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The Wage Scar from Youth Unemployment

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  • 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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Bibliographic 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;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. An ageing workforce
    by chris dillow in Stumbling and Mumbling on 2010-02-17 11:52:52
  2. The horrid state of economy for low-educated young people
    by socialcapital in Social Capital Blog on 2013-05-06 14:55:44
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Cited by:
  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 Programme).
  2. Gail Pacheco, 2012. "The cost of poor transitions for youth," Working Papers 2012-09, Auckland University of Technology, Department of Economics.
  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.
  4. Amynah Vanessa Gangji & Robert Plasman, 2007. "The Matthew effect of unemployment: how does it affect wages in Belgium," DULBEA Working Papers 07-19.RS, ULB -- Universite Libre de Bruxelles.
  5. Niall O’Higgins, 2004. "Recent Trends in Youth Labour Markets and Youth Employment Policy in Europe and Central Asia," CELPE Discussion Papers 85, CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy.
  6. Gregg, Paul & Tominey, Emma, 2005. "The wage scar from male youth unemployment," Labour Economics, Elsevier, vol. 12(4), pages 487-509, August.

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