Research of 1980s recession shows white men took salary hit

Monday, September 7, 2009 | 1:41 p.m. CDT; updated 1:58 p.m. CDT, Tuesday, September 8, 2009

COLUMBIA — The salaries of people who graduated around the 1982 recession were hurt, but the severity varied by gender and level of formal education, economists have found.

Lisa B. Kahn, an assistant economics professor at Yale School of Management, found that white men who graduated in the growing economy of 1988 were paid $79,000 more, taking into account the inflation rate, over 20 years than their counterparts graduating six years earlier in the heart of the recession.

In her 2006 study, "The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy," Kahn found the recession not only affected the salary arc of those who graduated in a down economy but also their job prestige.

"I find that workers who graduated in worse economies are in lower-level occupations, on average. However, occupations difference cannot fully account for the wage differences," Kahn said in her study.

Kahn used data from the National Longitudinal Surveys from the U.S. Bureau of Labor Statistics, which track the transition of youth from school to adulthood.

Using the same data, Brad Hershbein, a doctoral student in economics at the University of Michigan, found that the salary arc for women who graduated high school in the 1980s recession and went straight into the job market did not see any significant effect in the long run.

“The difference in the trajectory of their earnings was almost imperceptibly small in five years after graduation,” Hershbein said in an interview. His 2009 study, "Persistence in Labor Supply Effects of Graduating in a Recession: The Case of High School Women," has also found that affected women were less likely to be in the labor force for up to four years after graduation.

Meanwhile, the risk of being in poverty for this group of women 12 years after graduation increased by 20 to 30 percent, Hershbein said.

"For high school graduate women, the risk of being in poverty at age 30 is usually at about 8 percent. If they graduated in a recession, it's instead about 10 percent," Hershbein said.

Taking into consideration that annually, about 1.5 million women graduated from high school during the 1980s recession, that meant about 30,000 more women in poverty, he said.

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