Uruguay’s Work-Study Initiative Delivers Higher Wages and Job Stability for Youth

A groundbreaking study by researchers from Tilburg University, Universidad de la República in Uruguay, Bocconi University, CEPR, IGIER, IZA, J-PAL, and the World Bank’s Gender Innovation Lab for Latin America and the Caribbean sheds light on one of the most pressing global challenges: youth unemployment. Their paper, The Lasting Effects of Working While in School, provides the first experimental evidence on the long-term consequences of combining education with structured work experience. The case in focus is Uruguay’s “Yo Estudio y Trabajo” (YET) program, launched in 2012. Using a randomized lottery design and administrative social security records, the researchers followed more than 90,000 applicants over seven years. 

A Program Built on Fairness and Access

The YET initiative was designed with inclusivity and fairness at its core. Open to all students aged 16 to 20, it offered nine to twelve-month part-time contracts in state-owned enterprises such as the national electricity and water companies, the state bank, and the telecom operator. Wages were slightly above the national minimum, and working hours, capped at 20 to 30 per week, ensured that school attendance was not compromised. Selection was strictly by lottery, preventing any bias from employers or applicants. Participants could not choose where they worked, and firms could not handpick candidates, meaning the opportunities were evenly distributed across socio-economic and demographic groups. In the program’s first three editions alone, tens of thousands applied, while only a fraction secured positions, creating a large natural control group for rigorous evaluation.

Earnings, Jobs, and Education

The benefits of participation proved substantial and long-lasting. By Year 7, treated youth were earning about $650 more per year in formal wages than their peers. This amounted to an 11 percent increase in annual income, driven both by a higher probability of employment, about two percentage points greater, and by higher wages, with participants earning six percent more each month than those outside the program. Crucially, the gains were not confined to the industries that initially provided jobs. Many participants later found work in market services such as banking and retail, suggesting that the skills acquired, from computer use and administrative tasks to teamwork and discipline, were widely transferable. The program also fostered greater stability in employment contracts, with participants more likely to secure regular, salaried jobs that offered better pay and long-term prospects.

Equally striking was the program’s impact on education. Fears that work-study initiatives might undermine academic achievement were unfounded. On average, participants completed 0.17 additional years of high school compared to their peers. While small, this increase contributed to higher long-term earnings. Researchers estimate that the added schooling explains roughly two percent of the wage boost, while accumulated work experience accounts for another two percent. Together, these channels reveal how combining work and study can enhance both immediate skills and long-term human capital.

Who Gains the Most?

The study highlights important variations across groups. Men benefited more strongly than women, with earnings gains of 17 percent compared to 8 percent. This gender gap challenges expectations, as many previous active labor market programs have shown stronger effects for women. Vulnerable youth, those from households receiving conditional cash transfers, also appeared to gain disproportionately, with long-term earnings increases estimated at up to 19 percent. Although differences were not always statistically significant, the pattern suggests that disadvantaged groups stand to benefit at least as much, if not more, than their better-off peers. The timing of participation also mattered. Students entering the program at pivotal moments, such as the end of secondary school or the start of tertiary education, saw particularly strong results, reinforcing the idea that adolescence and early adulthood are critical windows for shaping life trajectories.

A Policy That Pays for Itself

One of the most compelling aspects of the YET program is its cost-effectiveness. Despite relatively high upfront wages, the program ultimately proved fiscally sustainable. Researchers found that increased tax revenues from participants’ higher earnings would fully offset the government’s investment by age 34, just 15 years after participation. The program’s Marginal Value of Public Funds was calculated at 2.1 within seven years and projected to infinity over the life cycle, meaning its benefits outweighed costs many times over. Compared with traditional youth training programs, which often show modest and short-lived effects, Uruguay’s experiment stands out as far more impactful. Its cost-effectiveness rivals early childhood interventions, long considered the gold standard of social investments.

The implications are far-reaching. By proving that structured work opportunities can complement education rather than hinder it, the study challenges long-standing doubts about student employment. It demonstrates that early exposure to the formal labor market can set young people on a trajectory of greater stability and higher earnings. For governments grappling with high youth unemployment, the message is clear: carefully designed work-study programs not only improve individual life chances but also generate tangible fiscal returns. Uruguay’s experience provides a blueprint, showing that with fairness, accountability, and a strong link to continued education, such initiatives can become powerful tools for development.

At a time when nearly one in five young people in Latin America remains excluded from both school and work, these findings carry particular urgency. They underscore that adolescence is a critical stage, when providing meaningful opportunities can alter the course of entire lifetimes. Uruguay’s YET program demonstrates that far from being a stopgap measure, work-study programs can create lasting change, empowering youth and strengthening societies for decades to come.