Full Citation
Title: Making Their Own Luck: Education and the Lasting Effects of Early Labor Market Conditions
Citation Type: Miscellaneous
Publication Year: 2003
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: A variety of early experiences shape individuals in ways that are later rewarded or punished in the labor market. This paper asks whether early labor market conditions have persistent effects on adult outcomes and whether the impact differs with education. I show that negative shocks to early labor market conditions depress adult wages but that the impact is much reduced for college graduates. Early labor market conditions are quantified using an index of the average unemployment rate in an individual's birth state during the years he likely entered the labor market. A one standard deviation increase in average early labor market unemployment leads to a wage decline of 4-5 percent for workers ages 24-30. Years of education mitigate this effect slightly, but college graduates are more insulated than other education groups, experiencing less than half the average wage loss. Evidence from cohorts observed over time suggests that the losses are permanent for non-college graduates. College graduates generally make up any losses by their mid-thirties, but the rate of convergence differs across cohorts. I argue that college graduates are insulated from negative early labor market shocks, because they are significantly more likely than non college graduates to move out of their home state if high unemployment rates prevailed there at the time of labor market entry. Aggregate labor supply responses of the two education groups support this. I conclude that college graduates move to better labor markets to start their careers when unemployment in the home state is abnormally high, eliminating wage differentials between college graduates who enter better and worse local labor markets.
User Submitted?: No
Authors: Waggoner, Abigail
Publisher: Harvard University
Data Collections: IPUMS USA
Topics: Education, Labor Force and Occupational Structure
Countries: