Comparing long-term scarring effects of unemployment across countries: the impact of graduating during an economic downturn

Abstract

This chapter investigates the extent to which graduating in a bad economy scars careers of youth cohorts in terms of increased future unemployment and overrepresentation in fixed-term and involuntary part-time work. We explore these dynamics of scarring from a cross-country comparative perspective, focusing on the UK, Germany, Switzerland, Spain and Finland. These countries make up for interesting cases as they differ remarkably on institutional and economic dimensions. For instance, such dimensions include the vocational orientation of their education systems, the strictness of employment protection legislation, the active labour market policies to support job-search success of jobless young people and the general level of youth unemployment. We expect these dimensions to relate to cross-nationally distinct patterns in scarring effects. The focus of the empirical analysis is on the impact of youth unemployment at the time of graduation on the further career of upper-secondary school-leaver cohorts in the first 12 years since graduation. Overall, we find that bad luck in timing of labour market entry can scar future careers, even over the long run. There are reasons to see an economic downturn at labour market entry as an important risk factor for the future integration of youth cohorts across very different institutional contexts. However, the emerging pattern of scarring effects is complex and due to the small numbers of countries it is not possible to disentangle the role of different institutional factors. It would be desirable to extend the comparative approach suggested here to a larger number of countries and a longer observation span.