Early Labor Market Entry and Adult Labor Market Outcomes

Final Paper- Entry Labor Market Conditions
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1 Introduction: Motivation of the Question.
Question Proposed
What effects do initial labor market conditions have on coming-of-age adults?
yist =α+γe +βe URst +θt +λs +εist.
* Independent Variable: URst - Unemployment Rate in a given state
* Dependent Variable: yist - wage/earning in state s year t
The initial labor market conditions affect education and lifetime earnings and educations, where the adverse effects can be pervasive and long-term (Von Wachter, 2020). The entry labor market conditions affect future economic outcomes. Young people have different macroeconomic experiences, and their entry into the job market partly depends o their education and skills, which in turn influence their ability to earn livable wages. 
Increasingly, the youth change jobs numerous more than ever before, which may have positive or negative long-term effects on long-term employment. For instance, if the youth move from job to job without gaining substantial experience and skills, this limits their ability to earn more. On the other hand, job stability makes it easier to find jobs to leverage their skills, knowledge, and experiences while also earning more. In any case, the initial labor market condition is one way to study job stability and its influence on wages and income later in life.
The youth are less likely to get well-paying jobs when there are adverse labor conditions, partly because they lack job experience and skills. Von Wachter (2020) reported that there is a direct relationship between the change in annual earnings with experience in the US and Canada among all college-educated workers (Figure 1). Yet, the young job entrants’ choices in their jobs and careers affect their earnings growth. Going to schools and getting specialized and in-demand skills improves chances of employability even during times of slow economic growth. However, entering the job market during a depressed labor market may affect wages and employment years later. 
The local labor market conditions affect the type of jobs available and the pay. When there is low youth unemployment, the employed youth gain experience, which improves their employability and ability to get higher wage levels. When there are good local labor market conditions, there is also likely to be labor market stability, during early employment stability and experience improves the ability to earn more.
Literature Review & Innovation
Neumark (2002) used instruments to evaluate whether early labor market stability affects adult earnings while also considering labor market conditions. The researcher further considers aggregate labor market conditions and highlights that stable employment during the early phase is associated with later higher wages. Neumark (2002) singles out the school-to-work programs as one way to increase early job market stability. Economic models on the impact of early employment stability on employment outcomes and future employment prospects provide insights into early-career stability’s short-term and long-term gains. Few studies use instrumental variables and complementary evidence to study the effect of youth labor market conditions on the future labor market. Still, Neumark uses both approaches in the research study. To Neumark (2002), when there is employment stability, the young job entrants are matched with jobs and acquire the required skills, behavior, or other characteristics to increase future earnings. Job quality is one of the factors affecting job-finding success, and in early employment, it is more likely that young workers will move around before settling into their jobs or careers.
In the study by Raaum and Røed (2006), the researchers found out that the labor market conditions have a persistent effect on the long-term job prospects in Norway. However, few researchers have considered the impact of labor market training under different labor market conditions and performance. Thus, the research bridges the gap by examining the persistent effects of unemployment during entry into the labor market, earnings gap, and future employment prospects. Early unemployment, including cases where this is linked to lack of training, affects the ability to accumulate knowledge, skills, and experience, and this has scarring effects. To Raaum and Røed (2006), the labor market conditions affect the labor market entry whereby those who enter in difficult labor conditions are more likely to experience early spells of unemployment.
Comparative Review
Comparative Review of Empirical Models / Empirical Strategies 
Neumark (2002) looked into whether there was a direct relationship between early labor market entry and adult labor market outcomes. To evaluate the relationship, there was a focus on the job search or job shopping model where there were instrumental variables for early labor market job stability. The descriptive statistics are used for are regression estimates on both men and women (Table 1) (Neumark, 2002).The instrumental variables eliminated noncausal sources of correlation. The dependent Variable is adult wages, while the independen...