05.08.2015Schmelzer, Hlaimi 1 Unemployment and its scarring effect on post- unemployment career in...

19.04.23 Schmelzer, Hlaimi 1

Unemployment and its scarring effect on post-unemployment career in UKPaul Schmelzer, Boubaker Hlaimi

24.07.2007

QMSS Conference, Prague, Check Republic

Schmelzer, Hlaimi 219.04.23

Outline

1. Introduction

2. Theoretical Background

3. Main Hypotheses

4. Data, Variables, Methods

5. Main Results

6. Summary


Introduction – Research Question

Analytical Focus:

Has unemployment a scarring effect on the re-enter status and the growth for different educational groups in UK

Specific questions: Re-entering the labor market after unemployment do employment

career take a different future profile compared to those who have not been unemployed?

Does prolonged unemployment duration has a scarring effect on re-enter opportunities and subsequent growth of unemployment career?

Theoretical Background

Many studies strongly suggest a scarring effect of unemployment (for UK Arulampalam 2001, Gregory an Jukes 2001, Gregg 2001)

There have been a shift towards unemployment benefits and positive effects on duration of unemployment (for USA and Germany: Gangl 2004, for Canada Belzil: 2001)

unemployment benefits => longer job search => better match However they do not differentiate between educational groups Many studies compare only pre- and post-unemployment

wages and have not control group (lacking unemployment spells)

Researchers mainly focus on income for gains/losses and not on status


Main Hypotheses

Human capital theory: unemployment devaluates firm-specific skills

and thus has a scarring effect on post-unemployment career

But we analyze early careers with

1. few employment experience and

2. high rate of mismatches (unstandardized educational system)

unemployment can be used to find a better match

position However, we believe that impact of unemployment is different for

different educational groups


Main Hypotheses (Re-entry into the labor market) High productivity workers (tertiary education) might use unemployment

phase to find a better match

Higher educated do not take the first available job they get They have got higher previous income

Return wages are higher (employment insurance)

Partner usually also have high wages supporting them by the work search

There is no competition for tertiary education by other educational groups Higher educated have got an option to decide for an adequate job

They are pulled into the labor market

They perform better re-entering labor market than lower qualified

They do not loose in status by re-entering labor market compared to the end of the

last job

Prolonged searching phase might even improve the re-entry status and growth


Main Hypotheses (Re-entry into the labor market) Low productivity workers (primary education) are in competition with

more qualified workers

Lower educated are forced to take the first available job Low previous income

Return wages are low (employment insurance)

Low or no support by partners

Sanctions by job agencies when not taking an offer

=> They are pushed into the labor market

=> They perform worse re-entering the labor market than higher educated

=> They loose in status compared to the end of the last job

=> Prolonged unemployment phase does not improve re-entry status and growth (no

offers before)



Data

British Household Panel Survey (BHPS) from 1980 to 2003

(including retrospective data from 1980 to 1990), Northern Ireland

and the North and West Highlands are excluded

Sample definition: Persons who left the educational system between 1980 and 2004, excluding

persons older than 30

Gaps of less than 8 months between two educational episodes are closed

Starting sample: 2900 young men and women


Variables Educational cohorts

1980-1984, 1985-1989, 1990-1994, 1995-1999, 2000-2004

Gender

Type of contract and mismatches fixed-term vs. permanent contract

full-time, part-time contract, self-employment

Educational classification Modified CASMIN classification: 1. primary without 2. primary with qualification 3.

O-Level 4. A-Level 5. lower tertiary 6. higher tertiary

Region Middle, South, North, Scotland

Regional unemployment rate

Industry modified Singelmann classification


Methods Statistical methods:

Linear Mixed-effects models

Research window is 10 years when people left their education

Unbalanced data with 6.6 measurement points on average

Dataset covers on average 7 years

Time: starting time “0”

Subjects total 2928

Subjects with at least one unemployment spell 909 Dependent variable:

Occupational status measured in ISEI-Score


Methods (random effect models)

Closure of inactivity (unemployment) gaps but using this information

for random effects models (gaps are not missings)

Modeling two phases: pre-unemployment phase and post-

unemployment phase


Methods

Table 1: Person-period data with unemployment and full-time educational spells

ID S.N. Time1 Status Dur. Un. Dur. Educ ISEI

1 1 12 1 0 0 40

1 2 24 1 0 0 40

1 3 36 2 12 0 -

1 4 48 2 12 0 -

1 5 60 3 0 12 -

1 6 72 1 0 0 30

1 7 84 1 0 0 30 ID S. N. Time1 Time2 Status Last job Re-employm. Dur. Un. Dur. Educ ISEI

1 1 12 0 1 0 0 0 0 40

1 2 24 0 1 1 0 0 0 40

1 6 72 0 1 1 1 24 12 30

1 7 84 12 1 1 1 24 12 30

30

35

40

45

50

55

60

65

70

0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 time analysis: months

ISEI

Pre-unemployment intercept

Pre-unemployment slope

Post-unemployment intercept

Post-unemployment slope

Inactivity spell (unemployment, full-time education, something else)

Pre-unemployment phase


30

35

40

45

50

55

60

65

70


Primary

without qual. Primary with

qual.

O-Level A-Level

Lower tertiary Higher tertiary

ISEI


Model 1 Model 2 Model 3 Model 4

Time -0.00 0.00 0.00 0.00

time1: post-unemployment 0.02 * 0.03 ** 0.02 * 0.02 *

Primary without qual. (ref.)

Primary with qual. 2.56 * 2.41 * 2.44 * 2.48 * O-Level 5.09 *** 5.05 *** 5.06 *** 5.11 *** A-Level 9.06 *** 8.98 *** 8.99 *** 9.02 *** Lower tert iary 17.73 *** 17.52 *** 17.55 *** 17.61 *** Higher tert iary 25.42 *** 25.31 *** 25.32 *** 25.37 ***

Last job

Primary without qual. -0.33 0.14 0.17 0.15 Primary with qual. -0.65 -0.84 -0.85 -0.88 O-Level -1.29 *** -1.00 ** -0.99 ** -1.08 *** A-Level -1.46 *** -1.07 ** -1.03 ** -1.11 *** Lower tert iary -3.11 *** -3.81 *** -3.79 *** -3.86 *** Higher tert iary -2.52 *** -2.44 *** -2.39 *** -2.51 ***

Post-unemployment job

Primary without qual. -1.66 * -1.52 * -1.55 * Primary with qual. 0.64 0.79 0.77 O-Level -1.12 * -0.92 + -0.83 A-Level -1.52 ** -1.31 * -1.31 * Lower tert iary 2.78 ** 2.93 ** 2.92 ** Higher tert iary -0.31 -0.16 -0.31

Duration first employment -0.01 * -0.02 *

Why left job (before unemployment)

Promoted 0.18 Temporary contract 0.82 Made redundant 0.99 Dis missed 0.66 Other reasons -0.15 Missing -1.24

Results: pre- and post-unemployment phase


continued

Time x

Primary without qual. (ref.)

Primary with qual. -0.00 -0.01 -0.01 -0.01 O-Level 0.03 ** 0.03 * 0.03 * 0.03 * A-Level 0.05 *** 0.04 *** 0.04 *** 0.05 *** Lower tert iary 0.07 *** 0.06 *** 0.06 *** 0.06 *** Higher tert iary 0.07 *** 0.07 *** 0.07 *** 0.07 ***

Constant 30.44 *** 30.43 *** 30.40 *** 30.44 ***

Level 2.1 RI (l s.d.) -2.42 -2.42 -2.42 -2.42 Level 2.1 RS (l s.d.) -1.61 -1.61 -1.61 -1.61 Level 2.2 RI (l s.d.) 1.89 1.88 1.88 1.87 Level 2.2 RS (l s.d.) 2.33 2.33 2.33 2.33 Corr(time, t ime 1) -0.39 -0.39 -0.39 -0.39 Corr(time, interc 2) -0.09 -0.09 -0.09 -0.10 Corr(time, interc 1) -0.28 -0.28 -0.28 -0.28 Corr(time 1, interc 2) -0.30 -0.31 -0.31 -0.31 Corr(time 1, interc 1) 0.08 0.09 0.09 0.09 Corr(interc 1, interc 2) -0.43 -0.45 -0.45 -0.44 lnsig_e 2.00 2.00 2.00 2.00 Number of subects 18365 18365 18365 18365 Log likelihood -67323 -67309 -67306 -67303 AIC 134739 134722 134719 134720 BIC 135099 135128 135134 1351655 + p<0.10, * p<0.05, ** p<0.01, *** p<0.001 Full set of control variables (intercept): dummies for cohorts, panel vs. retrospective, sex, durat ion first employment squared (before first job), full-t ime vs. part-t ime, self-employed, permanent vs. temporary, b ranch of industry, regional unemployment rate for youths, regional dummies.

Results: pre- and post-unemployment phase

Schmelzer & Skopek 1719.04.23

Model 1 Model 2 Model 3

Time 0.00 0.00 0.01

Time1: post-unemployment 0.02 * 0.02 * 0.02 +

Last job x -0.16 -0.11 -0.05 Primary with qual. -0.44 -0.46 -0.47 O-Level -1.03 * -1.06 * -1.05 * A-Level -1.13 * -1.17 ** -1.14 * Lower tert iary -3.27 *** -3.30 *** -3.28 *** Higher tert iary -2.63 *** -2.72 *** -2.64 ***

Duration unemployment x -0.18 * -0.16 * -0.16 * Primary with qual. 0.06 0.07 0.07 O-Level 0.03 0.04 0.04 A-Level -0.10 -0.10 -0.10 Lower tert iary 0.40 ** 0.43 ** 0.41 ** Higher tert iary 0.31 + 0.30 + 0.29 +

Why left job (before unemployment) Promoted -0.20 0.40 Temporary contract 0.65 1.11 + Made redundant 0.66 1.29 + Dis missed 0.13 0.69 Other reasons -0.40 0.09 Missing -1.66 * -1.12

Duration first employment -0.05 **

Duration employment square 0.00 *

Constant 30.36 *** 30.40 *** 30.42 ***


Continued

Level 2.1 RI (l s.d.) -2.42 -2.42 -2.42 Level 2.1 RS (l s.d.) -1.61 -1.61 -1.61 Level 2.2 RI (l s.d.) 1.89 1.88 1.88 Level 2.2 RS (l s.d.) 2.33 2.33 2.33 corr(time, t ime 1) -0.38 -0.38 -0.38 corr(time, interc 2) -0.10 -0.10 -0.10 corr(time, interc 1) -0.28 -0.28 -0.28 corr(time 1, interc 2) -0.30 -0.30 -0.30 corr(time 1, interc 1) 0.10 0.10 0.10 corr(interc 1, interc 2) -0.45 -0.45 -0.44 lnsig_e 2.00 2.00 2.00 Number of subects 18365.00 18365.00 18365.00 Log likelihood -67306.54 -67300.53 -67295.68 AIC 134719.08 134719.07 134713.37 BIC 135133.44 135180.34 135190.28 + p<0.10, * p<0.05, ** p<0.01, *** p<0.001 Full set of control variables like in previous model . Additional variables (slope 2): duration in full time education, duration something else.


30

35

40

45

50

55

60

65

70


ISEI

Pre-unemployment intercept

Pre-unemployment slope

Post-unemployment intercept

Post-unemployment slope

Inactivity spell (unemployment, full-time education, something else)


Wald test statistics

estimator in they variablit thereflects )ˆ(ˆ

valuesedhypothesiz and estimatedbetween distance themeasures ˆ

constants of vector r

constants ofmatrix Q

parameters ofector vˆ

ˆ )ˆ(ˆ ˆ

1

1 - '

QVQ

rQ

rQQVQrQW

Schmelzer 2119.04.23

Time in months

chi2(d.f. = 1) p Amount (ISEI)

For one month Primary without qualification 1 0.08 0.7833 -0.10 Primary with qualification 1 0.42 0.5192 0.43 O-Level 1 10.04 0.0015 0.97 A-Level 1 9.23 0.0024 0.93 Lower tertiary 1 40.20 0.0000 3.58 Higher tertiary 1 16.83 0.0000 2.82 Predicted median life time (predicted time) Primary with qualification 8.8 2.70 0.1001 -1.40 Primary without qualification 6.8 0.01 0.9255 -0.12 O-Level 6 0.43 0.5110 0.36 A-Level 5 0.05 0.8179 -0.11 Lower tertiary 4 27.80 0.0000 4.33 Higher tertiary 4.5 8.71 0.0032 3.26 20% still in unemployment (predicted time) Primary with qualification 23 3.73 0.0534 -3.66 Primary without qualification 17 0.21 0.6442 -1.04 O-Level 14 0.33 0.5627 -0.62 A-Level 12 4.19 0.0407 -1.93 Lower tertiary 8 15.49 0.0001 5.59 Higher tertiary 9 3.68 0.0550 4.10


0

.02

.04

.06

.08

.1

.12

.14

.16

.18

.2

.22

.24

Haz

ard

rate

0 2 4 6 8 10 12 14 16 18 20

time analysis: months

Primary without qualification

Primary with qualification

O-Level

A-Level

Lower tertiary

Higher tertiary

.1

.2

.3

.4

.5

.6

.7

.8

.9

1

Sur

viva

l pro

babi

lity

0 2 4 6 8 10 12 14 16 18 20

time analysis: months

Primary without qualification

Primary with qualification

O-Level

A-Level

Lower tertiary

Higher tertiary

Hazard rate and survaval probability for leaving first unemployment

Pre-unemployment phase


30

35

40

45

50

55

60

65

70


Primary

without qual. Primary with qual.

O-Level A-Level


ISEI

4.5

4

5

8.8

6.8

6


Time in months


For one month Primary with qualification 1 0.08 0.7833 -0.10 Primary without qualification 1 0.42 0.5192 0.43 O-Level 1 10.04 0.0015 0.97 A-Level 1 9.23 0.0024 0.93 Lower tertiary 1 40.20 0.0000 3.58 Higher tertiary 1 16.83 0.0000 2.82 Predicted median life time (predicted time) Primary without qualification 8.8 2.70 0.1001 -1.40 Primary with qualification 6.8 0.01 0.9255 -0.12 O-Level 6 0.43 0.5110 0.36 A-Level 5 0.05 0.8179 -0.11 Lower tertiary 4 27.80 0.0000 4.33 Higher tertiary 4.5 8.71 0.0032 3.26 20% still in unemployment (predicted time) Primary with qualification 23 3.73 0.0534 -3.66 Primary without qualification 17 0.21 0.6442 -1.04 O-Level 14 0.33 0.5627 -0.62 A-Level 12 4.19 0.0407 -1.93 Lower tertiary 8 15.49 0.0001 5.59 Higher tertiary 9 3.68 0.0550 4.10


Time in months


For one month Primary with qualification 1 0.08 0.7833 -0.10 Primary without qualification 1 0.42 0.5192 0.43 O-Level 1 10.04 0.0015 0.97 A-Level 1 9.23 0.0024 0.93 Lower tertiary 1 40.20 0.0000 3.58 Higher tertiary 1 16.83 0.0000 2.82 Predicted median life time (predicted time) Primary with qualification 8.8 2.70 0.1001 -1.40 Primary without qualification 6.8 0.01 0.9255 -0.12 O-Level 6 0.43 0.5110 0.36 A-Level 5 0.05 0.8179 -0.11 Lower tertiary 4 27.80 0.0000 4.33 Higher tertiary 4.5 8.71 0.0032 3.26 20% still in unemployment (predicted time) Primary without qualification 23 3.73 0.0534 -3.66 Primary with qualification 17 0.21 0.6442 -1.04 O-Level 14 0.33 0.5627 -0.62 A-Level 12 4.19 0.0407 -1.93 Lower tertiary 8 15.49 0.0001 5.59 Higher tertiary 9 3.68 0.0550 4.10


Time in months


For one month Primary without qualification 1 0.08 0.7833 -0.10 Primary with qualification 1 0.42 0.5192 0.43 O-Level 1 10.04 0.0015 0.97 A-Level 1 9.23 0.0024 0.93 Lower tertiary 1 40.20 0.0000 3.58 Higher tertiary 1 16.83 0.0000 2.82 Predicted median life time (predicted time) Primary without qualification 8.8 2.70 0.1001 -1.40 Primary with qualification 6.8 0.01 0.9255 -0.12 O-Level 6 0.43 0.5110 0.36 A-Level 5 0.05 0.8179 -0.11 Lower tertiary 4 27.80 0.0000 4.33 Higher tertiary 4.5 8.71 0.0032 3.26 20% still in unemployment (predicted time) Primary without qualification 23 3.73 0.0534 -3.66 Primary with qualification 17 0.21 0.6442 -1.04 O-Level 14 0.33 0.5627 -0.62 A-Level 12 4.19 0.0407 -1.93 Lower tertiary 8 15.49 0.0001 5.59 Higher tertiary 9 3.68 0.0550 4.10


Summary

30

35

40

45

50

55

60

65

70


Primary

without qual. Primary with

qual.

O-Level A-Level


ISEI

Thank you for your

attention.


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