Precarious Employment Path Dependency

In Simple Words

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.

Research question

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.

Participants

N = 3,052 young high school graduates (aged 18–29) in Addis Ababa, Ethiopia.

Study Design

Causal mediation analysis calculating the Average Controlled Direct Effect (ACDE) of 1-year employment outcomes on 4-year wage earnings.

Results

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.

Takeaway

Target youth active labor market policies specifically toward placing job-seekers into permanent contracts rather than temporary stopgap jobs to prevent career scarring.

Related findings

• Employment Path Dependency and Scarring →Labour & employment

  Accepting short-term, low-skill jobs traps workers on a secondary track where skills are underutilized and future recruiters interpret frequent job switches as a negative signal. It is like taking a temporary detour on an unpaved dirt road: instead of eventually merging onto the highway, the vehicle remains stuck on rough terrain.

• Absence of Stepping-Stone Effect in Temporary Employment →Labour & employment

  Think of getting a temporary trial pass to a gym that expires after a few months. While using the temporary pass gets a person onto the exercise floor immediately, it does not guarantee a permanent gym membership once the trial period ends.

• Ability-Dependent Peer Screening →Labour & employment

  Imagine trying to pick the best chess player out of a crowd. Only a master chess player has the expertise to accurately assess who among their acquaintances truly plays at an elite level, whereas a beginner cannot distinguish between a decent amateur and a grandmaster.

• Ability-Heterogeneous Wage Returns →Labour & employment

  Imagine a nightclub with a strict dress code based on exam scores where high scorers enter easily without extra effort. For high-scoring individuals, additional work experience adds little value because employers already hire them based on test scores.