Leaving school in an economic downturn and self-esteem across early and middle adulthood

In this study, we test whether leaving school in an economic downturn affects self-esteem across early and middle adulthood.  Self-esteem refers to the positive or negative evaluation of the self as an object.  It is indicated by individual perceptions of worthiness (e.g., “I have a number of good qualities.”) and competence (e.g., “I am able to do things as well as most other people.”). Sociologists and psychologists have studied self-esteem for over a century, but economists have only recently begun to consider the importance of this concept (Almlund et al., 2011, Heckman et al., 2006, Heckman and Kautz, 2012, Cunha et al., 2010).

Although numerous studies have examined the inverse association between personal socioeconomic status (e.g., education, employment status, and income) and self-esteem, it is unclear whether self-esteem varies according to broader economic conditions.  Our work builds on a growing body of economic research that links leaving school in an economic downturn with a range of negative occupational (Oyer 2006, 2008; Genda et al. 2010; Kahn 2010; Oreopoulos et al. 2012), marital (Hershbein 2012; Maclean et al. 2013), and health-related (Maclean 2013) outcomes.  To the extent that self-esteem is associated with labor market success, stabile marriages, and good health, exposure to adverse economic conditions during critical periods of status attainment may effectively undermine self-esteem. 

Drawing on data from the National Longitudinal Survey of Youth 1979 Cohort, we model responses to the Rosenberg Self-esteem Scale (Rosenberg 1965) at various points across the adult life course as a function of the state unemployment rate at school-leaving.  Toward this end, we exploit variation generated by volatility in the United States economy between 1976 and 1987 to identify self-esteem effects.  We address the potential endogeneity of time and location of school-leaving with instrumental variables based on birth year, state of residence at age 14, and early life educational expectations (Oyer 2006; Kondo 2007; Kahn 2010; Oreopoulos et al. 2012; Maclean 2013). 

Our results suggest that economic conditions experienced at school-leaving strongly influence self-esteem but effects do not emerge until middle adulthood.  Respondents between the ages of 41 and 49 who left school in an economic downturn report lower levels of self-esteem than their counterparts who left school under stronger economic conditions.  This pattern of results is consistent with the hypothesis that the collateral consequences of leaving school in an economic downturn (e.g., depressed wages, failures in intimate relationships)  may accumulate over early adulthood, only to surface in middle adulthood when personal social and economic status tend to peak during the conventional life course.  We also observe that the effects of leaving school in an economic downturn are especially strong for men, non-Hispanic whites, and those with high skill levels.  Because these groups are advantaged relative to women, race/ethnic minorities, and lower skilled individuals, they are likely to experience the largest career penalties for leaving school in an economic downturn.  Our findings thus contribute to the broader economic literature on the life course consequences of leaving school in an economic downturn.