Child Labour's effect on long-run earnings: An analysis of cohorts

Abstract

The effect of child labour on wages in adulthood is conceptually ambiguous. Children who work learn responsibility and work-ethic, increasing adult earnings. However, working children have less time for play and homework, hindering cognitive development, resulting in lower earnings. The limited existing empirical work is similarly confounding. This paper assesses the nexus between child labour and adult earnings using unique data from an Ecuadorian 2015 labour market survey. It applies novel instrumental variable regression techniques that account for earnings, education and child labour being jointly determined. The sample is divided into age cohorts (20s, 30s, 40s and 50+) to ascertain the long-run consequences of child employment at different stages of life. The results suggest that former child (and teenage) workers earn significantly less per hour. The analysis of cohorts reveals that the effect is stronger for older workers. This gives impetus to the hypothesis that child work hinders cognitive development, which becomes more evident when workers reach full maturity. The study concludes with policy recommendations.