The cumulative disadvantage of unemployment: Longitudinal evidence across gender and age at first unemployment in Germany

Abstract:

Unemployment is an important predictor of one’s future employment success. Yet, much about the endurance of unemployment effects on workers’ careers remains poorly understood. Our study complements this knowledge gap by examining the rate of recovery in the quality of careers following an unemployment spell among a representative sample of previously unemployed workers with different socio-demographic characteristics in Germany. We apply a new dynamic measure that quantifies the quality of binary sequences, distinguishing between “good” (i.e., employment) from “bad” labor force status activities (i.e., unemployment and inactivity). We use longitudinal data from the German Socio-Economic Panel (GSOEP) before the Great Financial Recession over the period 1984–2005 and deploy a series of hybrid models that control for unobserved heterogeneity. We find a non-linear recovery process after unemployment across gender and age groups. That is, after a period of recovery, career quality worsens. Least impacted are men experiencing unemployment when aged between 25–34 years, while men 55–66 have rather stable, though stronger, penalties. Furthermore, we find that recovery processes are contingent upon when respondents experience unemployment.