Growing into Work - Pseudo Panel Data Evidence on Labor Market Entrance in Germany

While the potential merits of the German apprenticeship training system seem to be fairly well documented, relatively little is known about those youths who, at one point or another, do not follow the usual track from apprenticeship training to regular work. These youths are the subject of the present study which attempts to empirically evaluate the long-run consequences of a failed start into the labor market on future earnings. Using a sample of West German males born between 1930 and 1965, two groups of former apprentices are identified who do not report a smooth transition from apprenticeship training to work. The first group abandons the apprenticeship training without having obtained any vocational degree, the second group fails to find a regular employment opportunity after successfully completing the apprenticeship training and becomes unemployed. A priori, both groups may be expected to suffer from long-run earnings reductions because they either experienced a discontinuance of human capital formation at the beginning of their career or, at least, give such signals to potential future employers. This paper tries to disentangle these potential effects of a failed labor market entrance on long-run earnings from other observed and unobserved effects caused by individual heterogeneity. This is done by transforming the three repeated cross-sections of the German 'Qualification and Career' survey, conducted in 1979, 1985/86 and 1991/92, into a pseudo panel of birth cohorts and estimating earnings functions with pseudo 'panel methods. The estimation results indicate that both groups reporting a nonsmooth transition from the apprenticeship training to work do suffer from strong future earnings reductions. While the impact of an unsuccessfully completed apprenticeship vanishes with increasing labor market experience, the negative impact of an early unemployment spell lasts over the entire individuals labor market history.

Inkmann, J., Stefan Klotz und Winfried Pohlmeier (1998), Growing into Work - Pseudo Panel Data Evidence on Labor Market Entrance in Germany, ZEW Discussion Paper Nr. 98-47, Mannheim.