Essays on careers in U.S. labor markets

About this book

This thesis consists of three essays in which I seek to understand how internal firm practices affect long-term outcomes for workers. In each essay, I exploit variation in external labor market conditions to help identify changes inside the firm. In the first chapter, I explore whether employer learning about worker quality is asymmetric. Do incumbent employers learn faster about their workers than does the outside market? I develop a methodology to measure the extent to which employers learn by relating the pay change distribution to various features of ability distributions. I exploit three distinct external labor market factors to generate differences in ability distributions, including the reason why workers left the previous job, economic conditions when entering a job, and occupational differences. I find that asymmetric learning is prevalent in the labor market with effects on wage-change distributions that are significant, both statistically and in terms of economic magnitudes. In the second chapter, I look at the effect of graduating from college in a recession on long-term labor market outcomes. I employ both national and state variation in economic conditions at time of college graduation to identify the effect. I find large, negative wage consequences to graduating in a recession which persist for approximately fifteen years. I also find that cohorts who graduate in worse national economies are in lower-level occupations and have slightly higher educational attainment. In the last chapter, I seek to determine how employer-employee match quality varies with economic conditions at the start of the employment relationship. During a recession, firms may be more reluctant to hire worse matches, whereas workers might be willing to take any job. I exploit a unique dataset consisting of pay records for the universe of employees for each of 150 firms over a five-year period. As a proxy for match quality, I use length of the employment relationship. I find that jobs end sooner when workers enter firms in worse economies. However, once I take into account firm heterogeneity, the effect of entering a recession reverses; job last longer.