Job Instability Among Young Adults

Harry J. Holzer and Robert J. LaLonde

Early employment instability contributes to the low levels of employment observed among high school dropouts, especially female workers. Employment instability among women is correlated with childbearing and, to a lesser extent, marital status. Further, it is associated with poor cognitive skills rather than lower education levels. In their University of Chicago Harris School working paper titled, Job Change and Job Stability Among Less-Skilled Young Workers, researchers Harry J. Holzer and Robert J. LaLonde examine job retention and employment patterns among young adults. By addressing the influences that education, race and gender have on transitions into and out of the labor market, researchers are able to account for the employment patterns of different demographic and skill groups.

Holzer and LaLonde found that crucial determinates for job stability include cognitive skills, previous employment experiences and a variety of job characteristics, such as starting wage. Their findings have significant policy implications, especially for job training and placement programs and for educational initiatives designed to address these needs. As the results of this study indicate, work incentives alone are not likely to generate stable employment over time for unskilled individuals. Therefore, policy makers must consider other labor market interventions -accounting for such matters as the child bearing patterns of less educated women - that will provide unskilled workers with more stable employment and perhaps jobs with lower rates of turnover.

Findings

Work Experience Holzer and LaLonde compared the employment experiences of workers when they were in their early to mid twenties and again when they were in their late twenties / early thirties. They found that over time, the percentage of time spent in employment varied considerably by education, race and gender. Within each race/gender group, the least educated worked the least frequently. Among white males, for example, college graduates worked roughly 95% of the time, while high school dropouts work only 75% of the time. When examining these same individuals earlier in their life cycle, at ages 23-27, researchers found that male high school dropouts worked about 70% of the time (i.e. slightly lower than during their early thirties).

The corresponding figures for young adult females are more varied. Similar to their male counterparts, female college graduates accumulated approximately the same amount of work experience during their early to mid twenties and spent about the same amount of time either unemployed or out of the labor force. However, as researchers examine less educated groups they found that the time spent employed during this period drops sharply and is somewhat offset by a rise in the percentage of time spent out of the labor force. Specifically, female high school dropouts were employed only about one-third of the time during their early to mid twenties. One explanation for these differences refers to the marital status and childbearing patterns of these women, and to the costs associated with early child bearing (as the first births of less educated women tend to occur earlier than those of more educated women).

Job Retention Young adults who are less skilled exhibit less attachment to the employed work force than other workers, maintaining this pattern as they mature. This lack of attachment appears to be a barrier to future employment and to the acquisition of productivity/wage-enhancing training that most people receive on-the-job. For example, researchers found that individuals with low levels of education were noticeably more likely to leave employment for non-employment. A high school dropout was 63% more likely to move from employment to non-employment.

Table 2
Time Spent In the Labor Force by Young Adults (During 5 year span between age 23 and 27)
	Labor Market Status (Percentage of Weeks in State During 5 Year Time Span)
Demographic group (Gender/education)	Employed	Military	OLF	Unemployed
Males:
High School Dropout	75.8%	0.0%	11.9%	12.2%
High School Graduate	80.6	5.1	6.8	7.4
Some Post-Secondary (No schooling after age 22)	83.4	8.1	4.1	4.4
College Graduate (No schooling after age 22)	88.1	3.5	5.2	3.2
Attends College After Age 22	74.0	4.9	16.3	4.8
Females:
High School Dropout	36.8	0.0	55.9	7.3
High School Graduate	65.4	0.4	29.2	5.1
Some Post-Secondary (No schooling after age 22)	76.8	0.8	18.5	3.8
College Graduate (No schooling after age 22)	86.2	0.8	9.9	3.1
Attends College After Age 22	77.4	1.1	17.7	3.7
Notes: Source, authors calculations from NLSY, sample size is 9,295 observations. Observations are weighted using sample weights. Individuals in the sample must have birth years between 1957 and 1964, and a complete job history covering the five year time period between ages 23 and 27. "OLF" is defined as out of the labor force and not servinge in the armed forces. The "College Graduate" category includes only those who do not acquire any additional post-secondary schooling after age 22. "Attends College After Age 22" refers to persons wiht at least some post-secondary schooling by age 22 who also report attending school between ages 23 and 27.

Transition rates out of jobs did not vary greatly by gender. However, women who dropped out of high school were approximately 16% more likely to leave a job in a given week than their similarly educated male counterparts. Women are twice as likely to voluntarily leave a job for non-employment, most likely for reasons related to child bearing.

Holzer and LaLonde found that low job skills are associated with higher transition rates out of jobs. This relation is more striking for women than for men. As shown by column 1 of table 5 (below), male high school dropouts are about 15% more likely to leave their job in a given week than males with college degrees. Also, as shown by column 4 of the table, female high school dropouts are about 30% more likely to leave a job during a given week than are female college graduates. The influence of skill on job retention rates is exhibited by the measure of cognitive abilities (the score on the math portion of the AFQT).

As shown by columns 2 and 5, both males and females that score in the lowest quartile of this distribution have transition rates that are roughly 20% higher than those who scored in the highest quartile. The researchers found that measures of cognitive ability are strong predictors of transitions from jobs to non-employment, but have smaller effects on transition rates between jobs.

Table 5
Impact of Skill Characteristics on Transition Rates from Jobs (Coefficients from logit model)
		Males			Females
	(1)	(2)	(3)	(4)	(5)	(6)
Skill Characteristics:
H.S. Dropout	0.15 (.02)	0.02 (.03)	-0.16 (.03)	0.30 (.03)	0.18 (.03)	-0.03 (.04)
H.S. Graduate	0.05 (.02)	-0.05 (.02)	-0.20 (.03)	0.05 (.02)	-0.04 (.02)	-0.22 (.03)
Some College	0.07 (.02)	0.01 (.02)	-0.09 (.03)	0.04 (.02)	-0.02 (.02)	-0.15 (.03)
Math Score 1st quartile	--	0.22 (.03)	0.12 (.03)	--	0.18 (.03)	0.15 (.03)
Math Schore 2nd quartile	--	0.15 (.02)	0.10 (.03)	--	0.18 (.03)	0.16 (.03)
Math Score 3rd quartile	--	0.012 (.02)	0.09 (.02)	--	0.012 (.02)	0.11 (.02)
Other Controls:
Personal Characteristics	Yes	Yes	Yes	Yes	Yes	Yes
Job Characteristics	No	No	Yes	No	No	Yes
Notes: Omitted skill characteristics are college graduates and math scores in the top quartile. The personal characteristics include race, age, actual job experience, duration of last job, whether the individual is a dual job holder. The job characteristics include the log duration of the current job, and its square, industry and controls for occupation and pay at the start of the job. The models also include controls for the calendar year of the weekly observation, whether the job began as a part-time job.

Holzer and LaLonde found that current job duration, prior job duration and actual employment experience are all strongly associated with lower transition rates out of jobs, for both men and women within each educational category. Also, for all the educational groups, higher starting wages and average pay of the occupation are associated with greater job stability. During the first 18 months of employment, transition rates in managerial, technical and crafts occupations are substantially lower than the transition rates from other occupations. Similarly, among less educated men and women, transition rates from jobs in manufacturing, transportation, communications and public utility sectors are significantly lower than from jobs in the services sector.

Results indicate that once other personal characteristics were accounted for, an individual's race was not a factor in overall job stability, either for men or women, as the coefficients for blacks and other racial groups are both small and statistically insignificant. Holzer and LaLonde found that a larger portion of the differences in employment rates by race and gender result from differences in the probability of obtaining employment, while differences in transition out of employment were relatively minor. Results also indicate that job transition rates decline sharply with age, experience or tenure, among both men women. This fact might be viewed as an individual's "aging" into job stability during the early phase of their careers.

Methodology

Holzer and LaLonde utilize data from the National Longitudinal Survey of Youth (NLSY79) to analyze job and employment stability. This data consists of more than 12,000 individuals who were between the ages of 14-21 in 1979. To be included in their sample, respondents must have been interviewed in 1994, must have had complete job histories during the years they were scheduled to be interviewed, and must have been employed at least once between 1978-1993.

The primary focus in this paper is on the stability of regular jobs during the first 18 months of the job. These jobs are defined as those in which respondents worked at least 30 hours per week. Whenever several jobs were held at the same time, researchers selected the job with the longest duration as the regular job, accounting for regular jobs that were once part time jobs. In their research, Holzer and LaLonde distinguish between employment stability, defined as how long an individual stays employed without an intervening spell of unemployment, and job stability, defined as how long an individual stays employed with a particular employer.

Background

Recently, there has been renewed interest in the relationship between employment stability and the performance of less-skilled workers in the labor market. While the inequality between skilled workers and unskilled workers has grown rapidly in the past decades, wages of the less skilled workers have sharply declined. In addition, employment rates among less skilled men have declined, while employment rates of less educated women have improved less rapidly than those of more educated women. Interest in these issues has also been fueled by the recent enactment of welfare legislation.

 

Research Summaries are designed to help broaden the dissemination of current policy-relevant research. These Summaries are funded by the Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago.

For more information, contact Jamie Rosman at HarrisSchool@uchicago.edu or (773) 702.2287.