Help Not Wanted: The Dismal Science of Youth Unemployment's Scarring Effect

Jordan Glatt () and Phanindra Wunnava

No 10069, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The scarring effect is defined as an increase in the probability of future unemployment spells and the reduction of subsequent wages as the result of joblessness early in one's working years. Many youths get into a rut at the beginning of their professional careers when they become unemployed, hindering future individual prospects and producing negative consequences for the economy as a whole. Because there is considerable evidence in the United States that early job displacement is followed by a higher risk of subsequent unemployment and lower trajectory for future earnings after re-entry, it is crucial to gain a better understanding of the economic factors that influence the youth unemployment rate in order to reduce the consequences on youths' future outlooks (Arulampalam, Gregg, and Gregory, 2001). This study not only demonstrates that the scarring effect is real but also allows for policy recommendations to be obtained from this analysis.

Keywords: Great Recession; earnings; job displacement; youth unemployment; unemployment spells; scarring; re-entry (search for similar items in EconPapers)
JEL-codes: I21 J24 J31 J64 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-07
New Economics Papers: this item is included in nep-cse and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: iBusiness, 2018, 10, 51-84

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