‘Scarred’ young entrepreneurs. Exploring young adults’ transition from former unemployment to self-employment

Abstract

ABSTRACTThe recent increase in youth unemployment has major implications for the current and future development of European labour markets. Previous studies reveal the long lasting ‘scarring effects’ of early unemployment experience on later career prospects, including a higher probability of future unemployment or social exclusion. Self-employment is often advocated as a potential remedy for unemployment in general and youth unemployment in particular. In this study, we investigate the individual-level factors that lead young people with the ‘scar’ of previous unemployment to engage in self-employment. Based on a recent survey among young adults in eleven European countries, we show that previous unemployment has a significant moderating effect on other individual-level characteristics usually associated with a higher likelihood of being self-employed. While the overall propensity of self-employment is not affected by unemployment experience, the reasons for becoming one’s own boss differ considerably between those young adults who have and those who have not experienced unemployment in the past.