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Scarring effects: A review of Australian and international literature

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  • Jeff Borland

    (University of Melbourne)

Abstract

Scarring occurs when an adverse experience for a worker – associated with macroeconomic conditions - has negative long-term impacts on their labour market outcomes. For example, a worker who is entering the labour market during a macroeconomic downturn may experience a spell of unemployment or have to take a job for which they are over-qualified – and those experiences then affect the worker’s labour market outcomes in future years. Recent studies find that scarring effects are substantial: for example, the main Australian study on scarring finds that graduates entering the labour market at a time when the youth rate of unemployment rate is 5ppts above average lowers annual earnings of graduates by about 8 per cent at the time of entry and by 3.5 per cent after five years. This article reviews Australian and international evidence on scarring; and provides an overview of the main channels through which scarring occurs.

Suggested Citation

  • Jeff Borland, 2020. "Scarring effects: A review of Australian and international literature," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 23(2), pages 173-187.
    • Handle: RePEc:ozl:journl:v:23:y:2020:i:2:p:173-187
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    References listed on IDEAS

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    Cited by:

    1. Lisa Meehan & Gail Pacheco & Thomas Schober, 2023. "Basic Reading and Mathematics Skills and the Labour Market Outcomes of Young People: Evidence from PISA and Linked Administrative Data," The Economic Record, The Economic Society of Australia, vol. 99(327), pages 473-491, December.
    2. Jeff Borland, 2021. "Is it ‘dog days’ for the young in the Australian labour market?," Melbourne Institute Working Paper Series wp2021n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Leonora Risse & Angela Jackson, 2021. "A gender lens on the workforce impacts of the COVID-19 pandemic in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 24(2), pages 111-144.
    4. Leonora Risse, 2023. "The Economic Impacts of the COVID‐19 Pandemic in Australia: A Closer Look at Gender Gaps in Employment, Earnings and Education," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 91-108, March.

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    More about this item

    Keywords

    scarring; unemployment; job quality;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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