# **1. Introduction**

Youth around the world face a range of challenges during their first forays into the labor market. Necessarily, they must find their initial employment utilizing nascent job search skills and with the disadvantage of having little prior paid work experience. They may also be involved in jobs to which they are poorly suited early in their careers as they sample different jobs before settling on career paths that they prefer. Voluntary job changes for youth are often associated with growth in wages (Keith and McWilliams, 1995; Abbott and Beach, 1994). Some, however, may get stuck in unfavorable employment rather than using early jobs as stepping stones to better work. Even worse, some young people, particularly in developing countries, may endure long periods without formal employment, either earning a limited income in the informal sector, searching for work, or as discouraged job seekers.

More generally, the possibility of youth making mistakes because they lack experience in many areas of life has been emphasized by the 2007 World Development Report that called for more policies that provide youth with “second chance” opportunities. They may suffer over the long term from unfavorable early experiences in the labor market and may need assistance to “move up” in the labor market. However, there is much to the process of career development that has not been investigated empirically, making evidence based policy formulation difficult. Open questions include: How do different types of labor market experiences impact on the future labor market outcomes of youth, particularly wages? Are some youth in a “poor jobs trap”, where lack of human capital leads them to poor initial work experiences that prevent or retard further human capital development and in doing so limit career progress? Such questions are particularly challenging to research in developing countries where high quality labor force panel data are still scarce.

Also, in countries like Indonesia, the challenges of labor market transitions are complicated by the different types of work that youth may engage in‐ some of it unpaid or paid below the wage rates of the formal sector, while some youth are in petty self‐employment. In Indonesia, a range of interesting issues pertaining to youth in the labor market have recently been identified such as higher unemployment rates for youth with higher education than for youth that dropped out before finishing high school (Cerdan‐Infantes et al., 2010). While youth without higher education may have lower unemployment rates, this is likely to be because they cannot afford to be unemployed, and so more readily accept less desirable work than the higher educated. However, the long term impacts of working in different types of work, particularly self‐employment versus employment in the private and public sectors, remains under‐researched. This paper begins to fill that gap.

There is a growing body of research that investigates the long run career impacts of periods of unemployment and periods of employment in different types of jobs. It has long been established that in some countries, current unemployment of an individual may increase their chance of being unemployed in the future (Arulampalam, Gregg & Gregory, 2001). More recently, the literature has expanded to investigate scarring effects from self‐ 2