Long-term Labor Market Outcomes Research Articles

ECONOMICS COURSEWORK AND LONG-TERM BEHAVIOR AND EXPERIENCES OF COLLEGE GRADUATES IN LABOR MARKETS AND PERSONAL FINANCE

I. INTRODUCTION If economics is a unique way of thinking, as many economists like to claim, some level of coursework in economics may provide enough specific knowledge and skills to lead students to make different choices in their adult roles as consumers, workers, and voters/citizens. Of course the same could be claimed for training in business and other areas, even though (or perhaps because) it could be argued that most content and training in business courses is more applied and pragmatic than what is presented in economics courses. Some empirical evidence--though really a great deal--suggests that training in economics and business is associated with different adult behaviors and outcomes. For example, Golec (1996) finds that mutual funds perform better if mutual fund managers have an MBA, and Chevalier and Ellison (1999) also report a positive correlation between mutual fund performance and the educational background of mutual fund managers. Black, Sanders, and Taylor (2003) found that economics majors earn almost 20% more than graduates in other social science majors, and about 10% more than those who major in business administration. In fields with large numbers of graduates, they find that only engineering majors earn more than economics majors. Similarly, Hecker (1995) reported that males majoring in economics had median earnings 3% higher than all majors for the age cohort of 25-34, and 53% more than average for the cohort aged 35-44. Craft and Baker (2003) find that lawyers with an undergraduate major in economics earn 13% more than otherwise comparable lawyers with other undergraduate majors, and economics is the only major with a statistically significant effect on earnings, (1) Hamermesh and Donald (2008), however, find that higher earnings by economics majors are partly due to economics majors working more hours than others. The relationship between financial literacy/ knowledge and adult behavior and outcomes in financial markets has been addressed in several recent studies--many sponsored by Federal Reserve Banks. Hilgert, Hogarth, and Beverly (2003) and Braunstein and Welch (2002) find that knowledge about credit, saving, and investment is significantly related to recommended financial practices in cash-flow management, credit management, saving, and investment. Unfortunately, there is also evidence of widespread financial illiteracy in U.S. households, and particularly among elderly women (see Lusardi and Mitchell 2007, 2008). Employee education programs have been found to affect workers' savings, retirement, and investment behaviors (Bayer, Bernheim, and Scholz 2009; Bernheim and Garret 2003). State mandates for precollege education in personal finance appear to succeed in at least exposing students to more information and sources on financial education, and students from states with such mandates report higher levels of savings and net worth as adults (Bernheim, Garrett, and Maki 2001; Tennyson and Nguyen 2001). Much less research exists linking college coursework or majoring in economics to personal finance outcomes, (2) but Christiansen, Joensen, and Rangvid (2008) find that those trained in economics (in college courses or employee education programs) are more likely to invest in stocks than those who receive training in other areas. Guiso and Jappelli (2005) report that, among college graduates, having a degree in economics is positively associated with knowledge about financial assets. Chert and Volpe (1998, 107) concluded that business majors had better knowledge about personal financial literacy than other students, but that in general college students were not knowledgeable about personal finance.'' (3) In this paper we use a large and unique data set to investigate the relationships between taking college coursework in economics or majoring in economics with long-term labor market and personal finance behaviors and outcomes. Our information on long-term behaviors and outcomes is drawn from a detailed questionnaire we mailed in January 2003 to over 25,000 graduates who attended four public universities in 1976, 1986, or 1996. …

Programs and Policies to Assist High School Dropouts in the Transition to Adulthood

Dan Bloom of MDRC examines policies and programs designed to help high school dropouts improve their educational attainment and labor market outcomes. So called "second-chance" programs, he says, have long provided some combination of education, training, employment, counseling, and social services. But the research record on their effectiveness is fairly thin, he says, and the results are mixed. Bloom describes eleven employment- or education-focused programs serving high school dropouts that have been rigorously evaluated over the past thirty years. Some relied heavily on paid work experience, while others focused more on job training or education. Some programs, especially those that offered paid work opportunities, generated significant increases in employment or earnings in the short term, but none of the studies that followed participants for more than a couple of years found lasting improvements in economic outcomes. Nevertheless, the findings provide an important foundation on which to build. Because of the high individual and social costs of ignoring high school dropouts, the argument for investing more public funds in services, systems, and research for these young people is strong. The paucity of conclusive evidence, however, makes it hard to know how to direct resources and magnifies the importance of ensuring that all new initiatives provide for rigorous evaluation of their impacts. Bloom concludes with recommendations for policy and research aimed at building on current efforts to expand and improve effective programs for dropouts while simultaneously developing and testing new approaches that might be more effective and strengthening local systems to support vulnerable young people. He stresses the importance of identifying and disseminating strategies to engage young people who are more seriously disconnected and unlikely to join programs. A recurring theme is that providing young people with opportunities for paid work may be useful both as an engagement tool and as a strategy for improving long-term labor market outcomes.

Choice of College Major and Long-term Labor Market Outcomes

Choice of College Major and Long-term Labor Market Outcomes

The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income

New graduates of elite MBA programs flock to Wall Street during bull markets and start their careers elsewhere when the stock market is weak. Given the transferability of MBA skills, it seems likely that any effect of stock returns on MBA placement would be short-lived. In this paper, I use a survey of Stanford MBAs from the classes of 1960 through 1997 to analyze the relationship between the state of the stock market at graduation, initial job placement, and long-term labor market outcomes. Using stock market conditions at graduation as an instrument for first job, I show that there is a strong causal effect of initial placement in investment banking on the likelihood of working on Wall Street anywhere from three to twenty years later. I then measure the investment banking compensation premium relative to other jobs and estimate the additional income generated by an MBA cohort where a higher fraction starts in higher-paid jobs relative to a cohort that starts in lower-paid areas. The results lead to several conclusions. First, random factors play a large role in determining the industries and incomes of members of this high-skill group. Second, there is a deep pool of potential investment bankers in any given Stanford MBA class. During the time these people are in school, factors beyond their control sort them into or out of banking upon graduation. Finally, industry-specific or task-specific human capital appears to be important for young investment bankers.

Initial Labor Market Conditions and Long-Term Outcomes for Economists

Each year, graduate students entering the academic job market worry that they will suffer due to uncontrollable macroeconomic risk. Given the importance of general human capital and the relative ease of publicly observing productivity in academia, one might expect that long-term labor market outcomes for students graduating in unfavorable climates will resemble long-term outcomes for those graduating in favorable climates. In this paper, I analyze the relationship between macroeconomic conditions at graduation, initial job placement, and long-term outcomes for Ph.D. economists from seven programs. Using macroeconomic conditions as an instrument for initial placement, I show that a quality and type of initial job have a causal effect on long-term job characteristics. I also show that better initial placement increases research productivity, which helps to limit the set of economic models that can explain the effect of initial placement on long-term jobs.

Induced work participation and the returns to experience for welfare women: Evidence from a social experiment

In the late 1970's, a welfare reform experiment with 'workfare'-like provisions was conducted in Minnesota. The experiment provided education and training to AFDC recipients in an attempt to improve client long-term labor-market outcomes. An evaluation of the experiment applying simultaneous-equations modeling of outcomes, attrition, and endogenously missing data is presented. We find imprecise evidence that the program increased the probability of post-program work participation, and we measure a high rate of return in wages to work experience. Although we find no evidence of attrition bias, there is considerable influence of selectivity in the wage equations.