How Increased Labor Demand at the Start of Your Career Can Improve Long Run Outcomes

Joshua Mask ()

No 2201, DETU Working Papers from Department of Economics, Temple University

Abstract: The literature has traditionally focused on the local unemployment rate to estimate how initial economic conditions affect long-run outcomes. Using Job Openings and Labor Turnover Survey, or JOLTS, State Estimates for job openings, hires, and sep- arations along with Local Area Unemployment Statistics, I test how changes in other aggregate measures of labor market activity affect long run outcomes. I find that for every one point increase in the local unemployed-to-job-opening ratio, annual earnings are reduced by 4.45% and remain depressed for over 13 years. Conversely, I find that a one percentage point increase in the local job openings rate or a one point increase in the local vacancy/unemployment ratio, increases initial annual earnings by 8.18% and 17.16%, respectively, which persists for nearly 11 years. I similarly find a positive and persistent effect on annual earnings from other measures of labor market tightness like the job-to-job transition rate, quits rate, job finding rate, and the labor-leverage ratio.

Keywords: wage scarring; labor discrimination; Job Openings and Labor Turnover Survey (search for similar items in EconPapers)
JEL-codes: J11 J15 J16 J24 J31 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-lma and nep-ure
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