Understanding cross-country variation in the long-term consequences of graduating at a bad time: A comparison of five European countries

This working paper investigates if graduating in a bad economy scars careers of youth cohorts in terms of increased future unemployment and overrepresentation in fixed-term and involuntary part-time work. These dynamics of scarring are explored from a cross-country comparative perspective, focusing on the UK, Germany, Switzerland, Spain and Finland. These countries make up for interesting cases as they differ remarkably on institutional and economic dimensions such as for example the vocational orientation of their education systems, the strictness of employment protection legislation, active labour market policies to support job-search success of jobless young people and the general level of prevalent youth unemployment, which are assumed to be related to cross-nationally distinct patterns in scarring effects. The focus of the empirical analysis is on long-term effects of the level of aggregate youth unemployment at graduation on career evolvement of school-leaver cohorts over 12 years since their graduation, distinguishing between educational groups while allowing for gender effects. All in all we find that bad luck in timing of labour market entry can scar future careers over the long-run. A bad economy at labour market entry may thus be seen as a major risk factor for the future integration of youth cohorts in very different institutional contexts.