The Long-Term Impact of Labor Market Interruptions: How Crucial is Timing?

In this day of two earner and single adult families many women and a small but growing minority of men face the decision whether and when to drop out of the labor force for a time, most often in order to take care of young children or in some cases of elderly family members. In addition, both women and men face the risk of occasional interruptions in their labor force participation when they are unable to find a job. In this study we use the NLSY79 data to investigate the long run effects on earnings of dropping out of the labor force and/or of being unemployed during the first 15 years of the careers of men and women firmly attached to the labor force, with particular attention to the importance of the timing of these interruptions. After controlling for numerous relevant factors, we find no significant negative impact on wage growth associated with time out of the labor force either early on or later, but do find that unemployment during the second half of the period has such effects both for men and for women.