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The Wage Scar from Youth Unemployment

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Author Info
Paul Gregg
Emma Tominey ()

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Abstract

In this paper we utilise the National Child Development Survey to analyse the impact of unemployment during youth upon the wage of individuals up to twenty years later. We find a large and significant wage penalty, even after controlling for educational achievement, region of residence and a wealth of family and individual specific characteristics. We employ an instrumental variables technique to ensure that our results are not driven unobserved individual heterogeneity. Our estimates are robust to the test, indicating that the relationship estimated between youth unemployment and the wage in later life is a causal relationship. Our results suggest a scar from early unemployment in the magnitude of 12% to 15% at age 42. However, this penalty is lower, at 8% to 10%, if individuals avoid repeat incidence of unemployment.

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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 04/097.

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Length: 49 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:bri:cmpowp:04/097

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Related research
Keywords: youth unemployment; scarring; cost of job loss;

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. L.Guarcello & M. Manacorda & F. Rosati & J. Fares & S.Lyon & C. Valdivia, 2005. "School-to-Work Transitions in Sub-Saharan Africa: An overview," UCW Working Paper 15, Understanding Children's Work (UCW Project). [Downloadable!]
  2. Amynah Gangji & Robert Plasman, 2007. "The Matthew effect of unemployment: how does it affect wages in Belgium," Working Papers DULBEA 07-19.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
  3. Fares, Jean & Tiongson, Erwin R., 2007. "Youth unemployment, labor market transitions, and scarring : evidence from Bosnia and Herzegovina, 2001-04," Policy Research Working Paper Series 4183, The World Bank. [Downloadable!]
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