‘Scarred’ young entrepreneurs. Exploring young adults’ transition from former unemployment to self-employment

The recent increase in youth unemployment has major implications for the current and future development of European labour markets. Previous studies reveal the long lasting ‘scarring effects’ of early unemployment experience on later career prospects, including a higher probability of future unemployment or social exclusion. Self-employment is often advocated as a potential remedy for unemployment in general and youth unemployment in particular. In this study, we investigate the individual-level factors that lead young people with the ‘scar’ of previous unemployment to engage in self-employment. Based on a recent survey among young adults in eleven European countries, we show that previous unemployment has a significant moderating effect on other individual-level characteristics usually associated with a higher likelihood of being self-employed. While the overall propensity of self-employment is not affected by unemployment experience, the reasons for becoming one’s own boss differ considerably between those young adults who have and those who have not experienced unemployment in the past.     

Employment and labour productivity in high unemployment countries

Contemporary development strategies emphasize labour productivity growth because it has historically underpinned rising living standards. Today, however, poverty reduction and inclusive development in those developing countries with high unemployment require increasing the employment rate even if this means lower average labour productivity. We critique the International Labour Organization (ILO) for its overly universalizing advocacy of high‐productivity growth strategies and for failing to confront the trade‐off between more and better‐quality jobs. This is particularly problematic in high unemployment contexts in Southern Africa, where labour productivity growth between 2000 and 2013 came at the cost of a falling employment rate.     

Does unemployment lead to isolation? The consequences of unemployment for social networks

Popular accounts in both social science and society claim that unemployment goes together with social withdrawal. However, empirical support for this conclusion is largely derived from cross-sectional studies or indirect measurements of social contacts. In this study, we argue that consequences of unemployment for personal networks differ across social groups and by length of unemployment. Using longitudinal data from the Swiss Household Panel (1999–2010), we focus on three frequently employed social network statistics: network size, contact frequency, and perceived support by friends, family, neighbors, and acquaintances. We estimate how short (<1 year) and long term (>1 year) unemployment relates to these network characteristics for men and women, people below and above 50 years of age, and lower and higher educated individuals. Our results provide a more-nuanced perspective on the commonly assumed social withdrawal following unemployment.     

The effect of labour market polarization on university students’ job market‐related outcomes in the Republic of Korea: Implications for youth unemployment

This article aims to assess the effect of the labour market environment on university students’ labour market‐related behaviour in the Republic of Korea. Using data from the country's Graduates Occupational Mobility Survey for 2005–13, the author estimates the effect of macroeconomic variables on university students’ job market‐related outcomes. Results indicate that labour market polarization, as measured by the labour market polarization index developed by Chung and Jung (2016), has a significant effect on both the nominal and masked (through extension of university enrolment and university transfers) unemployment of university students. These findings imply that the labour market structure is a key element in understanding youth unemployment.     

Measuring labour absorption problems in developing countries: Limitations of the concept of unemployment

The “standard” unemployment rate is often criticized for omitting large numbers of people who are classified as employed or as not economically inactive, when in fact their situation amounts to unemployment. The author discusses the limitations of this standard definition for developing countries. After reviewing the methodological and statistical problems posed by the standard rate, he looks at the reality behind the words in contexts where the labour market is highly segmented. He shows that the standard unemployment rate underestimates excess labour supply and is a poor indicator of the Decent Work deficit, and considers its limitations in guiding economic policy.     

Doubly disadvantaged: Unemployment,young age,and electoral participation in the United Kingdom

Previous studies examine how unemployment affects socio-political behaviour, but this literature has scarcely focused on the role of the life-course. Integrating the frameworks of unemployment scarring and political socialisation, we posit that unemployment experiences, or scars, undermine electoral participation, and that this is exacerbated at younger ages. We test these hypotheses relying on the British Household Panel Survey and Understanding Society datasets (1991–2020), employing panel data analysis approaches as Propensity Score Matching, Individual Fixed Effects, and Individual Fixed Effects with Individual Slopes. Results suggest that unemployment experiences depress electoral participation in the UK, with effect sizes around −5% of a Standard Deviation in turnout. However, this effect varies powerfully by age: the impact of unemployment on electoral participation is stronger at younger ages (−21% SD at age 20), and weaker to not significant after age 35. This is robust across the three main approaches and several robustness checks. Further analyses show that the first unemployment spell matters the most for electoral participation, and that for individuals under 35, there is a scar effect lasting up to 5 years after the first unemployment spell. The life-course emerges as central to better understand the relationship between labour market hardships and socio-political behaviour.     

Does deregulation decrease unemployment? An empirical analysis of the Spanish labour market

Spain underwent two major labour reforms in 2010 and 2012 under the assumption that deregulating the labour market and decentralizing collective bargaining would automatically reduce unemployment (deregulation hypothesis). This article highlights the impact of demand and the sectoral structure of the economy to explain the behaviour of this variable (structural hypothesis). Analysing subnational panel data, the authors assess the capacity of these two hypotheses to explain unemployment trends. Their results cast doubt on the deregulation hypothesis and indicate the importance of cyclical and structural factors.     

Measuring the effect of matching problems on unemployment

This article shows how matching problems reduce employment figures – and hence also raise those for unemployment – by creating a gap between labour demand and employment. It also shows how this gap can be measured by unfilled jobs (unmet demand) as distinct from job vacancies (recruitment processes) and reports results from the Swedish vacancy survey which measures both. In fact, while a shift of the matching function indicating longer recruitment times suggests increasing matching problems, this can only be verified by measuring unfilled jobs, which also quantifies the effect on unemployment.     

The effect of education on unemployment duration

Exploiting the variation in education induced by a reform that compelled individuals to obtain additional schooling in Turkey, and using administrative unemployment insurance (UI) records, we show that high-educated unemployed workers, compared to their low-educated counterparts, use unemployment benefits longer, and they are less likely to find employment before their benefit periods expire. This suggests education increases one's selectiveness over jobs. We also show benefit generosity impacts the high- versus low-educated differentially. Extended benefits increase low-educated workers' probability of finding employment more than the high-educated. Our findings highlight the importance of considering worker attributes when designing the UI system.     

Can welfare and labour market regimes explain cross‐country differences in the unemployment of young people?

No single institution can reduce (long‐term) youth unemployment. Welfare and labour market institutions function as “bundles”, through multiple inter‐institutional synergies. Based on a focused literature review for theory and on cluster analysis for empirics, the author identifies five such regimes across the EU‐27 and estimates their effects on the youth unemployment ratio and on long‐term youth unemployment. The most helpful institutional arrangement for young people in the labour market would be a combination of strong dual apprenticeship embedded in a corporatist labour market regime with high levels of social security, active labour market policy, and spending on education and childcare.     

Family challenges created by unemployment

The detrimental effects of job loss and unemployment are not limited to the unemployed worker but ripple out to affect those closest to him or her. These ripple effects most notably impact the unemployed worker’s family, including a spouse or partner and/or children. Previous research related to the impacts on marital or partner relationships and families and the particular effects of unemployment on children is explored. Financial or economic stressors and strain brought about by job loss; the effects of stress and reduced mental health among unemployed workers and their spouses; and protective resources for coping with job loss are also discussed. The impact on children, in particular their mental health, development, and educational/human capital attainment are outlined. Implications for future interventions and unemployment policy are highlighted.     

Factory women,redundancy and the search for work: toward a reconceptualisation of employment and unemployment

A number of social scientists (see for example, Allen et al., 1986; Brown, 1984; Purcell, 1985; Purcell et al., 1986; Roberts et al., 1985) have drawn attention to the way in which patterns of working have changed radically in recent years suggesting that we need to rethink and reconceptualise with regard to work, employment and unemployment. This paper examines these issues in Sweden where recession in the early eighties and economic restructuring, similar to the experience in other Western countries, have affected individuals’relation to the labour market. It is our view that the effects of these developments (have) affect(ed) women and immigrants differently. It is furthermore our contention that welfare state policies related to the functioning of the labour market (inadvertently) play a role in the maintenance of inequality.     

Coping with the unemployment crisis in Europe

Since the 1970s, Europe has been plagued by a chronic unemployment crisis, which has escalated with the current Great Recession. The author discusses a number of relevant elements in this regard, including the extent to which social dialogue and social pacts have been successful in reforming labour markets and pension systems, the effect of active labour market policies and the characteristics of “resilient” economies. She concludes with the need to rethink social dialogue, social safety nets, the granting of loans – especially to SMEs – and the coordination of macroeconomic policies to increase labour demand.     

How do labour laws affect unemployment and the labour share of national income? The experience of six OECD countries, 1970–2010

Using longitudinal data on labour law in France, Germany, Japan, Sweden, the United Kingdom and the United States over the period 1970–2010, the authors estimate the impact of labour regulation on unemployment and the labour share of national income. Their dynamic panel data analysis distinguishes between the short‐run and long‐run effects of regulatory change. They find that worker‐protective labour laws in general have no consistent relationship to unemployment but are positively correlated with labour's share of national income. Laws specifically relating to working time and employee representation are found to have beneficial effects on both efficiency and distribution thus proxied.     

Parental unemployment and children's educational attainment: How big is the role of aspirations?

Children exposed to parental unemployment have been found to lag behind in school, but research has struggled to pin down the underlying explanation. One hypothesis is that parental unemployment may dampen children's aspirations to do well and go far in school. Yet, few studies on parental unemployment have relied on actual measures of children's aspirations or devised a formal analysis of this mechanism. Using the UK Household Longitudinal Study (Waves 1–12, N = 1067), I investigate the role of educational aspirations in children's General Certificate of Secondary Education (GCSE) attainment. I compare adolescents exposed to parental unemployment before or only after the typical age at which GCSE exams are taken. In adjusted models, children exposed to parental unemployment before their GCSEs are around 6 percentage points less likely to attain any GCSE qualification by age 17. On average, children have high educational aspirations, although intentions to enrol in college or university are relatively lower among children exposed to an early spell of parental unemployment. Nevertheless, a hypothetical intervention setting these aspirations to the same level for all children only accounts for a modest portion of the educational penalty tied to an early spell of parental unemployment. Several sensitivity and robustness tests support this conclusion. This note seeks to stimulate more research on the mechanisms underpinning the intergenerational effects of unemployment. Findings cast doubts on the idea that children's aspirations, the target of broader policy discourse and interventions, are a crucial part of the equation.     

The measurement of unemployment using completed durations: evidence on the gender gap in unemployment in France

This paper examines how unemployment can be measured in a normative fashion - taking into account the mean and inequality of spell lengths - and how the extent of unemployment can be estimated from cross section data of the type found in labour force surveys. The issue is not straightforward since in these surveys completed durations of unemployed individuals are not observed yet they constitute the basis for calculating the kind of index that has been proposed to measure the extent of unemployment in a way that goes beyond the unemployment rate. The index proposed by Shorrocks has robust normative foundations and has an equivalent representation in terms of average complete duration and the density of completed durations. Building upon earlier work applied in the United States for estimating the average completed duration, we present a method that enables the index to be calculated based on an estimate of the density of completed durations. The approach is illustrated in the context of comparing male-female unemployment differences in France, where historically female unemployment has been higher than that of males.     

Unemployment duration and the measurement of unemployment

We propose a framework in which the welfare bases of various unemployment measures available in the literature can be analyzed and a decomposition of these measures can be made into aggregate unemployment and the concentration of its distribution. A set of axioms for an unemployment measure is then introduced, which relate to the sensitivity of an unemployment measure to the inequality in the distribution of the unemployment. An unemployment measure is derived on the basis of these axioms that captures the distributional considerations in the measurement of unemployment.      

Does output predict unemployment? A look at Okun's law in Greece

Using a dynamic specification of Okun's law, the authors examine the relationship between unemployment and output in Greece over the period 2000–12. While Granger causality tests indicate that real output is important to understanding future movements in unemployment, Okun's ratio is found to be 3:1, implying that a 1 per cent increase in unemployment was associated with a 3 per cent decrease in real output during the 13‐year period under study. Also, asymmetric analysis shows that the response of unemployment to real output is stronger during contractions of real economic activity than in expansionary periods.     

Poverty and the business cycle: A regional panel data analysis for Spain using alternative measures of unemployment

Conventional wisdom predicts that changes in the aggregate unemployment rate may significantly affect a country’s income distribution and, consequently, have a relevant impact on the evolution of its poverty rate. However, the relationship between labour macroeconomic indicators and poverty seems to have become weaker recently. Using panel data on unemployment and poverty for Spanish regions, we estimate a system GMM model to model this relationship using alternative measures of the unemployment rate. We also test the hypothesis of asymmetric effects of the business cycle on the share of poor individuals in the population. Our results show that unemployment has a positive impact on severe poverty, while inflation has a negative effect. We also highlight the extent to which results differ when alternative intra-household unemployment distribution-sensitive measures are considered. Regarding the existence of asymmetric business cycle effects on severe poverty, our results show that despite the fact that the Great Recession has had a strong and positive effect on severe poverty, the effects of expansions and recessions on poverty are not significantly different.     

The psychological impact of unemployment and joblessness

Economists have identified two principal adverse effects of unemployment. One is the output foregone that could have been produced if unemployed workers had been productively employed. The second is the psychological damage suffered by unemployed workers and their families. Psychologists have offered theories to explain how experiences such as Joblessness may lead to a deterioration in mental health. They also have designed and validated survey instruments capable of measuring various aspects of emotional health. Unfortunately, their efforts to document the psychological impact of unemployment have been plagued by data limitations, while economists largely have ignored this task. The purpose of this study is three-fold. First, we discuss why unemployment and Joblessness are likely to influence an individual's perception of personal efficacy, locus of control, and hence psychological well-being. Second, we discuss and critique existing efforts to examine the relationship between labor force experiences and locus of control. Third, we investigate the relationship between Joblessness and its component parts—unemployment and dropping out of the labor force—on personal locus of control, using observations from the NLSY and an alternative methodological framework. The NLSY is a longitudinal data set that contains detailed information on the personal characteristics of individuals in the sample, their labor force experiences and a specific personal locus of control. In discussing the results we also attempt to shed some new light on the debate between Clark and Summers (1979) and Flinn and Heckman (1982, 1983) over the question of whether being out of the labor force and being unemployed should be thought of as distinct states. We add further insight into this issue by examining whether there are psychological differences, as measured by locus of control, between otherwise comparable members of these two groups. Finally, we reconsider the Ellwood and Ruhm exchange over whether joblessness and unemployment lead to “psychological” scarring. We find that labor force experiences fail to influence personal locus of control for male youths. There is evidence, however, that perception of personal efficacy is altered by joblessness among young women. As the duration of a current unemployment spell lengthens, the likelihood of holding beliefs of personal efficacy decline for young women. There is also some evidence of scarring among women. For females who in the past have spent time both unemployed and out of the labor force, the greater the duration of their joblessness the more likely is a reduction in feelings of personal efficacy and more aggravated one's self-perception of helplessness. We also offer psychological evidence on the relative emotional well-being of the unemployed and labor force drop outs that largely supports the position of Clark and Summers that these conditions are largely indistinguishable.