Precarious Employment Path Dependency
Young workers in developing economies frequently fall into cycles of short-term, informal jobs that fail to generate wage growth or serve as stepping stones to permanent employment.
Picture this
Imagine building a house on sand versus a concrete foundation—working short-term temporary jobs is like building on sand, where each wave washes away progress without accumulating height, whereas securing an early permanent contract provides a stable foundation that allows workers to climb higher wage ladders over time.
What the evidence says
Securing a permanent job after 1 year accounts for 23% of the 4-year earning gains, while 1-year earnings account for 56% (62% joint); holding a temporary or informal job after 1 year yields zero long-term wage gain compared to remaining unemployed.
- Who
- N = 3,052 young high school graduates (aged 18–29) in Addis Ababa, Ethiopia.
- How
- Causal mediation analysis calculating the Average Controlled Direct Effect (ACDE) of 1-year employment outcomes on 4-year wage earnings.
What to do
Target youth active labor market policies specifically toward placing job-seekers into permanent contracts rather than temporary stopgap jobs to prevent career scarring.
From the source
"Most strikingly, having any job after one year is not correlated with earnings at all after controlling for having a permanent or formal job. That is, individuals who had temporary or informal jobs after year do not have higher earnings that those that were unemployed."
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