Educational attainment, age and the consequences of job loss: empirical evidence from Germany

Education is a crucial determinant of labour market success. We investigate whether education is an appropriate means to cushion the negative consequences of job loss and study the role of age as a second major labour market factor. Using German Socio-Economic Panel (SOEP) data for the years 2000 to 2016, we analyse unemployment durations and unemployment-induced wage penalties for prime-age men. We show that individuals without formal qualifications face a significantly lower probability of finding a new job than workers with some kind of formal qualification, and hence face a higher risk of long-term unemployment. Furthermore, the duration of unemployment prior to finding a new job rises with age. This pattern is particularly pronounced for individuals with upper secondary education or no formal qualifications. Moreover, we find a negative relationship between unemployment and an individual’s subsequent wage. This depressing impact is significant only for unqualified workers and workers with intermediate vocational education. Yet, differences between educational groups are not statistically significant. Across all education groups, unemployment depresses subsequent wages more strongly at a higher age. However, the results suggest that this is due to longer unemployment spells of older workers, not age per se.