IZA DP No. 10597: The Perfect Storm: Graduating in a Recession in a Segmented Labor Market
published in: Industrial Labor Relations Review, March 2018, 71(2): 492-524
This paper analyzes the effects of entry labor-market conditions on workers' career in Spain, a country well known for its highly segmented labor market and rigid labor-market institutions. In contrast with more flexible labor markets, we find that the annual earnings losses of individuals without a university degree are greater and more persistent than those of college graduates. For workers without a college degree, the effect is driven by a lower likelihood of employment. For college graduates, the negative impact on earnings is driven by both a higher probability of non-employment, and employment in jobs with fixed-term contracts. While a negative shock increases mobility of college graduates across firms and industries, there is no earnings recovery, just secondary labor-market job churning. Our results are consistent with tight regulations of the Spanish labor market such as binding minimum wages and downward wage rigidity caused by collective bargaining agreements.