Abstract

\label{abstract}
Some young workers enter labor markets during periods marked by low levels of unemployment and rising wages; others enter during more difficult periods with high levels of unemployment and stagnant wages. Previous research finds negative and long-lasting effects for those who initially enter the labor force during weak labor markets.
Of course, discerning the effects of initial market conditions is difficult as young workers may attempt to time their entry by, for example, spending additional time in school during weak markets. Here, we take advantage of a novel form of exogenous variation that affected a large group of older workers; we use the Health and Retirement Survey to examine the long-term earnings and wealth accumulation of older veterans from the draft era. These men had little choice about the timing of entry into the labor force; they generally were drafted or volunteered based on world events and they left the military at the end of fixed contracts after fairly short terms of service. Our results indicate that even among draft-era veterans, those who enter the labor force during a weaker economy have lower levels of earnings, and that the effects lasted for several decades after leaving the military and entering the civilian labor force. While veterans who enter weak labor markets eventually catch up with other veterans on most measures, we find that they may do so partly by choosing to spend additional years in the labor force.