Wage Scarring – The problem of a bad start

Abstract

As the economic downturn continues in Europe, unemployment has risen in many countries. Among these, the UK has an unemployment rate which now stands at 8% or 2.56 million people. Of these people the unemployment rate amongst 16 to 24 year olds is particularly high at 20.7% (just over 1 million people); this is especially problematic as research shows that if one gets off to a bad start when moving from school or university into work, future job prospects and general well-being may well be compromised. Researchers such as Bell and Blanchflower (2011), Dieckhoff (2011) and Gregg and Tominey (2005) found that periods of unemployment when young may blight the future of young people in terms of their future labour market outcomes, such as the likelihood of further unemployment, lower pay, lower job quality and reduced wellbeing -- this they termed the "scarring effect".