Unpacking the Education-to-Labor-Market Transition and Its Implications for Inequality

Session Submission Type: Panel

Abstract

Research has consistently documented the returns to post-secondary educational attainment (Lovenheim and Smith, 2023). But not every graduate gets the average outcome, and earnings gaps by gender, race/ethnicity, and socioeconomic status remain large and persistent even after accounting for educational attainment (Goldin et al. 2017; Bayer & Charles 2018; Chetty et al. 2020). While degree level, field of study, and institutional quality are well-established drivers of this variation, less is understood about the role of the initial labor market transition and how it may influence inequality in longer-term labor market outcomes. 

Labor economists have long recognized that the initial labor market transition involves a high degree of functional churn, reflecting the time needed for a good job prospect to materialize, as well as productive job switching as employees and employers learn more about each other and workers acquire new skills (Jovanovic, 1979; Topel & Ward, 1992; Klerman & Karoly, 1994; Jovanovic & Nyarko, 1997; Gardecki & Neumark, 1998; Alon & Tienda, 2005; Yankow, 2022; Rubinstein & Weiss, 2006). Just because this churn is functional, however, does not imply it is benign in its implications for inequality. We know from causal research on the effects of graduating into a recession that early labor market conditions can have a long-term scarring effect on earnings, in part due to deterioration in the quality of first jobs obtained (e.g. firm size, industry-major match). Cross-sectional inequality in labor market transitions - whether due to financial constraints, informational constraints, or other disadvantages - may lead to similar scarring effects. 

This panel brings together four papers spanning labor economics and the economics of education, to examine different aspects of education-to-labor-market transitions in three countries, as well as implications for longer-term economic inequality. The first two papers use administrative data to provide rich descriptive analyses, while the last two papers examine causal questions. 

The first paper, set in the UK, uses linked administrative and survey data to examine socioeconomic inequality in the match between young people and their occupation, controlling for academic qualifications. The second paper, set in the US, uses granular administrative data to provide new measures of early labor market “churn” for public college leavers and to examine how these measures vary across different types of leavers and over time. The third paper uses an innovative strategy to examine information frictions in the job search process for university graduates. The final paper examines heterogeneity in the labor market returns to completing an apprenticeship in Canada. We assembled this set of related-yet-distinctive papers to enhance the potential for stimulating new, cross-cutting questions and insights, across methods and contexts. All papers are already well along in preparation so there are no concerns about feasibility. 

Policy Area

• Employment and Training Programs

Secondary Policy Area

• Education

Chair

• Kevin Stange, University of Michigan

Discussants

• Brad Hershbein, W. E. Upjohn Institute for Employment Research

• Brendan Moore, Stanford University

Organizer

• Judith Scott-Clayton, Teachers College, Columbia University

Individual Presentations

• Occupational Hazard: Inequalities in Labour Market Mismatch - Non-Presenting Co-Author: Lindsey Macmillan, University College London

• The Storm Before the Calm: The Immediate Post-College Transition and Long-Term Labor Market Outcomes - Presenting Author: Judith Scott-Clayton, Teachers College, Columbia University

• Preference Signaling and Worker-Firm Matching: Evidence from Interview Auctions - Presenting Author: Russell Weinstein, University of Illinois

• Employer Preferences and Student Beliefs in the Post-College Job Search Process: Experimental Evidence - Presenting Author: Tarikua Erda, New York University