Question

Research shows that after-school jobs are highly correlated with decreases in grade point averages. Those who work 1 to 10 hours get a 3.0 GPA and those who work 21 hours or more have a 2.7 GPA. Higher GPA are, however, highly correlated with higher lifetime earnings. Assume that a person earns $8,000 per year for working part-time in college, and that the return to 0.1 increase in GPA gives one a 10 percent increase in one's lifetime earnings with a present value of $80,000. a) What would be the argument for working rather than studying harder? b) Is this assumption that there is a trade-off between working and grades reasonable?

Answer 1

a) the argument for working rather than studying harder would be that the GPA is highly correlated with higher lifetime earnings but if the person wants the money now it gives no incentives. no doubt studying hard and getting good grades always pays off later but there is no quid-pro-quo in this case as in if a person sits in the class room and studies hard he/she doesnot get paid for the time the person is spending at school. and studying hard like many other things comes with its opportunity cost . if a person is studying meanwhile he is loosing the opportunity to earn money and spend it wisely to earn more money. one more thing is to notice here is if a person wants then he can work part time and earn money as well as get good GPA by studying in rest of the time, because the person can trade off between the two according to its need.

b)this assumption that there is a trade-off between working and grades is logically not reasonable because as has been mentioned above a 0.1 increase in GPA gives 10% increase in ones life time earnings with a present value of $80,000 . and to increase this 0.1 GPA a person must study hard and make his future secure rather than earning money now and get paid much lesser in the future date.