When economic downturn hits bottom workers: Labor market entry conditions and long-term career effects

Recessions can have enduring negative consequences on labor markets, yet their impacts on bottom workers employed in flexible forms remain underexplored. This study provides empirical evidence on how adverse labor market entry conditions persistently affect the careers of bottom workers, specifically Chinese rural-urban migrants. Baseline estimations reveal that increases in national or regional unemployment rates significantly reduce the career earnings and labor supply of these migrants. The persistent adverse effects are largely driven by long-term penalties stemming from initial job downgrading at labor market entry. Additionally, this study examines heterogeneities in career effects, uncovering substantial impacts on individual life trajectories, such as delayed marriage and fertility plans. These findings have important policy implications and enhance our understanding of the long-term effects of macroeconomic fluctuations on vulnerable labor cohorts.