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 potentially strong counter-argument to this negative view of the turbulent nature of youth labor markets in the U.S. Specifically, there is compelling evidence that workers receive positive returns to job shopping (e.g., Topel and Ward, 1992), presumably as workers (and employers) learn about their skills, aptitudes, and interests by trying different jobs, leading to increasingly better matches as young workers move through a series of jobs. Thus, it remains an open question whether school-to-work programs or other means of increasing early job market stability would result in higher earnings as adults-stemming from good matches as well as acquired skills, behavior, or other characteristics-compared with the current functioning of youth labor markets in the U.S. credit