Initial Labor Market Conditions andIndividual Employability

Luo Chuliang, Gao Tianyi, and Zou Xianqiang*

School of Labor and Human Resources, Renmin University of China, Beijing, China

Abstract: Initial labor market conditions affect how individuals build their humancapital and look for jobs and thus can have long-term effects on their income levels, workperformance, 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 ofhow initial labor market conditions affect the employability of individuals. Our researchshows that people’s future incomes suffer if they start out in an adverse job market. Eachpercentage point of increase in the unemployment rate at an individual’s entry into the labormarket 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 conclusionstill holds. In the context of global economic instability, our findings may assist governmentpolicymakers in addressing adverse labor market conditions.

Keywords: Initial labor market conditions, unemployment, labor market frictions, shortterm

JEL Classification Code: J21, J23, J24, J60

DOI: 10.19602/j.chinaeconomist.2023.05.03