IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/20531.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Joseph G. Altonji & Lisa B. Kahn & Jamin D. Speer, 2014. "Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success," NBER Working Papers 20531, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20531
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w20531.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo, 2013. "Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1123-1167.
    2. Abigail Wozniak, 2010. "Are College Graduates More Responsive to Distant Labor Market Opportunities?," Journal of Human Resources, University of Wisconsin Press, vol. 45(4), pages 944-970.
    3. Hershbein Brad J., 2012. "Graduating High School in a Recession: Work, Education, and Home Production," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-32, January.
    4. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 921-955.
    5. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
    6. Joseph G. Altonji & Anthony A. Smith Jr. & Ivan Vidangos, 2013. "Modeling Earnings Dynamics," Econometrica, Econometric Society, vol. 81(4), pages 1395-1454, July.
    7. Joseph G. Altonji & Erica Blom & Costas Meghir, 2012. "Heterogeneity in Human Capital Investments: High School Curriculum, College Major, and Careers," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 185-223, July.
    8. Paul J. Devereux, 2002. "Occupational Upgrading and the Business Cycle," LABOUR, CEIS, vol. 16(3), pages 423-452, September.
    9. Ayako Kondo, 2015. "Differential effects of graduating during a recession across gender and race," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-24, December.
    10. Josh Kinsler & Ronni Pavan, 2015. "The Specificity of General Human Capital: Evidence from College Major Choice," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 933-972.
    11. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
    12. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
    13. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
    14. Marianne Bertrand & Claudia Goldin & Lawrence F. Katz, 2010. "Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 228-255, July.
    15. Paul Oyer, 2006. "Initial Labor Market Conditions and Long-Term Outcomes for Economists," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 143-160, Summer.
    16. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2012. "The Short- and Long-Term Career Effects of Graduating in a Recession," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 1-29, January.
    17. Matthew T. Johnson, 2013. "The Impact of Business Cycle Fluctuations on Graduate School Enrollment," Mathematica Policy Research Reports 77da29f047574fbfb5f216d63, Mathematica Policy Research.
    18. 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.
    19. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    20. Johnson, Matthew T., 2013. "The impact of business cycle fluctuations on graduate school enrollment," Economics of Education Review, Elsevier, vol. 34(C), pages 122-134.
    21. Bedard, Kelly & Herman, Douglas A., 2008. "Who goes to graduate/professional school? The importance of economic fluctuations, undergraduate field, and ability," Economics of Education Review, Elsevier, vol. 27(2), pages 197-210, April.
    22. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-188, January.
    23. Sarah E. Turner & William G. Bowen, 1999. "Choice of Major: The Changing (Unchanging) Gender Gap," ILR Review, Cornell University, ILR School, vol. 52(2), pages 289-313, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Venke Furre Haaland, 2016. "The lost generation: Effects of youth labor market opportunities on long-term labor market outcomes," Discussion Papers 835, Statistics Norway, Research Department.
    2. 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.
    3. Cockx, Bart & Ghirelli, Corinna, 2016. "Scars of recessions in a rigid labor market," Labour Economics, Elsevier, vol. 41(C), pages 162-176.
    4. Blom, Erica & Cadena, Brian C. & Keys, Benjamin J., 2015. "Investment over the Business Cycle: Insights from College Major Choice," IZA Discussion Papers 9167, Institute of Labor Economics (IZA).
    5. Fraser Summerfield & Ioannis Theodossiou, 2017. "The Effects Of Macroeconomic Conditions At Graduation On Overeducation," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1370-1387, July.
    6. Berge, Wiljan van den, 2018. "Bad start, bad match? The early career effects of graduating in a recession for vocational and academic graduates," Labour Economics, Elsevier, vol. 53(C), pages 75-96.
    7. Sofoklis Goulas & Rigissa Megalokonomou, 2019. "Which degrees do students prefer during recessions?," Empirical Economics, Springer, vol. 56(6), pages 2093-2125, June.
    8. Alena Bičáková & Guido Matias Cortes & Jacopo Mazza, 2021. "Caught in the Cycle: Economic Conditions at Enrolment and Labour Market Outcomes of College Graduates," The Economic Journal, Royal Economic Society, vol. 131(638), pages 2383-2412.
    9. Beatrice Brunner & Andreas Kuhn, 2014. "The impact of labor market entry conditions on initial job assignment and wages," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 705-738, July.
    10. 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.
    11. Shvartsman, Elena, 2018. "The State of the Economy at Graduation, Wages, and Catch-up Paths: Evidence from Switzerland," IZA Discussion Papers 11622, Institute of Labor Economics (IZA).
    12. Toman Barsbai & Andreas Steinmayr & Christoph Winter, 2022. "Immigrating into a Recession: Evidence from Family Migrants to the U.S," Working Papers 2022-01, Faculty of Economics and Statistics, University of Innsbruck.
    13. 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.
    14. Johanna Catherine Maclean & Reginald Covington & Asia Sikora Kessler, 2016. "Labor Market Conditions At School-Leaving: Long-Run Effects On Marriage And Fertility," Contemporary Economic Policy, Western Economic Association International, vol. 34(1), pages 63-88, January.
    15. Yaa Akosa Antwi & Johanna Catherine Maclean, 2017. "State Health Insurance Mandates and Labor Market Outcomes: New Evidence on Old Questions," NBER Working Papers 23203, National Bureau of Economic Research, Inc.
    16. Johanna Maclean, 2014. "Does leaving school in an economic downturn impact access to employer-sponsored health insurance?," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-27, December.
    17. Jennifer Graves & Zoë Kuehn, 2022. "Higher education decisions and macroeconomic conditions at age eighteen," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(1), pages 171-241, May.
    18. Arellano-Bover, Jaime, 2020. "Career Consequences of Firm Heterogeneity for Young Workers: First Job and Firm Size," IZA Discussion Papers 12969, Institute of Labor Economics (IZA).
    19. Neel Rao, 2016. "The Impact Of Macroeconomic Conditions In Childhood On Adult Labor Market Outcomes," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1425-1444, July.
    20. Beiler, Hendrik, 2017. "Do you dare? The effect of economic conditions on entrepreneurship among college graduates," Labour Economics, Elsevier, vol. 47(C), pages 64-74.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:20531. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.