Academic journal article Yale Economic Review

Stay in School: The Consequences of Graduating during a Recession

Academic journal article Yale Economic Review

Stay in School: The Consequences of Graduating during a Recession

Article excerpt

THE IMMEDIATE and intuitive effect on those graduating from college in a stagnating economy is obvious: they are less likely to be hired, especially for the most desirable jobs. However, how do those who graduate during a recession fare over the course of their careers compared to graduates during periods of economic growth? Yale School of Management Professor Lisa Kahn addresses this question in her October 2007 paper tided "The LongTerm Labor Market Consequences of Graduating from College in a Bad Economy." Relying on detailed year-byyear occupational and educational information from the National Longitudinal Survey of Youth (NLSY) for white males who graduated from college between 1979 and 1988, Kahn followed participants for 14 to 23 years after college graduation to study the effect on employment status, occupational attainment, job tenure, wages, and enrollment in graduate schools as a function of economic conditions.

One uplifting finding is that economic conditions at the time of graduation have no substantial long-term effect on labor supply. As a whole, those who graduate during a recession tend to have the same probability of being employed and will generally work the same amount per year as those graduates entering the job market in a strong economy. The short-term effects of increased unemployment in a recession thus appear to be overcome by future economic expansion and growth in the job market.

Less encouraging is that while they may be equally likely to have a job, students who receive their undergraduate degrees during turbulent economic times tend to occupy less desirable positions. LJsing ratings of "occupational prestige" as a proxy for job desirability, Kahn found that recession graduates tend to have less prestigious jobs compared to their classmates who graduate in boom years. …

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