Graduated: and then? How your career is influenced by your first years on the labour market Lisanne van Koperen

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1 Graduated: and then? How your career is influenced by your first years on the labour market Lisanne van Koperen Statistics Netherlands, the Hague Henri Faasdreef JP The Hague P.O. Box HA The Hague Graduated: and then? How your career is influenced by your first years on the labour market Lisanne van Koperen Katja Chkalova InGRID summer school The gender pay gap revisited causes and consequences of horizontal and vertical gender inequalities on the labour market 7-11 July 2014 University of Amsterdam/AIAS Background This research is conducted for my internship at Statistics Netherlands and is part of the BUD project (Baan-en Uitkeringsdynamiek: Job and Benefits Dynamics). As the study is still under construction, feedback is welcome. The article will be submitted to the Dutch journal Tijdschrift voor Arbeidsvraagstukken (Journal for Labour Issues).

2 INTRODUCTION In recent years, the unemployment rate in the Netherlands has increased sharply. In 2013, Dutch people were unemployed. This is 8.3% of the total workforce and an increase of 74% compared to 2009; the first year after the Netherland was hit by the credit crisis (Statistics Netherlands, 2014). The Dutch government aims to get these unemployed back on the labour market as quickly as possible in order to prevent or mitigate the possible negative effects that are associated with unemployment. The negative impact that unemployment can have on someone s labour market position has been regularly studied. Previous research on career development focused on the influence of a bad start on the labour market, which is indicated as a (longer) period of unemployment after graduation (e.g. Van der Linden & Van der Velden, 1997; Luijkx & Wolbers, 2009; Pollaerts, de Graaf & Luijkx, 1989l Steijn, Need & Gesthuizen, 2006; Wolbers, 2010). Unemployment in the first years after graduations seems to bring an increased risk of unemployment in the further career. This is a long-lasting effect: the initial period of unemployment can have a negative impact even 15 years after graduation (Luijkx & Wolbers, 2009). It has also been shown that the longer the period of unemployment after graduation, the greater the negative repercussion (Steijn, Need & Gesthuizen, 2006). Other studies support these findings (e.g. Scherer, 2004; Wolbers, 2010). The focus of this study is on higher educated men and women between 18 and 30 years old in the Netherlands who enter the labour market after they are graduated. The study researches whether the initial years after graduation can influence the further career development. It especially concentrates on two characteristics of this first period: the number of working hours and the number of transitions someone makes. Besides, someone s field of study, and the economic situation at the time of graduation are taken into account. Differences between men and women will also be considered. The question that will be studied in this research is to what extent the first years on the labour market after graduation influence someone s career. 1

3 As previous research has mainly studied the influence of having a bad career start defined as a period of unemployment for the further career, not much is known about the influence of having a better career start. The current study contributes to the existing literature on career flows by also studying the influence of having a good start on the later career. Besides, the effect of having an unstable career start is also studied. THEORY According to the human capital theory (Becker, 1964), people gather capital (skills and experience) during their education and career. Working is seen as one of the most important ways to gather human capital (Wolber, 2010). The more capital someone has, the more attractive this person is as potential employee. A poor career start after graduation is detrimental to the further development of human capital (Bratberg & Nilsen, 2000; Wolbers, 2010). Being unemployed or having an unstable career start does not only imply that human capital is not, or barely build, it could also cause the destruction of already existing skills (Luijkx & Wolbers, 2009). This destruction of human capital can happen in several ways. One possibility is that the knowledge and skills someone already had are forgotten because they are not put in practice anymore. Another possibility is that someone s skills and knowledge become outdated because the person cannot keep them up to date (De Grip & Van Loo, 2002). Both the stalled formation of new capital and the loss of existing capital make those who start their career with a period of unemployment or instability less attractive as potential employee for employers (Steijn, Need & Gesthuizen, 2006). The signalling theory also focuses on attractiveness of an employee (Spence, 1973). According to this theory, employers search for certain signals in potential employees that make them attractive. On the basis of these signals, employers determine the attractiveness of someone as a new employee. Education is an important signal of the capabilities of a graduate (Wolbers, 2010). This is because there is little other information available about recently graduated job seekers. Education serves as an indication of the acquired skills and the abilities of the graduates (Luijkx & Wolbers, 2

4 2009). A career path that starts with a period of unemployment or instability gives off the signal that the abilities of job seekers are not good enough for a solid job. This makes the graduate less appealing for an employer. The result of this attractiveness is that the graduate is likely to remain unemployed for a longer period of time, or remain having an unstable career path with many transitions, which makes the graduate even more unattractive. On the basis of both the human capital and the signalling theory, it could be expected that a poorer start on the labour market has a negative impact on someone s further career. Having a poorer start results in less human capital, and unattractiveness signals for potential employers, which continues to negatively impact the career. Hypothesis 1: Starting the career with a period of unemployment or instability is more likely to result in unemployed or instability in the further career than starting the career with a period of stable (part-time/fulltime) employment. Both theories are also applicable to those who start their career with stable employment. Graduates who start their career with a part-time or fulltime job immediately form human capital in the form of skills, knowledge, and experiences. This makes them more employable in the future. Besides, they also give off the positive signal that, as they have a stable job, they must have good skills and the necessary abilities. This is positively valued by employers and therefore increases the likelihood that the graduates who start with a stable job will continue to do that in their further career. Hypothesis 2: Starting the career with a period of stable employment is more likely to result in stable employment in the further career than starting the career with a period of unemployment or instability. Graduating during a recession increases the risk of unemployment. As a result, being unemployed or having an unstable career path in an economically unfavourable period, has less to do with the capabilities of a graduated and more with the labour market conditions. It can therefore be expected that starting the career with a period of 3

5 unemployment or instability during an economically unfavourable period will be less detrimental for the further career than the same start during an economically favourable period. The latter would mean that there are jobs available, but that the graduate nevertheless does not find a job. The signal that the graduate is not suitable and does not have the necessary capabilities will be even greater in this situation than when someone graduates in a period where there are less jobs available. Conversely, starting the career with stable employment in an economically unfavourable period gives the signal that someone is highly skilled and can therefore be higher valued by employers. Hypothesis 3: Starting the career with a period of unemployment or instability during an economically unfavourable period is less likely to result in unemployed or instability in the further career than when the career is started with a period of unemployment or instability during an economically favourable period. Hypothesis 4: Starting the career with a period of stable employment during an economically unfavourable period is more likely to result in stable employment in the further career than when the career is started with a period of stable employment during an economically favourable period. RESEARCH DESIGN Data from Statistics Netherlands are used. These are monthly registered data containing information about people s employment status and demographic characteristics. After list wise deletion, the dataset contains men and women who are graduated between 2000 and 2003 and between the age of 18 and 30. The start period is defined as the first two years after the graduation month. The end period consists of the sixth and seventh year after graduation. Instability is measured as making more than two transitions. For the other positions (unemployment, part-time employment and full-time employment), the number of hours that someone works are used. It is then calculated whether the person works mostly part-time, fulltime, or not during the specified years. As both the dependent (end position) and independent (start position) variable are categorical, multinomial logistic regression is used to test the hypotheses. 4

6 FINDINGS When the end groups are studied separately, it can be seen that every end position consists for the greatest part of people who also started in that position (see table 1). Table 1. Percentage of people in a certain end position, by start position. start position unstable inactive part-time fulltime end position unstable 9,8 7,4 5,9 3,2 inactive 6,9 22,3 5,9 2,3 part-time 11,5 9,1 37,8 10 fulltime 71,7 61,2 50,4 84,6 total 100% 100% 100% 100% CONCLUSIONS Having a negative start (unemployment or instability) is more likely to result in unemployment or instability in the further career Having a more positive start (stable employment) is more likely to result in stable employment in the further career The first years on the labour market are influential for the further career! 5

7 Literature Becker, G.S. (1964). Human Capital: A Theoretical and Empirical Analysis, With Special Reference to Education. National Bureau of Economic Research, New York. Beer, P., de (2006). Perspectieven voor de laagopgeleiden. Tijdschrift voor Arbeidsvraagstukken, 22(3), Centraal Bureau voor de Statistiek ( ). Beroepsbevolking; geslacht en leeftijd. =0&D4=0-4&D5=0-6,11,16,21,26,31,36,41,46,51,60,65,l&HDR=T,G3,G1&STB=G2,G4&CHARTTYPE=1&VW=T Eurostat (2014). Underemployment and potential additional labour force statistics. Eurostat, _potential_additional_labour_force_statistics Gesthuizen, M. (2008). Trends in de arbeidsmarktpositie van laagopgeleiden. Tijdschrift voor Arbeidsvraagstukken, 24(1), Grip, de, A. & Loo, van, J. (2002). The Economics of Skills Obsolescence: A Review, Research in Labor Economics, 21, Linden, A.S.R., van der & Velden, R.K.W., van der (2009). Het effect van werkloosheid en onderbenutting bij arbeidsmarktintrede op de latere loopbaan en inkomen. Cornell family papers. Luijkx, R. & Wolbers, M.H.J. (2009). The Effects of Non-Employment in Early Work-Life on Subsequent Employment Chances of Individuals in The Netherlands. European Sociological Review, 25(6), Pollaerts, H., Graaf, P.M., de & Luijkx, R. (1989). Ontwikkelingen in intragenerationele beroepsmobiliteit gedurende de vroege carrière van Nederlandse mannen en vrouwen geboren tussen 1915 en Scherer, S. (2004). Stepping-Stones or Traps?: The Consequences of Labour Market Entry Positions on Future Careers in West Germany, Great Britain and Italy. Work Employment Society, 18(2), Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 87, Steijn, B., Need, A. & Gesthuizen, M. (2006). Well begun, half done? Long-term effects of labour market entry in the Netherlands, Work, Employment and Society, 20, Steijn, B., Need, A.& Gesthuizen, M. (2006). Well begun, half done? Long-term effects of labour market entry in the Netherlands, Work, Employment and Society, 20, Wolbers (2010). Gevolgen van een gebrekkige start. Tijdschrift voor Arbeidsvraagstukken, 26(2): Wolbers, M.H.J. (2010). Blijvende gevolgen van een gebrekkige start? Tijdschrift voor Arbeidsvraagstukken, 26(2),

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