The Long-Term Labor Market Effects of Parental Unemployment

Abstract

I investigate the impact of parental unemployment on children's educational attainment and long-run labor market outcomes in Austria. I find that parental unemployment shortly before an important educational decision by parents for their children lowers a child's probability of holding a university degree by more than 5 percentage points. I do not find that income is affected at the beginning of a child's labor market career along the distribution, but I find a gradual deterioration later on. A substantial share of these long-term losses can be explained by the lower parental investment decision. My results emphasize the intergenerational and longlasting consequences of parental unemployment.

Parental Job Loss and Early Child Development in the Great Recession

“…More broadly, our results speak to previous studies showing how income losses due to job displacement might be more consequential when timed around a specific parental investment in formal education. While previous studies ascertained this for secondary and tertiary education (Coelli, 2011; Schmidpeter, 2020), we provide evidence for pre‐school education in the form of childcare enrolment.…”

“…Out of the remaining 7,063 complete records, we further excluded 406 households in which either the mother or father of the study child never held a full‐time job. We follow previous studies on the (intergenerational) effects of job loss (e.g., Jacobson, LaLonde, & Sullivan, 1993; Schmidpeter, 2020) and limit our analysis to households with a minimum attachment to the labor market.…”

“…Similar results have been found in other contexts (Coelli, 2011; Gregg et al., 2012) and for other aspects of school performance such as grade retention (Stevens & Schaller, 2011). On college enrolment, evidence also pointed to small negative effects of paternal job loss (Hilger, 2016), whereas findings for adult‐life earnings have been more mixed (Bratberg, Nilsen, & Vaage, 2008; Gregg et al., 2012; Hilger, 2016; Oreopoulos et al., 2008)—hinting perhaps at a dilution of the influence of parental job loss over children’s lifetime (but see, in contrast, Schmidpeter, 2020).…”

“…Job losses around specific stages of children’s educational trajectories might have a stronger impact. Schmidpeter (2020) found that parental unemployment, occurring around the time of early tracking in the Austrian school system (age 10), is most harmful for children’s university completion chances and future earnings, the latter being measured as late as age 37 (see also Coelli, 2011). Focusing on the stages before and around school entry in our paper, the relevant educational investment decision likely involves formal childcare.…”

Spillover Effects of Immigration Policies on Children's Human Capital

“…Second, we contribute to the literature on determinants of parental human capital investment decisions (Baranov et al, 2020;Nicoletti and Tonei, 2020;Schmidpeter, 2020;Laffers and Schmidpeter, 2021) and, more specifically, investment decisions made by likely undocumented parents. Thus, to a certain extent, we also contribute to works investigating the intergenerational mobility of migrants (Chetty et al, 2020;Abramitzky et al, 2021).…”