Entering the Labor Market in a Recession: Some Findings and Advice

Entering the Labor Market in a Recession: Some Findings and Advice

Timothy Taylor 06/11/2020 6
Entering the Labor Market in a Recession: Some Findings and Advice

Trying to get a job during a period of recession and high unemployment is hard for everyone, especially those just entering the labor market for the first time.

It can leave scars on their lifetime earnings and even their personal health. Till von Wachter discussed the evidence from past recessions--and offers some advice for those currently living through this experience, in "The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources." Journal of Economic Perspectives, 34:4, pp. 168-94). In describing the longer-term effects of entering the labor market in a recession, he writes: 

Over the last 15 years, an increasing number of studies have analyzed the short- and long-term effects on individuals entering the labor market in a recession, and this article will take stock of the core empirical methods and findings from this literature. On average, individuals entering the labor market in a typical recession (a 3–4 point rise in unemployment rates) experience a reduction in earnings of about 10–15 percent initially---somewhat smaller for college graduates, somewhat larger for high school graduates, and a particularly large reduction for nonwhites. Estimates for college graduates suggest that during recessions, workers tend to start jobs at less prestigious occupations and smaller- and lower-paying firms. For some groups, such as PhD economists and possibly MBA graduates, an initial occupation choice permanently affects career outcomes. An early-career economic shock has the potential to be disruptive beyond strictly economic outcomes, too. An increasing number of studies document that adverse labor market entry has effects on health and other outcomes like marriage, divorce, and women’s fertility and can affect socio-economic outcomes, health, and mortality in middle age. ...

As he digs down into the evidence and models, a basic insight here is that early jobs often set the stage for the later jobs. Many workers in their 20s switch jobs a number of times before settling into what feels like a good fit for at least the medium term. But when dealing with limited options for employment, finding that employer who is a a good fit for the long-term is harder, and switching between jobs may be harder, too. Von Wachter offers some advice: 

The crisis in the labor market triggered by the COVID-19 pandemic has given this line of research increased urgency and has made it relevant to the 4 million or so young individuals graduating from college or high school in the summer of 2020.  Some useful lessons emerge from the research reviewed here:

  1. Your first job out of school may not be what you had expected, but that’s OK. Being flexible in your choice of, say, occupation or where you live will give you more options.
  2. Your career will take longer to develop than that of luckier peers. Do what you can to avoid being locked into that first job by continuing to accumulate general skills and looking for opportunities to move to other jobs.
  3. If things are going slow, remember, it is hard for everyone. At the same time, all findings discussed here are for averages and do not necessarily apply to you—you have agency in shaping your life and career. 
  4. You may need to save a higher percentage of income early in life to meet long-term wealth goals.
  5. Your desired patterns of marriage and fertility may take more effort to achieve. 
  6. Take particular care to develop and maintain a healthy lifestyle and be kind to yourself, in part because it will help you weather difficult initial labor market conditions. 

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  • Dan Hargreaves

    Start from the bottom and gain experience !!

  • Rob Mcewan

    This cohort is unlucky !!

  • Jack Knowles

    Interesting facts

  • Brad Clayton

    2020 in a nutshell for jobseekers

  • Amanda White

    Stay flexible and consider other career paths

  • Phil C

    Entering the job market requires patience

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Timothy Taylor

Global Economy Expert

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.


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