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"The results of our study confirm that economic shocks experienced during early adulthood can lead to lasting changes in values and preferences, which can cause individuals to make important attitudinal changes, such as in their job search. We should take advantage of this fact, for example, by expanding the capacity of universities in times of recession when demand for studies is higher," said Alena Bičáková, who belongs to SYRI's Labour Market Research Group.
Experts analyzed graduates from nearly four dozen U.S. colleges. The study clearly showed a positive relationship between local economic conditions at the time of college enrollment and future annual earnings, especially for women.
"While men and women experience similar increases in hourly wages, we also saw larger increases in annual earnings for women due to increases in the number of weeks worked per year and the number of hours worked per week. In addition, we observe a higher probability of engagement in the labour market among women," added Bičáková.
In the study, the researchers calculate that a 1 pp higher unemployment rate at the time of entering college leads to an increase in annual real earnings of about 0.35% for women and about 0.21% for men, equivalent to $180 per year for women with average earnings and $172 per year for men.
This positive relationship between unemployment rates and future earnings cannot be explained, for example, by the fact that only a selected group of above-average students from classes exposed to adverse economic conditions enter and successfully graduate from college, or by the fact that only a selected group of these graduates, those with above-average earnings, are working. "Nor can it be explained by a change in the choice of college major or a change in the decision whether to pursue graduate education. Nor is the above-average income of graduates from these classes due to potentially better, economic conditions at the time of entry into the labour market. However, almost one-third of the above-average earnings of these graduates can be explained by the fact that they seek employment in higher-income locations after graduation and move there. The results are clearly consistent with a behavioural change that encourages individuals who experience bad economic times at the beginning of their studies to make a greater effort to obtain better-paying jobs," added Bicakova of SYRI and CERGE-EI.
See more: https://www.sciencedirect.com/science/article/pii/S0927537123000866
Alena Bičáková received the degree of M.Phil. at the University of Cambridge in the UK and a doctorate at Johns Hopkins University in the USA. She then worked for two years as a researcher at the European University Institute in Florence. He has been working at CERGE-EI since 2007. In his research, he focuses on the economics of the labor market and some other topics from the field of applied microeconomics, such as gender inequalities, the economics of education, or the formation of political preferences. Recently, he has been mainly concerned with the effect of the length of parental leave on the employment of mothers in the labor market and on the long-term outcomes of children. Together with several foreign co-authors, he also researches the effect of the economic situation at the time of starting university on the results and careers of students. She is also interested in the effect of the possibility of working from home and other flexible forms of work on the employment of women with small children and work-life balance.