Does Early Career Unemployment at the Peak of a Recession Leave Economic Scars? Evidence from Estonia

AuthorKadri Täht,Marge Unt
Published date01 March 2020
Date01 March 2020
DOIhttp://doi.org/10.1177/0002716220911890
246 ANNALS, AAPSS, 688, March 2020
DOI: 10.1177/0002716220911890
Does Early
Career
Unemployment
at the Peak of a
Recession
Leave
Economic
Scars?
Evidence from
Estonia
By
MARGE UNT
and
KADRI TÄHT
911890ANN THE ANNALS OF THE AMERICAN ACADEMYEARLY CAREER UNEMPLOYMENT
research-article2020
On average, individuals who have experienced unem-
ployment are disadvantaged in terms of later lifetime
earnings. Those who graduated from school during the
Great Recession are especially prone to have experi-
enced bouts of unemployment, but we know little about
how much they suffer in later career earnings. Estonia
was heavily hit by the economic crisis but recovered
relatively quickly. This study explores poverty and earn-
ings effects for a cohort of recession graduates in
Estonia, finding that early career unemployment is not a
direct trigger for poverty risk and income loss five years
later. The main mechanism for disadvantage among
recession graduates is recurring unemployment, mean-
ing that the scars of initial unemployment are avoided
only if graduates succeed in avoiding unemployment
later. Findings also indicate that during an economic
downturn, employers may not regard unemployment as
a signal of lower productivity or depreciation of skills.
Keywords: financial crises; unemployed youth; wage
penalty; life course
Research has identified early unemployment
experience to be detrimental to youth’s later
careers. Studies from Great Britain, Sweden,
Germany, and the United States have shown that
unemployment experience may result in lower
postunemployment earnings (Arulampalam,
Booth, and Taylor 2000; Gregg and Tominey
2004; Nordström Skans 2004; Schmelzer 2012;
Gangl 2006). During the Great Recession, youth
were more likely to experience unemployment
than older generations, and this raises significant
research questions for that youth cohort: Did the
unemployment experienced during the Great
Marge Unt is a professor of comparative sociology and
the head of the Institute of International Social Studies
at Tallinn University, Estonia. Her research interests
relate to life course research, especially labor market
transitions. She coordinated the Horizon2020 project
Social Exclusion of Youth in Europe (EXCEPT-project.
eu) and is currently coordinating the ESF project
Reducing Gender Wage Gap (REGE).
Correspondence: marge.unt@tlu.ee

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