Working Paper: NBER ID: w25141
Authors: Hannes Schwandt; Till M. von Wachter
Abstract: This paper studies the differential persistent effects of initial economic conditions for labor market entrants in the United States from 1976 to 2015 by education, gender, and race using labor force survey data. We find persistent earnings and wage reductions especially for less advantaged entrants that increases in government support only partly offset. We confirm the results are unaffected by selective migration and labor market entry by also using a double-weighted average unemployment rate at labor market entry for each birth cohort and state-of-birth cell based on average state migration rates and average cohort education rates from Census data.
Keywords: Labor Market; Recession; Earnings; Social Insurance; Demographics
JEL Codes: E32; J21; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Entering the labor market during periods of high unemployment (J68) | substantial initial effects on earnings (M52) |
| a three-point rise in the unemployment rate at entry (J68) | reduction in cumulated earnings (H55) |
| The effects on earnings vary significantly across demographic groups (J79) | nonwhites and high school dropouts experiencing the largest losses (J79) |
| U.S. social insurance system provides a buffer (H55) | individuals who suffer the greatest earnings losses (J17) |
| social support mitigates some negative impacts (I14) | long-term reductions in earnings and increases in poverty (I32) |