Full Citation
Title: Essays on the Long-Term Consequences from Entering the Labor Market During a Recession
Citation Type: Dissertation/Thesis
Publication Year: 2021
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: This dissertation primarily focuses on the topic of wage scarring. Wage scarring is the long-term negative disparity in wages that results from starting a career during a recession. Oreopoulus et al. (2012) and Kahn (2010) show that this disparity can last for up to 10 years and 20 years, respectively. I first became interested in this topic after witnessing the job search struggles many of my friends had after graduating college in 2008. I was lucky. I graduated in 2006. A tight labor market at the start of my career meant that I had relative ease finding a good paying job commensurate with my degree. Two years after I graduated, however, and the US economy was ravaged by the housing market crash. My friends starting their careers during that time were not as lucky. Without an abundance of available jobs reflecting what they learned in school, many were forced to take jobs to make ends meet instead. Through no fault of their own, the investment they made in their education had a significantly lower return than mine. I first study this topic in the context of migration. While it has been shown in the literature that starting a career during a recession can harm wages for college graduates, there is not much literature on the severity of this effect for other groups. In Chapter 1, I ask what happens when you migrate to the US during a recession. Although this question seems fairly straightforward, it is difficult to answer because of selective migration. As economic conditions worsen, potential migrants may become less likely tomove. To sidestep this selection problem, I use refugees as a my primary population of interest. Due to unique restrictions related to the US Refugee Resettlement program, refugees are not able to choose when they can migrate to the US. By exploiting the timing of these refugee arrivals, I am able to measure how much of an effect local economic conditions can have on employment and wage outcomes for refugees. I show that migration during a recession also creates a long-term negative wage disparity, especially for the most vulnerable migrant groups. I also study the mechanisms behind wage scarring. In particular, I want to understand why this effect persists. It makes sense why wage offers for inexperienced workers might be depressed during a recession. With less jobs available and more people applying, inexperienced workers face much higher competitive pressure. However, even after the economy recovers and these competitive pressures dissipate, the negative wage disparity observed with this cohort still persists. In the literature (Oreopoulus et al., 2012), job mobility is suggested as the principal cause. If scarred workers are not switching jobs once the economy recovers, they will not see increases in their wages. As these workers get older, the costs involved with switching jobs becomes greater. In Chapter 2, I show this disparity also persists because employers use prior wages to screen job applicants. This is a notable finding because it means that scarred workers may not see the same level of wage growth fromswitching jobs as non-scarred workers. As a result, it may take even more job mobility for scarred workers to reach parity with non-scarred workers. As recessions continue to disrupt the long-term career plans of young graduates and new labor market entrants, it is important to understand both the severity of this effect and the root causes of why it persists. This dissertation offers insight in both areas. I show that wage scarring can be especially severe for vulnerable immigrant groups. I also show that this effect persists partially because employers ask job applicants about their current and past salary. These contributions help to underline the importance of studying wage scarring and also offer insight into ways to potentially reverse this effect through policy
User Submitted?: No
Authors: Mask, Joshua Floyd
Institution: University of Illinois at Chicago
Department: Economics
Advisor:
Degree:
Publisher Location:
Pages:
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure
Countries: