Non-Technical Summary:
Policy makers in many OECD countries have used parental joblessness, where children live with parents who are not employed, as a key indicator of severe childhood disadvantage. In Australia, parental joblessness is the single greatest cause of childhood poverty. However, there is a limited amount of research on longer-term outcomes for these children. Parental joblessness may inhibit parents from investing in their children’s development, cause stress within the family, reduce social connections, and model jobless behavior for children, all of which may contribute to worse outcomes in adulthood.
In this paper, we use household panel data from Australia and the U.S. over the period 2001-2015 to measure parental joblessness directly from parents. We then follow children from those households and observe them as they exit education and enter the labor market. We ask the following research questions: (1) does having experienced parental joblessness during childhood increase the time to employment after leaving education? (2) does obtaining a university degree mitigate this relationship? and (3) are there differences in this relationship between Australia and the U.S.? We build on previous parental joblessness research by creating a measure of parental joblessness from contemporaneous reports by parents over many years and by specifically examining the transition from education to the labor market, a key time in the career.
We find that in both Australia and the U.S., having experienced parental joblessness for a greater proportion of childhood and adolescence is associated with slower transitions into employment among young adults on average. This association remains significant after controlling for observable background characteristics such as parental education, family structure, gender, birth year, and state or region of residence. Furthermore, in Australia (but not the U.S.), achieving a university degree reduces the negative effect of parental joblessness. Therefore, parental joblessness is most harmful for Australian children who do not go on to complete university education. In the U.S., however, parental joblessness remains disadvantageous at all levels of education. These differences across context may be due to differences in welfare generosity, education and labor market regulations, or macroeconomic contexts.