Unemployment, Inactivity, and Hiring Chances: A Systematic Review and Meta-Analysis

Policymakers' push for higher employment rates requires the activation of long-term unemployed jobseekers and inactive persons. However, stigma related to unemployment or inactivity can hinder their hiring chances when applying for a job. This systematic literature review investigates whether, when, and why periods of not working are penalised in hiring. Our review confirms that employers generally treat the unemployed and inactive less favourably than their employed counterparts. A meta-regression analysis of transnational experimental data points to heterogeneity by the duration of being out of work: short-term unemployment of up to six months positively affects hiring prospects, while the adverse effects of unemployment scarring become noticeable after about twelve months. We highlight evidence for signalling mechanisms underlying this pattern: immediate availability offsets the negative signals in short spells, whereas expectations about reduced productivity primarily drive the negative impact of longer spells. The latter negative signal is more pronounced when unemployment rates are low.