Unemployment Scarring in the Great Recession

• In Event: 362 - Regular Session. Labor Market 2

Abstract

As the current economic recession dramatically raised the levels of unemployment in a number of European countries, we seek to address the question of how institutional protection for the unemployed has performed in this period of severe economic crisis. Previous research demonstrated that episodes of unemployment have enduring negative effects on worker’ career prospects and that labor market institutions, such as employment protection or unemployment insurance, play an important role mitigating those effects (e.g. Gangl, 2006). Earlier research also demonstrated that aggregate labor market conditions affect unemployment scarring, yet it has not been examined whether or not the effectiveness of labor market policies in protecting workers’ reemployment and earnings capacity also is, as might be expected, deteriorating in a period of severe economic crisis. We examine these questions using harmonized work history data for 28 countries for the years 2004 to 2012 (from the European Union Statistics on Income and Living Conditions (EU-SILC), German Socioeconomic Panel (GSOEP), the British Household Panel Study (BHPS), the Understanding Societies Survey (UKLS), and the Survey of Income and Program Participation (SIPP). We use multilevel modelling to estimate the effect of the recession on workers’ reemployment and post-unemployment earnings, and to assess how this effect varies across countries.

Authors

• Pilar Gonalons-Pons, Goethe University Frankfurt am Main

• Markus Gangl, Goethe University Frankfurt am Main