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The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment

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  • Gianni De Fraja
  • Sara Lemos
  • James Rockey

Abstract

This paper uses UK administrative data to study the long‐term effects of unemployment on earnings. It is the first paper to pinpoint accurately the relative importance of the timing of employment shocks within workers’ lives. We find a strong effect of events in the first few years after entry into the labour market: each month of unemployment between ages 18 and 20 causes a permanent income loss of 1.2% per year. This scar effect of youth unemployment is lower when it happens when the worker's age is between 21 and 23, and it disappears altogether in the next three‐year age period. The scar effect is most severe for individuals at the lower end of the ability distribution.

Suggested Citation

  • Gianni De Fraja & Sara Lemos & James Rockey, 2021. "The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment," Economica, London School of Economics and Political Science, vol. 88(352), pages 896-941, October.
    • Handle: RePEc:bla:econom:v:88:y:2021:i:352:p:896-941
    DOI: 10.1111/ecca.12384
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    3. Cotofan, Maria & Matakos, Konstantinos, 2023. "Adapting or compounding? The effects of recurring labour shocks on stated and revealed preferences for redistribution," LSE Research Online Documents on Economics 121297, London School of Economics and Political Science, LSE Library.
    4. Dennis Tamesberger & Johann Bacher, 2020. "COVID-19 Crisis: How to Avoid a ‘Lost Generation’," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(4), pages 232-238, July.
    5. Steve Bradley & Giuseppe Migali & Maria Navarro Paniagua, 2019. "Spatial variations and clustering in the rates of youth unemployment and NEET," Working Papers 262342718, Lancaster University Management School, Economics Department.
    6. José Ignacio García-Pérez & Antonio Villar, 2020. "NON-WORKING WORKERS. The unequal impact of Covid-19 on the Spanish labour market," Studies on the Spanish Economy eee2020-43, FEDEA.
    7. Bernhard Hammer & Sonja Spitzer & Alexia Prskawetz, 2022. "Age-Specific Income Trends in Europe: The Role of Employment, Wages, and Social Transfers," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(2), pages 525-547, July.
    8. Gregory Corcos & Silviano Esteve-Pérez & Salvador Gil-Pareja & Yuanzhe Tang, "undated". "Firm-level export and import survival over the business cycle," Working Papers 2022-22, Center for Research in Economics and Statistics.

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    More about this item

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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