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Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success

In: Labor Markets in the Aftermath of the Great Recession

Author

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  • Joseph G. Altonji
  • Lisa B. Kahn
  • Jamin D. Speer

Abstract

We analyze the early labor market outcomes of U.S. college graduates from the classes of 1974 to 2011, as a function of the economic conditions into which they graduated. We have three main findings. First, poor labor market conditions substantially disrupt early careers. A large recession at time of graduation reduces earnings by roughly 10% in the first year, for the average graduate. The losses are driven partially by a reduced ability to find employment and full-time work and partially by a roughly 4% reduction in hourly wage rates. Second, these effects differ by field of study. Those in majors with typically higher earnings experience significantly smaller declines in most labor market outcomes measured. As a result, the initial earnings and wage gaps across college majors widen by almost a third and a sixth, respectively, for those graduating into a large recession. Most of these effects fade out over the first 7 years. Those in higher paying majors are also slightly less likely to obtain an advanced degree when graduating into a recession, consistent with their relative increase in opportunity cost. Our third set of results focuses on a recent period that includes the Great Recession. Early impacts on earnings are much larger than what we would have expected given past patterns and the size of the recession, in part because of a large increase in the cyclical sensitivity of demand for college graduates. The effects also differ much less by field of study than those of prior recessions.
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Suggested Citation

  • Joseph G. Altonji & Lisa B. Kahn & Jamin D. Speer, 2013. "Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success," NBER Chapters, in: Labor Markets in the Aftermath of the Great Recession, pages 361-401, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13276
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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