The Intergenerational Transmission of Employers and the Earnings of Young Workers

Authors:

Matthew Staiger, University of Maryland

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 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 conditional on doing so. 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 a parent.