experience. Using German data, we address the question of whether early work experience pays off upon labour market entry. We compare the labour market benefits of different types of work experience. This comparison allows us to more generally test hypotheses about different explanations of why education pays off. Results indicate that tertiary graduates do not profit from work experience that is unrelated to the field of study or was a mandatory part of the study programme. Even though field-related and voluntary work experience helps graduates to realize a fast integration into the labour market, it is not linked to higher chances for entering a favourable class position or to higher wages in the long run. These results provide evidence for the signalling explanation of educational benefits in the labour market rather than the human capital explanation.