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The Impact of Labor Market Entry Condition on Initial Job Assignment, Human Capital Accumulation, and Wages

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  • Beatrice Brunner
  • Andreas Kuhn

Abstract

We estimate the effects of labor market entry conditions on wages for male individuals first entering the Austrian labor market between 1978 and 2000. We find a large negative effect of unfavorable entry conditions on starting wages as well as a sizeable negative long-run effect. Specifically, we estimate that a one percentage point increase in the initial local unemployment rate is associated with an approximate shortfall in lifetime earnings of 6.5%. We also show that bad entry conditions are associated with lower quality of a worker's first job and that initial wage shortfalls associated with bad entry conditions only partially evaporate upon involuntary job change. These and additional findings support the view that initial job assignment, in combination with accumulation of occupation or industry-specific human capital while on this first job, plays a key role in generating the observed wage persistencies.

Suggested Citation

  • Beatrice Brunner & Andreas Kuhn, 2010. "The Impact of Labor Market Entry Condition on Initial Job Assignment, Human Capital Accumulation, and Wages," NRN working papers 2010-15, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:nrnwps:2010_15
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    2. Liu, Kai & Salvanes, Kjell G. & Sørensen, Erik Ø., 2016. "Good skills in bad times: Cyclical skill mismatch and the long-term effects of graduating in a recession," European Economic Review, Elsevier, vol. 84(C), pages 3-17.
    3. Hamaaki, Junya & Hori, Masahiro & Maeda, Saeko & Murata, Keiko, 2013. "How does the first job matter for an individual’s career life in Japan?," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 154-169.
    4. Andrea Diem & Stefan C. Wolter, 2014. "Overeducation among Swiss university graduates: determinants and consequences [Nicht ausbildungsadäquate Beschäftigung bei Universitätsabsolventinnen und -absolventen – Determinanten und Konsequenz," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(4), pages 313-328, December.
    5. Blázquez, Maite & Herrarte, Ainhoa & Llorente-Heras, Raquel, 2018. "Competencies, occupational status, and earnings among European university graduates," Economics of Education Review, Elsevier, vol. 62(C), pages 16-34.
    6. Haaland, Venke Furre, 2013. "The Lost Generation: Effects of Youth Labor Market Opportunities on Long-Term Labor Market Outcomes," UiS Working Papers in Economics and Finance 2013/8, University of Stavanger.
    7. Munshi Sulaiman, 2012. "Does the Labor Market Reward Easy Certificates? Evidence from Bangladesh," Journal of Human Capital, University of Chicago Press, vol. 6(4), pages 336-367.
    8. López-Martín Bernabé & Takayama Naoki, 2015. "The Blighted Youth: The Impact of Recessions and Policies on Life-Cycle Unemployment," Working Papers 2015-22, Banco de México.
    9. P. Taylor, Mark, 2013. "The labour market impacts of leaving education when unemployment is high: evidence from Britain," ISER Working Paper Series 2013-12, Institute for Social and Economic Research.
    10. Daiji Kawaguchi & Tetsushi Murao, 2014. "Labor‐Market Institutions and Long‐Term Effects of Youth Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 95-116, October.
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    More about this item

    Keywords

    initial labor market conditions; endogenous labor market entry; initial job assignment; specific human capital;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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