Message from new paper: try not to enter the labor market during a severe economic downturn

South Korean workers

Individuals entering the labor market during a recession can face severe economic consequences, and not just in the short run. A new working paper from the W.E. Upjohn Institute provides some of the first long-term evidence showing the lasting impacts workers suffer as a result of unfortunate timing.

Using data from the Korean Labor and Income Panel Study, authors Eleanor Choi, Jaewoo Choi, and Hyelim Son follow cohorts in South Korea who graduated from college before, during, and after the 1997–1998 Asian financial crisis. This allows them to examine the long-term impacts on work, family, and household finance for workers who entered the labor market during the crisis.

Their results suggest that labor market entry has a substantial long-term impact on these factors, but the effects differ for men and women.

According to Choi, Choi, and Son, “For men, we find a large and persistent reduction in employment and earnings for nine years of labor market experience among those who graduated from college during the Asian financial crisis. The deterioration in career outcomes leads to a permanent decline in the marriage and childbearing rate and a substantial delay in financial asset building. For women, on the other hand, the penalty in the labor market disappears in two years, and consumption and asset holdings are mostly unaffected. Instead, women respond to limited job opportunities at college graduation by substituting into motherhood and having more children.”

Download “The Long-Term Effects of Labor Market Entry in a Recession: Evidence from the Asian Financial Crisis