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Help Not Wanted: The Dismal Science of Youth Unemployment's Scarring Effect

Author

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  • Glatt, Jordan
  • Wunnava, Phanindra V.

    (Middlebury College)

Abstract

The scarring effect is defined as an increase in the probability of future unemployment spells and the reduction of subsequent wages as the result of joblessness early in one's working years. Many youths get into a rut at the beginning of their professional careers when they become unemployed, hindering future individual prospects and producing negative consequences for the economy as a whole. Because there is considerable evidence in the United States that early job displacement is followed by a higher risk of subsequent unemployment and lower trajectory for future earnings after re-entry, it is crucial to gain a better understanding of the economic factors that influence the youth unemployment rate in order to reduce the consequences on youths' future outlooks (Arulampalam, Gregg, and Gregory, 2001). This study not only demonstrates that the scarring effect is real but also allows for policy recommendations to be obtained from this analysis.

Suggested Citation

  • Glatt, Jordan & Wunnava, Phanindra V., 2016. "Help Not Wanted: The Dismal Science of Youth Unemployment's Scarring Effect," IZA Discussion Papers 10069, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10069
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    References listed on IDEAS

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    1. J. Michael Orszag & Dennis Snower, 1999. "Youth unemployment and government policy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(2), pages 197-213.
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    4. Gómez-Salvador, Ramón & Leiner-Killinger, Nadine, 2008. "An analysis of youth unemployment in the euro area," Occasional Paper Series 89, European Central Bank.
    5. Bart Cockx & Matteo Picchio, 2013. "Scarring effects of remaining unemployed for long-term unemployed school-leavers," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 176(4), pages 951-980, October.
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    1. Elda Pema & Stephen Mehay & Simona Tick, 2017. "Noncognitive skills and job match: evidence from military applicants," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(5), pages 511-533, September.

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    More about this item

    Keywords

    Great Recession; earnings; job displacement; youth unemployment; unemployment spells; scarring; re-entry;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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