Scars of recessions in a rigid labor market

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Scars of Recessions in a Rigid Labor Market AbstractWe study the impact of graduating in a recession in Flanders (Belgium), i.e. in a rigid labor market. In the presence of a high minimum wage, a typical recession hardly influences the hourly wage of low educated men, but reduces working time and earnings by about 4.5% up to twelve years after graduation. For the high educated, the working time is not persistently affected, but the penalty on the hourly wage (and earnings) increases with experience, and attains roughly -6% ten years after labor market entry. We also contribute to the literature on inference with few clusters.

Scars of early non-employment for low educated youth: evidence and policy lessons from Belgium

“…Accordingly, we divide the sample between low and high educated, with the former having completed at most secondary education and the latter having a higher level of education. 9 In doing this we follow Cockx and Ghirelli (2015) since the Belgian institutional setting entails different sources of rigidities for blue and white collar workers and because there is a clear correspondence between the educational level and the worker's function (see Section 2).…”

“…Oreopoulos et al (2012) for Canada, Kahn (2010) for US, Brunner and Kuhn (2014) for Austria). Among this literature, Cockx and Ghirelli (2015) offer a particularly relevant contribution by investigating the scarring effect of graduating in downturns for Flanders based on our data. Therefore, we use their results in order to improve the credibility of our exclusion restriction relative to the aforementioned literature that applies the same IV approach to study the long-term effects of youth unemployment for different countries.…”

“…Since our study builds upon the research of Cockx and Ghirelli (2015), we dedicate to this study the rest of the section. Overall, the authors show that graduating during downturns inflicts persistent penalties for both low and high educated Flemish youth but that this scar occurs though different channels depending on the educational level.…”

“…Thus, Cockx and Ghirelli (2015) distinguish between "low educated" (with at least secondary education) and "high educated" (with higher education) new graduates by exploiting two features of the data. First, there is a clear correspondence between low educated and blue collar workers as well as between high educated and white collar workers: within the first 6 years after graduation, 70% of low educated are prevalently employed as blue collar workers, while this figure corresponds only to 14% for the high educated (see Table 3 in Appendix A).…”

Differential effects of graduating during a recession across gender and race

“…On the other hand, Raaum and Røed (2006) find that the effects of the unemployment rate experienced in youth tend to be more persistent for those with advantaged backgrounds in Norway. Moreover, a recession at entry could increase the incidence of nonemployment in subsequent years without affecting the wage rate for less-educated men in countries with a rigid labor market structure such as Belgium (Cockx and Ghirelli 2015) and Spain (Fernández-Kranz and Rodríguez-Planas 2015). Therefore, my findings may not be generalizable to minorities in countries with rigid labor market structures.…”