Wage Scarring - The problem of a bad start

Abstract

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. As part of a European 7 th Framework funded project called "WorkAble", the Employment Research Institute was commissioned to undertake research using the British Household Panel (BHPS) survey to assess the empirical evidence for wage scarring. We followed a cohort of young adults aged between 18 and 24 in 1998 over a ten year period to 2008 when they were aged 28 to 34 years (Waves H to R of the BHPS). Of those aged 18 to 24, after excluding those still in full time education, we defined two groups, one representing those who were out of work for at least one month on 1998 and those who were not unemployed in 1998. Plotting the mean and 95% confidence interval logarithm of the current monthly shows that initially there is little difference between the mean monthly pays of the two groups but, after four years, the effect of being "scarred" might begin to show.