The lost generation: Effects of youth labor market opportunities on longterm labor market outcomes

Abstract

This study shows that local unemployment rates at the age of graduation from compulsory school and high-school have negative effects on males’ earnings, employment and disability pension when measured as late as age 35.

Utilizing registry data for all Norwegian males born in 1959–1973, I demonstrate that local unemployment rates at the typical age of graduation from compulsory school (age 16) and high-school (age 19) have persistent, negative effects on males’ earnings, employment, and disability pension utilization when measured as late as age 35. With data on every male IQ, I study how labor market conditions at age of graduation have differential effects for low- and high-ability males. As one would expect, low-ability males are particularly vulnerable to business cycles at the time of labor market entry.