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The Wage Scar from Youth Unemployment

Author

Listed:
  • Paul Gregg
  • Emma Tominey

Abstract

In this paper we utilise the National Child Development Survey to analyse the impact of unemployment during youth upon the wage of individuals up to twenty years later. We find a large and significant wage penalty, even after controlling for educational achievement, region of residence and a wealth of family and individual specific characteristics. We employ an instrumental variables technique to ensure that our results are not driven unobserved individual heterogeneity. Our estimates are robust to the test, indicating that the relationship estimated between youth unemployment and the wage in later life is a causal relationship. Our results suggest a scar from early unemployment in the magnitude of 12% to 15% at age 42. However, this penalty is lower, at 8% to 10%, if individuals avoid repeat incidence of unemployment.

Suggested Citation

  • Paul Gregg & Emma Tominey, 2004. "The Wage Scar from Youth Unemployment," The Centre for Market and Public Organisation 04/097, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:04/097
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp97.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. State of economy for less-educated young people compounds growing Opportunity Gap
      by socialcapital in Social Capital Blog on 2013-05-06 19:55:44
    2. An ageing workforce
      by chris dillow in Stumbling and Mumbling on 2010-02-17 17:52:52
    3. Recession & work ethics
      by chris dillow in Stumbling and Mumbling on 2013-06-18 18:27:00

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    More about this item

    Keywords

    youth unemployment; scarring; cost of job loss;
    All these keywords.

    JEL classification:

    • 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

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