Wage scarring among unlucky European cohorts

ESRI working papers represent un-refereed work-in-progress by researchers who are solely responsible for the content and any views expressed therein. Any comments on these papers will be welcome and should be sent to the author(s) by email. Papers may be downloaded for personal use only.

June 12, 2020
Attachment Size
Download PDF 2.14 MB

This paper examines how starting one’s career in a weak labour market affects future labour market outcomes using data from 13 European countries. Income losses, so called scarring effects, are found to be solely levied on college graduates. For every percentage point increase in the national unemployment rate at graduation, college graduates incur wage penalties of 2% one year later. These penalties are over 1% for the next eight years but are zero by year ten. During the Great Recession, college graduates in countries who experienced harsh sovereign debt crises were particularly affected. In Portugal, Italy, Ireland, Greece and Spain new graduates with a college education faced wage losses of between 12 and 23% in each of the first ten years of their career.