The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment

De Fraja, Gianni; Lemos, Sara; Rockey, James

Abstract

This paper uses UK administrative data to study the long-term effects of unemployment on earnings. It is the first paper to pinpoint accurately the relative importance of the timing of employment shocks within workers' lives. We find a strong effect of events in the first few years after entry into the labour market: each month of unemployment between ages 18 and 20 causes a permanent income loss of 1.2% per year. This scar effect of youth unemployment is lower when it happens when the worker's age is between 21 and 23, and it disappears altogether in the next three-year age period. The scar effect is most severe for individuals at the lower end of the ability distribution.

Citation

De Fraja, G., Lemos, S., & Rockey, J. (2021). The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment. Economica, 88(352), 896-941. https://doi.org/10.1111/ecca.12384

• Journal Article Type: Article
• Acceptance Date: May 25, 2021
• Online Publication Date: Aug 4, 2021
• Publication Date: 2021-10
• Deposit Date: May 26, 2021
• Publicly Available Date: Aug 5, 2023
• Journal: Economica
• Print ISSN: 0013-0427
• Electronic ISSN: 1468-0335
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 88
• Issue: 352
• Pages: 896-941
• DOI: https://doi.org/10.1111/ecca.12384
• Keywords: Youth unemployment; Lifetime earnings; Scarring effect
• Public URL: https://nottingham-repository.worktribe.com/output/5573819
• Publisher URL: https://onlinelibrary.wiley.com/doi/10.1111/ecca.12384
• Additional Information: This is the peer reviewed version of the following article: De Fraja, G., Lemos, S. and Rockey, J. (2021), The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment. Economica, 88: 896-941 which has been published in final form at https://doi.org/10.1111/ecca.12384. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.