Youth Labor Markets in the U.S.: Shopping Around vs. Staying Put

Abstract

The need for school-to-work programs or other means of increasing early job market stability is predicated on the view that the chaotic' nature of youth labor markets in the U.S. is costly because workers drift from one job to another without developing skills, behavior, or other characteristics that in turn lead to higher adult earnings. However, there is also ample evidence that workers receive positive returns to job shopping. This paper asks whether youths in unstable or dead-end jobs early in their careers suffer adverse labor market consequences as adults. In particular, it accounts for the endogenous determination of early job stability as a response to job match quality which may also influence adult wages using labor market conditions in the early years in the labor market as instrumental variables for the job stability experienced during those years. The instrumental variables estimates generally point to substantial positive effects of early job stability on adult wages.