Abstract

Labor market research provides paramount evidence for the negative impact of educational dropout on individuals’ careers, confirming human capital and signaling theory predictions (Brekke 2014, Campbell 2015, Johnes/Taylor 1991, Oreopoulos 2007). Though it is well established that educational dropout has negative labor market consequences, research has largely overlooked the structural embeddedness of both dropout decisions and the consequences of these decisions. We know, however, that labor market conditions influence especially young adults’ career decisions and that social origin moderates the consequences of these decisions (Witteveen 2021, Zwysen 2016). This study analyzes the consequences of dropping out from vocational training in Germany by considering the local embeddedness of dropout decisions. We use administrative data from the Federal Employment Agency on a 50% random sample of all apprentices in Germany between 2000 and 2012. In using administrative data, our analyses do not suffer from panel attrition or misreporting, which were typical issues in previous dropout analyses using survey data. Preliminary results show a significantly negative and persistent dropout effect on future income, which increases in size for dropouts in down-turning local labor mar-kets. Five years after their dropout, dropouts earn 13.6% less income than graduates. Good local labor markets conditions seem to offset the negative consequences for dropouts as the income development of dropouts in good local labor markets nearly equals the one of graduates. The study provides novel insights on the interplay between educational dropout and economic conditions thereby advancing sociological knowledge on how structural conditions shape individual-level outcomes.