Working Paper

Bad Times, Bad Jobs? How Recessions Affect Early Career Trajectories

Abstract: Workers who enter the labor market during recessions experience lasting earnings losses, but the role of non-pay amenities in either exacerbating or counteracting these losses remains unknown. Using population-scale data from Germany, we find that labor market entry during recessions generates a 6 percent reduction in earnings cumulated over the first 15 years of experience. Implementing a revealed-preference estimator of employer quality that aggregates information from the universe of worker moves across employers, we find that one-quarter of recession-induced earnings losses are compensated for by non-pay amenities. Purely pecuniary estimates can therefore overstate the welfare costs of labor market entry during recessions.

Keywords: earnings inequality; recessions; non-pay amenities;

JEL Classification: E32; J24; J31; J32;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Working Papers

Publication Date: 2022-10-01

Number: 22-12