Initial labor market conditions and subsequent fertility behavior

Abstract

The conditions upon which young adults enter the labor market have been demonstrated to affect various later-life employment and family formation outcomes. After the 2008–2009 Global Financial Crisis, a thick strand of the literature has shown that precarious initial employment leads to postponed childbearing and higher ultimate childlessness. However, it is not only individual conditions that matter. Broader macroeconomic conditions upon entry also matter. The “scarring” literature has illustrated the consequences of entering the labor market during a recession on later life outcomes. Speaking to both strands and using detailed employment and birth histories of labor market entrants in Germany, this paper examines the effects of initial conditions, operationalized using fixed-term employment and recession year entry, on subsequent fertility behavior. To partly address bias from endogenous selection into initial conditions, we employ a two-step estimation strategy combining a non-parametric optimal full matching step and a parametric event history modeling step using the matched data. Results suggest that entering the labor market with a fixed-term contract is persistently and negatively associated with first births up to a decade after entry, and this pattern is pronounced only among women, whereas entering during a recession has persistent negative associations only among men.