Schmelzer, Hlaimi 1 Unemployment and its scarring effect on post- unemployment career in UK Paul Schmelzer, Boubaker Hlaimi QMSS Conference, Prague, Check Republic

Schmelzer, Hlaimi Outline 1.Introduction 2.Theoretical Background 3.Main Hypotheses 4.Data, Variables, Methods 5.Main Results 6.Summary

Schmelzer, Hlaimi Introduction – Research Question Analytical Focus: Has unemployment a scarring effect on the re-enter status and the growth for different educational groups in UK Specific questions:  Re-entering the labor market after unemployment do employment career take a different future profile compared to those who have not been unemployed?  Does prolonged unemployment duration has a scarring effect on re- enter opportunities and subsequent growth of unemployment career?

Theoretical Background Many studies strongly suggest a scarring effect of unemployment (for UK Arulampalam 2001, Gregory an Jukes 2001, Gregg 2001) There have been a shift towards unemployment benefits and positive effects on duration of unemployment (for USA and Germany: Gangl 2004, for Canada Belzil: 2001) unemployment benefits => longer job search => better match However they do not differentiate between educational groups Many studies compare only pre- and post-unemployment wages and have not control group (lacking unemployment spells) Researchers mainly focus on income for gains/losses and not on status Schmelzer, Hlaimi

Main Hypotheses Human capital theory: unemployment devaluates firm-specific skills and thus has a scarring effect on post-unemployment career But we analyze early careers with 1. few employment experience and 2. high rate of mismatches (unstandardized educational system)  unemployment can be used to find a better match position However, we believe that impact of unemployment is different for different educational groups Schmelzer, Hlaimi

Main Hypotheses (Re-entry into the labor market) High productivity workers (tertiary education) might use unemployment phase to find a better match Higher educated do not take the first available job they get  They have got higher previous income  Return wages are higher (employment insurance)  Partner usually also have high wages supporting them by the work search There is no competition for tertiary education by other educational groups  Higher educated have got an option to decide for an adequate job  They are pulled into the labor market  They perform better re-entering labor market than lower qualified  They do not loose in status by re-entering labor market compared to the end of the last job  Prolonged searching phase might even improve the re-entry status and growth Schmelzer, Hlaimi

Main Hypotheses (Re-entry into the labor market) Low productivity workers (primary education) are in competition with more qualified workers Lower educated are forced to take the first available job  Low previous income  Return wages are low (employment insurance)  Low or no support by partners  Sanctions by job agencies when not taking an offer => They are pushed into the labor market => They perform worse re-entering the labor market than higher educated => They loose in status compared to the end of the last job => Prolonged unemployment phase does not improve re-entry status and growth (no offers before) Schmelzer, Hlaimi

Schmelzer, Hlaimi Data British Household Panel Survey (BHPS) from 1980 to 2003 (including retrospective data from 1980 to 1990), Northern Ireland and the North and West Highlands are excluded Sample definition:  Persons who left the educational system between 1980 and 2004, excluding persons older than 30  Gaps of less than 8 months between two educational episodes are closed  Starting sample: 2900 young men and women

Schmelzer, Hlaimi Variables Educational cohorts  , , , , Gender Type of contract and mismatches  fixed-term vs. permanent contract  full-time, part-time contract, self-employment Educational classification  Modified CASMIN classification: 1. primary without 2. primary with qualification 3. O-Level 4. A-Level 5. lower tertiary 6. higher tertiary Region  Middle, South, North, Scotland Regional unemployment rate Industry  modified Singelmann classification

Schmelzer, Hlaimi Methods Statistical methods:  Linear Mixed-effects models Research window is 10 years when people left their education Unbalanced data with 6.6 measurement points on average Dataset covers on average 7 years Time: starting time “0” Subjects total 2928 Subjects with at least one unemployment spell 909 Dependent variable:  Occupational status measured in ISEI-Score

Schmelzer, Hlaimi Methods (random effect models) Closure of inactivity (unemployment) gaps but using this information for random effects models (gaps are not missings) Modeling two phases: pre-unemployment phase and post- unemployment phase

Schmelzer, Hlaimi Methods

Pre-unemployment intercept Pre-unemployment slope Post-unemployment intercept Post-unemployment slope Inactivity spell (unemployment, full-time education, something else)

Pre-unemployment phase Schmelzer, Hlaimi

Schmelzer, Hlaimi Results: pre- and post-unemployment phase

Schmelzer, Hlaimi

Results: pre- and post-unemployment phase Schmelzer & Skopek

Schmelzer, Hlaimi

Schmelzer & Skopek Pre-unemployment intercept Pre-unemployment slope Post-unemployment intercept Post-unemployment slope Inactivity spell (unemployment, full-time education, something else)

Schmelzer, Hlaimi Wald test statistics

Schmelzer

Schmelzer Hazard rate and survaval probability for leaving first unemployment

Pre-unemployment phase Schmelzer & Skopek

Schmelzer & Skopek

Schmelzer & Skopek

Schmelzer & Skopek

Schmelzer Summary

Thank you for your attention. Schmelzer, Hlaimi