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The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment
journal contributionposted on 22.09.2021, 11:04 by Gianni De Fraja, Sara Lemos, James Rockey
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.