Initial Labor Market Conditions and Individual Employability

Initial labor market conditions affect how individuals build their human capital and look for jobs and thus can have long-term effects on their income levels, work performance, and career development. Based on data from the Urban Household Survey(UHS) of urban households in China from 1986 to 2009, we perform an empirical test of how initial labor market conditions affect the employability of individuals. Our research shows that people’s future incomes suffer if they start out in an adverse job market. Each percentage point of increase in the unemployment rate at an individual’s entry into the labor market is associated with a two-percentage-point drop in his or her average annual income.Even after looking at different parts of the job market and sample groups, this conclusion still holds. In the context of global economic instability, our findings may assist government policymakers in addressing adverse labor market conditions.