Multiple scarring effects of youth unemployment

Transcription

1 Multiple scarring effects of youth unemployment Professor Ronald McQuaid, Stirling Management School, University of Stirling E: Skills Development Forum, Skills Development Scotland Glasgow 12 June 2015

2 Outline Introduction Literature on scarring Causes of scarring Conclusions

3 Unemployment rate (2015) Scotland (16-24 years) unemployment rate = 14.9% (UK = 15.5%) Around 6.0% for those years old Germany (7.2%); the Netherlands (12.5%); France (26.1%)

4 Youth Unemployment rate v unemployment ratio 10 people are unemployed: 90 are working: Unemployment rate = 10/100 = 10% But for young people if say 50 are studying (not looking for work) and 40 working then: Unemployment rate = 10/50 = 20% So changes in % students with jobs or looking for work may affect figures Definition: stics

5 Unemployment ratio Unemployment ratio shows the percentage of the total of each age group who are unemployed (Eurostat) Unemployment (2013) % RATE RATIO UK Germany France We may not be as good as we look!

6 BUT also Scarring effects Periods of unemployment when someone is young may blight their future in terms of their labour market outcomes, such as the likelihood of: further unemployment, lower pay, lower job quality reduced health and wellbeing Also can look at other forms of poor starts

7 And it s expensive! 47% of people on Jobseeker s Allowance are likely to have two or more spells on benefit over the next five years if job sustainability in the UK was improved and the time that repeat unemployment claimants spend on benefit was reduced by 50%, then the Exchequer would save 520 million ( 650 million) a year The UK National Audit Office (2007: 4)

8 Some types of scarring

9 Scarring effects on pay Periods of unemployment when young have a significant effect on future pay and income especially for the low skilled the length of unemployment and gender (worse for men) were associated with scarring manifested as reduced wages potential in Australia however, also found that while unemployment has a wage scar effect, and the first spell is the most damaging, duration is not important and redundancy is less scarring than other types

10 Logarithm of pay and unemployment when young (LFS)

11 Scarring effects on pay & occupation Unemployment when young might also result in lower future occupational status and downward job mobility resulting in having lower quality jobs Gender: for men, early employment instability linked to lower career satisfaction as well as lower occupational status

12 Scarring effects on unemployment Prior employment status was the most powerful effect on current employment status: so those who were previously unemployed were more likely to be currently unemployed than other groups The length that someone is unemployed. People who had been unemployed for a longer term were less likely to return to employment than those who recently were in work Particularly pronounced for those with limited work experience to begin with, such as young workers, with a small minority becoming persistently unemployed

13 .unemployment Both genders were affected by scarring in terms of future unemployment, although the duration was greater for men however, using a random effects model, concluded that it is difficult to disentangle the various effects and the impact of low-wage jobs is statistically indistinguishable from the impact of unemployment on future prospects

14 .unemployment Using data from ten years of the British Household Panel Survey Burchardt (2003) found that people adapt to their situation rather than being scarred by it and argues that life satisfaction is more likely to be adversely affected among those who have experienced a recent downturn in their circumstances than those who have experienced long-term low income

15 Scarring effects on health & well-being Unemployment while young also has important affects on health and wellbeing, including influencing psychiatric illness during young adulthood and psychological health and smoking as well as general satisfaction with life the length of time being unemployed is also important in reducing wellbeing. As the duration of unemployment increased, there were significant tendencies for rates of major depression, anxiety disorders, conduct disorders, substance use disorders and attempted suicide causal direction is not uni-directional.

16 Scarring effects on health & well-being cont. The social networks of young workers have been found to be closely tied to higher wellbeing, as well as to finding employment

17 Effects of scarring influenced by the characteristics of the event (e.g. the length and frequency of unemployment) its nature (e.g. voluntary or involuntary unemployment, was it due to a gap year or dismissal/redundancy?) the characteristics of the individual (e.g. their resilience, qualifications etc.) the reactions of others to the events and to the person (e.g. some employers may treat different people suffering a similar spell of unemployment differently, and also peers, families or advisors assisting them may react differently)

18 Why scarring? Six broad inter-related groups of theories on the mechanisms that may lead to scarring: 1. employer responses 2. the young person s human capital 3. early life experiences 4. their expectations 5. job search 6. the influence of external factors in the economy and society (peers; local economy; cycle of some needing to accept first poor job, then becoming unemployed later - entrapment hypothesis - etc.)

19 Transmission mechanisms are unclear Demand-side: perhaps periods of unemployment are used as negative signals by employers, so reducing the likelihood of being employed, or being offered lower pay or lower level jobs may get discrimination and red lining etc.

20 Transmission mechanisms cont. Supply-side factors may be important, such as reduced human capital due to unemployment at a crucial stage of their career leading to reduced generic and/or technical skills acquisition or skills redundancy or a loss of confidence by the individual or perhaps underlying issues from when young etc.

21 Supply-side factors cont. Pay potential may be affected through damaged or decayed cognitive and non-cognitive skills reducing the level of human capital Cognitive skills (e.g. learning skills and the ability to process information) are likely to affect the productivity and adaptability of a worker and hence their likely pay progression. Non-cognitive skills (for example, a person s dependability, self-discipline, inter-personal skills, communication, adaptability, consistency, persistence and self-confidence) affect labour market outcomes, including subsequent pay, and their wellbeing (Heckman, et al., 2006). Can non-cognitive skills be changed?

22 Reducing scarring effects?

23 Is the answer Work First? Stop young people becoming unemployed, or get them (back) into work quickly.

24 Work First For decades in the UK, Work First approaches seen as work is the best way out of poverty (HM Government 2010) As even if it is a poor job, people: gain work experience and some skills can demonstrate their employability directly to employers

25 But some criticisms of Work First Focus on dead-end jobs Revolving door of support low-pay no-pay cycle as work is often economically unsustainable (recurrent poverty) lack of progression in jobs organisational support for unemployed people may aim at only the minimum skills to reach entry-level jobs creaming of those nearly job ready & parking of those far from job ready

26 Some criticisms of Work First (cont.) Work first does not prioritise intensive and long-term support or interventions for those facing complex barriers to the labour market Yet such unemployed people needed substantial support when seeking sustainable work

27 Move towards sustainable employment? According to one definition, Sustainable employment means: that an individual remains in work, either in one job or by moving to other jobs; & work that provides opportunities to advance and earn more (UK National Audit Office 2007: 7)

28 Monitoring & targeting of job support Until 1980s, most UK policies evaluated by: 1. input measurements (e.g. the amount spent on training or number of training courses run) 2. output measures (e.g. the number of people trained or having been given advice etc.) 3. Then outcome measures such as the entry of unemployed people into work 4. Work Programme (2011) rewards for remaining in employment (up to 2 years) (supported by Freud 2007)

29 Direction of travel? These trends suggest we have moved (in some ways) towards more time sustainability jobs objectives, but the next stage could be to focus more on: longer-term and other sustainability outcome measures, especially progression in employment (for those that want progression) (e.g. in terms of income, working conditions and contracts, skills acquisition and utilisation etc.)

30 Policy cont. Career progression not any job Focus on a career or career progression (for those wanting it) including having a skills set that facilitates long-term employment security, support for skills development, and promotion, encourages a person s own career self-management (in addition to technical & job search skills) May sometimes also be based on job mobility; moving between employers, with employers helping to improve the employability and careers of employees

31 Anti-scarring policies

32 Some anti-scarring policy issues Demand for labour - suitable and high quality job opportunities Greater support for those having experienced unemployment, (improved education opportunities, possibly in a workplace setting; support for those in mid-career; reduce the length and frequency of unemployment A balance between longer-term career progression and quick entry into a job. A move towards a more sustainable Career First approach Scarring may also be the result of early experiences

33 policy issues cont. There appear to be parallels with experiences of other groups, such as women leaving the workforce for childcare - holistic effective and efficient policies (how policies delivered is important) A recognition of the importance and value of appropriate careers information, advice and guidance at early stages in life and at key decision points thereafter The value of healthy working lives initiatives in encouraging those in work to adopt a healthier lifestyle

34 Conclusions Long term scarring effects of youth unemployment, especially in terms of: pay (and type of job); unemployment; health and wellbeing Some young people are particularly disadvantaged (NEETS, living in areas of multiple deprivation) so how to support them and improve their resilience? Complex reasons (perhaps linking back to early years)

35 Conclusions cont. Support needs to be holistic, flexible and based on the young people s identified needs it should be aimed at sustainable employment Recruitment of, and support for, employers crucial

36 Thank you for listening

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