Motivation THIS TALK: 1. Documents a stagnation in the schooling attainment at age 25 of Spanish cohorts born after 1976. 2. Can we explain the poorer performance of those cohorts with the recent behaviour of wages and unemployment of youth?

Motivation Recent birth cohorts present lower educational attainments than previous generations (Source: EPA 1992-2007).

Motivation The recent slowdown of the educational attainment raises many issues: Causes of the slowdown: Composition of children (migrants). Economic opportunities (wages, unemployment). Consequences: Future productivity of the labour force. Assimilation of migrants.

Motivation The recent slowdown of the educational attainment raises many issues: Causes of the slowdown: Composition of children (migrants). Economic opportunities (wages, unemployment). Consequences: Future productivity of the labour force. Assimilation of migrants.

Outline The importance of the composition in the labour force Why economic opportunities might matter during this period Data and identification strategy Empirical results Conclusions Importance for productivity (future research)

The importance of the composition in the labour force There has been a huge increase in the % of foreign children. Problem of defining “immigrant” when considering children: First generation Generation 1 1/2 : those who entered in Spain at a late age. Generation 2: those born in Spain having at least a foreign parent

The importance of the composition in the labour force Foreign children who arrive before the age of 16 behave poorly in terms of school attainment after compulsory education.

The importance of the composition in the labour force Especially important the differences for Africans, foreigners from the enlargement. Age of entry matters and some socio-economic conditions.

The importance of the composition in the labour force However, we also see a relative slowdown or even decline in the educational attainment of natives born after 1976 as well.

Outline The importance of the composition in the labour force Why economic opportunities might matter for recent cohorts Data and identification strategy Empirical results Conclusions Importance for productivity (future research)

Why economic opportunities might matter for recent cohorts We claim that there has been an important increase in the economic opportunities of young unskilled workers from 1995 onwards. This boom in job opportunities for that particular group of individuals is observed through: a decline in young unemployment. relative to the 36-45 years. an increase in real wages of young adults (between 16 and 20) relative to same age group. Unadjusted by education, occupation and so on.

Why economic opportunities might matter for recent cohorts Using unemployment rates computed in the Labour Force Survey we observe the relative decline in the youth unemployment rates from 1995 onwards. Notice that 1995 corresponds to the age of 16 for the cohort 1976.

Why economic opportunities might matter for recent cohorts Real wages for that particular group have gone up from 1995 onwards: Encuesta de Estructura Salarial (INE)

Outline The importance of the composition in the labour force Why economic opportunities might matter for recent cohorts Data and identification strategy Empirical results Conclusions Importance for productivity (future research)

Data and identification strategy Labour Force Survey: Quarterly data to include all possible observations from 1992 until 1997. Problem of repeated observations (checked). Use young adults who live with their parents. Control for family/household characteristics. We are going to look at three questions: School attendance during the last 4 weeks. We exlude third quarter. Attending school is separated regular and non-regular from 1st quarter 2005. Construct a variable of “attending a lower grade than the corresponding to my generation”. Problem: existence of different educational systems in different generations generate problems. The first comparable measure of “unsuccessful career” over time is at age 19 going to tertiary education or not. Youth unemployment taken at the provincial level by age, gender and period.

Data and identification strategy Muestra Continua de Vidas Laborales 2007: We construct median wages of males by province and age over time. General regime. Add up all contributions per person. Wages in October (start school year) We only observe those who work or are in paid unemployment in 2007: We restrict to males. Groups below 40 years old in 1992 are below 65 in 2007. Most of them should be still working especially for young workers.

Data and identification strategy Do contemporaneous wages and unemployment affect school attendance? Identifying source of variation: changes in province-specific wages and unemployment over time. Was enrollment in school below the province-specific average in years when wage is above the province-specific average? (or unemployment below the province-specific mean). Do contemporaneous wages and unemployment affect the composition of students? (Who drops out?) Does the fraction of grade repeaters enrolled at school fall when province-specific wages increase (or unemployment falls)? Multinomial logit: with three outcomes: Leaving school, Enrolled at school in a lower course (repeaters). Staying in the course that corresponds to my age.

Outline The importance of the composition in the labour force Why economic opportunities might matter for recent cohorts Data and identification strategy Empirical results Conclusions Importance for productivity (future research)

Empirical results

Empirical results

Empirical results (ii)

Outline The importance of the composition in the labour force Why economic opportunities might matter for recent cohorts Data and identification strategy Empirical results Conclusions Importance for productivity (future research)

Conclusions Documented a stagnation in the educational attainment of Spanish cohorts born after 1976 at age 25. Drop in college and stagnation of upper secondary completion. Composition matters but not the whole story (natives’ completion also stagnated). Related early school dropout to higher relative wages and lower relative unemployment of 16-20 year olds (from 1995-onwards) Many issues still open: Long-term consequences? How wages affect the effective educational attainment at any age. Quantification of impact on future wages of youth.

Outline The importance of the composition in the labour force Why economic opportunities might matter for recent cohorts Data and identification strategy Empirical results Conclusions Importance for productivity

Importance for productivity We draw from Altonji and Lange (2008) and plan to run the following regressions : E(Yi,30|i=cohort j, Si22 , PAR_Si22 ,HHi22 )= β0 + β1Si22 + β2PAR_Si22 + β2HHi22 +εit Yi,30: indicators of employment and wages in separate regressions on labor market outcomes at age 30. Si22 schooling attainment at age 22. PAR_Si22 parental schooling when the child was 22. HHi22 household structure when the child was 22. We use the previous regression to construct population averages aggregating across cells (after taking into account population weights). We construct counterfactuals using the techniques in Altonji and Lange (2008) or DInardo Fortin and Lemieux (2001) . E(Y *i,30, i=cohort 1980) = E(Yi,30|i=cohort 1970 , Si22 , PAR_Si22 ,HHi22 )* *π(Si22 , PAR_Si22 ,HHi22| i=cohort 1980)

Implications for productivity

The importance of the composition in the labour force Foreign children behave poorly in terms of school attainment after compulsory education.

Data: productivity Labour Force Survey: We take quarterly data to include all possible observations. Problem of repetition (checked). Problem third quarter from 2005. Migrants defined by nationality (only individuals that give the age of entry) Change in definition of education in 2000. We proceed from that year onwards. Implemented in 1993 (3rd and 4th grade). Generation 1983 first affected

Empirical results: Mechanisms Economic opportunities for young unskilled individuals might be important to decide leaving the school. The proportion of individuals who are leaving the household early is increasing.