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The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources

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  • Till von Wachter

Abstract

Unlucky young workers entering the labor market in recessions suffer a range of medium- to long-term consequences. This paper summarizes the findings of the growing empirical literature on this subject and uses it to assess economic models of career development. The literature finds large initial effects on earnings, labor supply, and wages that tend to fade after ten to fifteen years in the labor market, and that are accompanied by changes in occupation, job mobility, and employer characteristics. Adverse initial labor market entry also has persistent effects on a range of social outcomes, including timing and completed fertility, marriage and divorce, criminal activities, attitudes, and risky alcohol consumption. There is also evidence that early exposure to depressed labor market lowers health and raises mortality in middle age, patterns accompanied by a reopening of earnings gaps.

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  • Till von Wachter, 2020. "The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources," Journal of Economic Perspectives, American Economic Association, vol. 34(4), pages 168-194, Fall.
    • Handle: RePEc:aea:jecper:v:34:y:2020:i:4:p:168-94
    DOI: 10.1257/jep.34.4.168
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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