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

• Published date: 01 March 2020
• Date: 01 March 2020
• DOI: http://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