Social Capital and Its Returns as an Explanation for Early Labor Market Success of Majority and Minority Members in the Netherlands

Abstract

This paper tests whether social capital can explain differences in labor market success between ethnic majority and minority members. To overcome problems of reverse causality—labor market success is not only the result of social capital, but also leads to better networks—the focus is on adolescents who enter the labor market. Data from the ‘Children of Immigrants Longitudinal Survey’ are used (N = 2574) and matched to register data from Statistics Netherlands. Hypotheses are tested with structural equation models and a longitudinal approach. Two different mechanisms are tested: the capital deficit and the return deficit. Ethnic majority and minority members do not differ in social capital, thus refuting the capital deficit hypothesis. However, for majority members, the upper reachability of their social capital negatively affects chances of unemployment and positively affects chances of having a permanent contract. For minority members, no such effects were observed, indicating that the same level of social capital that benefits majorities, does not benefit minorities. More research into the return deficit minority members face is needed.