The Intergenerational Transmission of Employers and the Earnings of Young Workers
The Intergenerational Transmission of Employers and the Earnings of Young Workers
Author: Matthew Staiger
Abstract: This paper investigates how the earnings of young workers are affected by the intergenerational transmission of employers–which refers to individuals working for the same employer as a parent. My analysis of linked survey and administrative data from the United States indicates that 7% of young workers find their first stable job at the same employer as a parent. Using an instrumental variables strategy that exploits exogenous variation in the availability of jobs at the parent’s employer, I estimate that working for the same employer as a parent increases initial earnings by 31%. The earnings benefits are attributable to parents providing access to higher-paying employers. Individuals with higher-earning parents are more likely to work for the employer of their parent and experience greater earnings benefits when they do. Thus, the intergenerational transmission of employers amplifies the extent to which earnings persist from one generation to the next. Specifically, the elasticity of the initial earnings of an individual with respect to the earnings of their parents would be 10% lower if no one worked for the employer of their parent.
Date Added: 11/3/2021, 9:17:23 AM
Reading Notes:
Objective: To estimate the effect of working for a parents’ employer for the young worker and broader implications for intergenerational mobility
Importance: Intergenerational transmission of employers may be one source of lower than desired intergenerational income mobility
Background: Previous papers have found that a small but not negligible number of children work for their parents’ employer. This paper adds a credible estimate of the earnings effects
Data & Key Variables: 2000 Decennial Census to identify parent-child link
Child DOB between 6/30/1982-7/1/1992
LEHD earnings 2000-2016
Labor market entry=first time individual earns at least $3300 per quarter for 3 consecutive quarters and earns at least some of that from the same employer for all 3 quarters
Methodology: IV that uses variation in job availability at parent’s employer
Results: 7% of young workers find their first stable job at the same employer as their parents. Working for this employer increases initial earnings by 31%
The intergenerational elasticity of earnings (IGF) would be 10% lower without intergenerational transmission of employers
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