Monthly Archives: April 2014

If early job stability enhances adult labor market outcomes conditional on the adult characteristics in X, then oc in equation (1) should be positive when S is the longest tenure attained, and negative when S is the number of jobs held. In GN, OLS estimates generally indicated that the coefficients on longest tenure attained and number of jobs were small and insignificant, and often did not have the expected sign.
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The component riit is the usual idiosyncratic error, assumed to be uncorrelated with S and X, and independently and identically distributed across observations. The component fiit is an unobserved measure of the quality of the adult job match, and hence is assumed to be positively correlated with ln(w). In turn, |ijt is presumed to be positively related to the quality of the job match attained during the five-year post-schooling period, jiit., for two reasons. First, some individuals remain on the same job and hence retain their earlier match. Second, all else the same individuals with good matches in the early years may be more likely to have good matches as adults even if they changed jobs, because voluntary job changes, at least, are likely to be in the direction of even better matches. Thus, because jiit. is likely to be positively correlated with early job stability, (ijt is also likely to be positively correlated with early job stability, suggesting that OLS estimation of equation (1) will result in upward biased estimates of the effects of early job stability. no teletrack payday loans
The concern with omitted job match quality suggests that the error term e consists of two components, The strategy for estimating equation (1) in the presence of an unobserved variable related to match quality is to use an instrumental variable for S, the measure of early job stability. What is required is a variable or set of variables that explains variation in S, but does not directly affect the current wage-specifically, it must be uncorrelated with ц1Г Various measures of the unemployment rate faced by the individual in the immediate post-schooling period are used. Variation in unemployment rates faced by young people should be related to early job stability. For example, if a recession occurs soon after a person enters the labor market, the likelihood of holding a job for a long period would be reduced. Similarly, the number of jobs the person held in this period might increase, if the principal effect of the recession is to cause jobs to end. In this case, a weak youth labor market reduces early job stability. On the other hand, the relationship between early unemployment and early job stability could go in the opposite direction, as, for example, slack labor markets reduce wage offers from firms to employed workers and hence deter mobility. The direction of this relationship is an empirical question; what is required, however, is that youth labor market conditions help to predict early job stability.

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Information on local unemployment rates is used to measure youth labor market conditions that might have exerted an exogenous influence on youth labor market experiences, as explained more fully in the next section. These unemployment rates come from the NLSY Geocode data file, and are based on state and area labor force data from the May Employment and Earnings covering March of each year; for most states and areas, these rates are based on more than just the household data from the CPS. The Geocode file includes the rates for metropolitan areas for which unemployment rates are reported in Employment and Earnings, for individuals residing in those areas, and rates for the rest of the state for other individuals.

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To obtain data on these early labor market periods, individuals with non-interviews in the relevant periods, individuals missing the enrollment data required to date their labor market entry, and individuals who did not have a first labor market entry (as defined above) in the 1979-1982 period had to be dropped; obviously, these restrictions generate large reductions in the available sample, because they tend to exclude both the oldest and youngest members of the NLSY cohort. GN present evidence suggesting that these sample selection rules hinge largely on the age of respondents-although obviously schooling decisions also play a role-and therefore may not generate substantial biases.

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The data set is very similar to that used in GN, since the goal of this paper is to expand the empirical analysis in that paper. This section provides an overview. The NLSY is used for the years 1979-1992, providing comprehensive labor market, schooling, and test score information on a large cohort near or at the beginning of their school-to-work transition, and later in their careers as more mature adults. The sample is first restricted to individuals who were neither in the military subsample nor reported any military duty through 1992. Next, a number of restrictions on the sample are imposed to focus on individuals’ first years in the labor market. A window of five years is used, based on the presumption that this window is sufficiently long to observe many individuals’ transitions from their earliest entrance into the labor market into somewhat steadier employment (Osterman, 1980).

The tradeof...

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Earlier research considered evidence on the relationship between early job market stability and adult labor market outcomes by exploring the correlations between a wide range of individuals’ youth labor market experiences and their labor market outcomes as more mature adults, in a multivariate framework that controlled for other adult characteristics (Gardecki and Neumark, 1998, hereafter GN). GN reported estimates of wage regressions for individuals in their late-20s to mid-30s, controlling for the usual ingredients of wage regressions-schooling, experience, etc-at the time the wage was measured, but adding in measures of youth labor market experiences over the first five years in the labor market, including number of jobs, longest job held, labor market experience, industry and occupation changes, etc. The results suggested that adult labor market outcomes are for the most part unrelated to the stability of early labor market experiences, especially for men, although as many studies have found, training bestowed longer-term benefits. This evidence was interpreted as undermining the case for policy initiatives to create more early job market stability in U.S. labor markets.

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The goal of this paper is to examine evidence on the causal effects of early job stability on adult labor market outcomes, by eliminating the bias in this estimated relationship that stems from omitted job match quality or other factors. Specifically, rather than simply estimating least squares regressions of adult wages on youth labor market experiences related to early job stability, along with adult characteristics, youth labor market conditions from the years in which workers entered the labor market are used as instrumental variables for the job stability experienced by workers as youths. The idea is that variation in youth labor market conditions is exogenous to the individual, and therefore generates variation in early job stability that is unrelated to job match quality. This empirical approach, in principle, yields estimates that come closer to measuring the potential effects of policies that would increase early job stability.

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Answering this question is extremely difficult, probably requiring carefully designed experiments. The compendium of research on school-to-work programs discussed in the NCRVE report by Stem, et al. (1994) suggests that researchers are a long way from a definitive answer to this question. A more limited goal is to ask whether youths who appear to be in unstable or dead-end jobs early in their careers suffer adverse labor market consequences as adults. It seems that, minimally, a case for attempting to replace current-perhaps chaotic-methods of job shopping with programs that induce earlier job stability requires evidence that those youths who experience unstable jobs or “floundering about” in their early years in the labor market suffer longer-term consequences.

Asses...

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Early labor market experiences of youths in the U.S. are often characterized as “churning” or “milling about” in the form of initial periods of joblessness or a series of “dead-end” jobs (U.S. General Accounting Office, 1990), or as ’’floundering” from one job to another, representing a “waste of human resources” (Stem, et al., 1990). This characterization of U.S. labor markets has motivated policy initiatives to address the school-to-work transition by helping to transform the youth labor market from the current “chaotic” system in the U.S. to a more “orderly” system, like that of the German apprenticeship system or the informal contracts between Japanese schools and employers, in which youths leave school for further career training or stable employment. The need for school-to-work programs or other means of increasing early job market stability is predicated on the view that the chaotic nature of youth labor markets in the U.S. is costly, presumably because workers drift from one job to another without developing skills, behavior, or other characteristics that in turn lead to higher adult earnings. Such problems may be particularly profound for less-advantaged workers, as recognized, for example, in the 1994 School-to-Work Opportunities Act. Thus, policies that hasten the placement of workers into steady jobs soon after leaving school may help to offset the wage declines experienced by many workers in the U.S. in recent decades, especially young, less-skilled, or disadvantaged workers.

However, there is a pot...

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