Help Not Wanted: The Dismal Science of Youth Unemployment’s Scarring Effect - iBusiness

IB > Vol.10 No.2, June 2018

Help Not Wanted: The Dismal Science of Youth Unemployment’s Scarring Effect ()

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DOI: 10.4236/ib.2018.102004 1,169 Downloads 3,664 Views Citations

Author(s)

Jordan Glatt¹, Phanindra V. Wunnava^2,3*

Affiliation(s)

¹Deloitte Consulting, Washington DC, USA.
²Department of Economics, Middlebury College, Middlebury, USA.
³IZA (Institute of Labor Economics), Bonn, Germany.

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 [22]. This study not only demonstrates that the scarring effect is real but also allows for policy recommendations to be obtained from this analysis.

KEYWORDS

Scarring, Youth Unemployment, Unemployment Spells, Job Displacement, Earnings, Re-Entry, Great Recession

Share and Cite:

Glatt, J. and Wunnava, P. (2018) Help Not Wanted: The Dismal Science of Youth Unemployment’s Scarring Effect. iBusiness, 10, 51-84. doi: 10.4236/ib.2018.102004.

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