Unemployment and Subsequent Earnings: Estimating Scarring Among British Men 1984–94

Abstract

This paper estimates the impact of unemployment on earnings following re-employment for a large and representative sample of British men, 1984±94. Unemployment incidence is found to have only a temporary effect, an average earnings setback of 10% on initial re-engagement largely eroding over two years. The effect of unemployment duration, by contrast, is permanent, a one-year spell adding a further penalty of 10 percentage points. These wage penalties are least for young men and the low paid ± those most at risk of unemployment ± and greatest for prime age and highly paid men.

Unemployment and the timing of parenthood

“…For men, unemployment could also be a crucial factor for timing of parenthood. The economic consequences of unemployment are obvious: loss of current income, potential loss in future wages (Arulampalam 2001), and risk of subsequent unemployment spells (Arulampalam 2002;Arulampalam et al 2001;Gregory and Jukes 2001). Also widely documented in the literature is the fact that unemployment has an immense deteriorating impact on men"s physical and psychological well-being (see for example Clark 2003;Clark et al 2001;Clark and Oswald 1994;Frey and Stutzer 2002;McKee-Ryan et al 2005;Murphy and Athanasau 1999;Nordenmark 1999, Nordenmark andStrandh, 1999;Whelan et al 1998).…”

Does temporary interruption in postsecondary education induce a wage penalty? Evidence from Canada

“…We compute this variable by generating the average curricular number of years for the highest degree attained by 2005 21 . Table 1 reports descriptive statistics of our dependent and explanatory variables.…”

“…20 Potential experience is usually measured as: age -years of schooling -5. 21 We set years of schooling to 14 years for those with a trade/vocational diploma or college/CEGEP certificate, 15 years for university diploma or certificate below bachelor's level, 17 years for a bachelor's degree, 18 years for a university diploma or certificate above bachelor's level but below master's level, 19 years for a master's degree, and 22 years for respondents with an earned doctorate. However, some suggested that education levels should replace schooling years in the wage equation.…”

Do young people not in education, employment or training experience long-term occupational scarring? A longitudinal analysis over 20 years of follow-up

“…Furthermore, scarring of the wage level was not found to occur for workers who experience a break in employment whilst young, but had an increasing effect for those who experienced unemployment during what would otherwise be prime years of employment. Gregory and Jukes (2001) found a spell of unemployment to reduce wages by 10% with this penalty diminishing over time, but that a long spell of unemployment had a lasting outcome that increased for those of prime age and with higher pay.…”

“…There is a large literature examining scarring (e.g. Arulampalam, Gregg, & Gregory, 2001;Gregory & Jukes, 2001;Knabe & RÄTzel, 2011), much of it concerned with the effect of a period of unemployment on subsequent wage level or employment (Nilsen & Reiso, 2011), there has been little engagement, within this literature, with the concept of NEET per se. Knabe and RÄTzel (2011) examine the psychology of scarring and show a negative psychological scar related to past unemployment that manifests itself in a fear of future unemployment.…”