The Impact of Labor Market Entry Conditions onInitial Job Assignment, Human Capital Accumulation,and Wages

We estimate the effects of labor market entry conditions on wages for male individuals firstentering the Austrian labor market between 1978 and 2000. We find a large negative effect ofunfavorable entry conditions on starting wages as well as a sizeable negative long-run effect.Specifically, we estimate that a one percentage point increase in the initial localunemployment rate is associated with an approximate shortfall in lifetime earnings of 6.5%.We also show that bad entry conditions are associated with lower quality of a worker’s firstjob and that initial wage shortfalls associated with bad entry conditions only partiallyevaporate upon involuntary job change. These and additional findings support the view thatinitial job assignment, in combination with accumulation of occupation or industry-specifichuman capital while on this first job, plays a key role in generating the observed wagepersistencies...