Encouraged or Discouraged? The Effect of Adverse Macroeconomic Conditions on School Leaving and Reentry

Abstract

Existing research generally confirms a countercyclical education enrollment, whereby youths seek shelter in the educational system to avoid hardships in the labor market: the “discouraged worker” thesis. Alternatively, the “encouraged worker” thesis predicts that economic downturns steer individuals away from education because of higher opportunity costs. This study provides a formal test of these opposing theories using data from the United States compared with similar sources from the United Kingdom, Germany, and Sweden. I investigate whether macroeconomic stimuli—including recessions and youth unemployment fluctuations—matter for enrollment decisions. Analyses rely on 10 years of detailed individual-level panel data, consisting of birth cohorts across several decades. Across data sources, results show enrollment persistence in secondary education is stronger in response to economic downturns. These patterns differ sharply for tertiary-enrolled students and those who recently left higher education. Surprisingly, U.S. youths display an increased hazard of school leaving and a decreased hazard of educational reenrollment in response to adverse conditions. In contrast, European youths tend to make enrollment decisions supportive of discouraged-worker mechanisms or insensitivity to adverse conditions. The U.S.-specific encouraged-worker mechanism might be explained by the relative importance of market forces in one’s early career and the high costs of university attendance, which induces risk aversion with regard to educational investment. The discussion addresses the consequences for educational inequality.

Career Complexity No Longer on the Rise: Comparing Early- and Mid-Career Complexity Across the 1930s thru 1980s Birth Cohorts in Sweden

“…Our findings suggest that the long-term trend of increasing career complexity is in line with previous research for the lion share of the historical period covered, i.e. between about 1970to mid-1990s (Van Winkle and Fasang, 2017, 2021. An additional finding is that this trend of increasing career complexity is largely driven by an increase in complexity during early-careers (cohorts born between 1950 and 1964).…”

“…Thus, school-to-work trajectories have been prolonged and more complex in recent years, although during cyclical business upturns, such as between the recessions of the early-1990s and the Great Recession of 2008-2011, the time between education and first job was shortened in a number of OECD-countries (Quintini et al, 2007, for Sweden see also Halldén and Hällsten, 2008). Nevertheless, using data from individuals born in the 1970s and the 1980s, whose careers covered different recessions, Witteveen (2021) argues that the connection between macroeconomic factors and the smoothness of school-to-work-transitions is relatively weaker in Sweden compared to Germany, the United Kingdom, and the United States. Rodrigues and Guest (2010) review the literature on trends in average job tenure in the United States, Europe, and Japan.…”

“…Despite evident structural change in high-income countries, research on trends in career complexity, as defined by the average duration within and transitions between labor market related states, remains rather scarce. Recent research however suggests that career complexity has only moderately increased in Europe ever since labor market entry of the 1930s birth cohorts and up to the birth cohorts of the late 1960s (Van Winkle & Fasang, 2017, 2021.…”

Formal adult education and socioeconomic inequality: Second chances or Matthew Effects?

“…Here again empirical evidence implies either negative or no effects (Blossfeld et al, 2014;Groenez et al, 2007). A recent study by Witteveen (2021) finds that the patterns may be more complex than this. American and European youth differ in their responsiveness to economic conditions when making decisions about educational reentry, with American being generally more risk-averse because of their uncertainty about the expected benefits from further schooling (Witteveen, 2021).…”

“…Accordingly, their educational re-entry before age 25 will be underestimated. Recognizing the difficulties associated with age-related measures of adult education, recent studies have adopted a life perspective and now define adult learners as those who have completed their initial education by excluding educational (re-)entries in a typical age range (Blossfeld et al, 2014) and those before labor market entry (Kosyakova & Gerber, 2019;Witteveen, 2021). Thus, in nations in which the first Bachelor's (or equivalent) degree is normally obtained at age 23, individuals who gain these qualifications up to age 25 would be excluded from the analyses until they have graduated and entered the labor market.…”