The basic thesis of this paper is to explore the long-term relationship between labor market experiences and the economic conditions at the time of graduation. In essence, this paper explores how economic climate at the time of graduation effects wages and career trajectory, not just at the time of graduation but also 20 years in the future.
The intent of the thesis is to discern whether graduating in a bad economy will have a significant or a lasting effect on a graduate’s future earning, career choice, and career path, and if such a difference is eliminated after a few years of work.
This thesis is both relevant and timely for college graduates looking to enter the job market in this economic climate as it discusses a number of issues related to the educational level, career path, job mistmatching, and underemployment during the time of a recession.
What is the Economic Theory underlying the study?
Rationale: It is important to know how the long-term career path is shaped by the economic climate at the time of graduation. In ideal circumstances, there should be no differences in the long-term for graduates with similar skill sets. And if there are significant differences, and they persist in the long-term, it can have serious repercussions for policy makers, college graduates, and educational institutes.
The economic theory that is being tested is how skills acquired in the early phase of a job are the foundation on which future job opportunities rest. This continuation could be the cause of persistence which is not necessarily a good omen for college graduates entering the job market in a recession.
The hypothesis that graduates tend to stay in school or go back to school higher education is based on economic theory because the opportunity cost of going back to school is low and there is a chance that with an advanced degree the same graduate could re-enter the job market at a better job prospect. For instance, before the recent recession, traders on Wall Street tended not to go back to school because it required giving up on high salaries and hefty bonuses and investing money in education. After the recession hit, MBA applications almost doubled to the top business schools.
The labor supply remains unaffected because the population and the graduating cohorts are independent of economic conditions, so every year the number of people looking for jobs does not vastly depend on economic climate.
What are the data sources?
The data sources used include the National Longitudinal Survey of Youth (NLSY79), which in 1979, 12686 youths between the age of 24 -22 were interviewed and followed annually until 1994. From this the most recent data available is from the 2006 survey, it is also restricted to cross section white male sample.
The author seems to use only white male data so as to not…