March 18, 2014, 15:30–17:00
Toulouse
Room MS 001
Econometrics Seminar
Abstract
We analyze labor market outcomes of U.S. college graduates from the classes of 1976 to 2011, as a function of the economic conditions they graduated into. We categorize college majors by average economic outcomes and skill level of the major, predominantly the average earnings premium, and measure a range of labor market outcomes over the first 13 years after college graduation. We have three main findings. First, poor labor market conditions disrupt early careers. For the average major, a large recession at time of graduation reduces earnings and wages by roughly 11% and 3% (respectively) in the first year, and reduces the probability of full-time employment by 0.095. Effects on earnings and full-time employment fade out over the first 7 years of a career, while the wage effects persist. There is a small positive effect on the probability of obtaining an advanced degree. Second, for the period as a whole, these effects are differential across college majors. High-earning majors are somewhat sheltered when graduating into a recession relative to the average major, experiencing significantly smaller disadvantages in most labor market outcomes measured. As a result, the initial earnings and wage gaps across college majors widen by 33% and 8%, respectively, for those graduating into a large recession. Most of these effects fade out over the first 7 years, but impacts on wages and a measure of occupational match quality persist. Higher paying majors are also slightly less likely to obtain an advanced degree when graduating into a recession. Our third set of results focuses on a recent period that includes the Great Recession. Early impacts on earnings are double what we would have expected given past patterns and the size of the recession, in part because of a large increase in the cyclical sensitivity of demand for college graduates. The effects are also dispersed much more evenly across college majors than those of prior recessions.