The long shadow of the recession

The British economy is currently emerging from its first recession in almost twenty years, during which GDP fell by more than in the recessions of the early 1980s and 1990s. In terms of loss of output, this recession was the worst since the Second World War. Despite this, unemployment rates have remained lower than in the recessions of the ’80s and ‘90s. Dr Mark Bryan outlines the evidence and the implications for policy.

 

Photo credit: Bill Dickinson

Young people have been badly hit. Youth unemployment remains stubbornly high at 19% for 16 – 24 year olds, and research presented this week by the Institute for Social and Economic Research at The Work Foundation, suggests that the current generation of young people may well be “scarred for life” by their recent experiences in the job market, especially those from low educated backgrounds.

Following the most prolonged downturn since the 1930s, recent economic statistics suggest that the economy is now recovery robustly, with rising consumer confidence, employment and output.

Does the good news mean it will soon be ‘business as usual’? At the Institute for Economic and Social Research, we have been looking into the long-term effects of recession and our findings indicate that people’s earnings and employment may suffer for years afterwards.

evidence suggests that young people leaving education in a recession suffer the consequences for years afterwards

In a number of projects, we have looked at how recession affects young people’s aspirations and their school leaving decisions, and how it impacts on the long-term job prospects of affected workers.

Reduced aspirations

We have uncovered evidence that high unemployment leads to reduced educational aspirations among schoolchildren from low educated backgrounds, but that it has no effect on those with more highly educated parents.

This is a concern not just because these children may under-perform in school and in later life, but because they may fall further behind their more privileged peers, with consequences for social inequality.

Other evidence suggests that young people leaving education in a recession suffer the consequences for years afterwards. In particular we find that men who started out during a recession had lower wages and were more likely to be unemployed or in non-standard work even 10 years later.

Part of the explanation may be the scarring effect of unemployment. In ongoing work we are looking at the how the unemployed fared at various times over the last twenty years, including two recessions and a boom.

Long-term unemployment

Even in good times, if a person is unemployed it is always more difficult to find a new job. But during recessions, we find that this scarring effect of unemployment is considerably worse and is much more likely to lead to a period of long-term unemployment.

Our findings underscore that recessions are doubly bad: they not only raise the number of unemployed, they increase the chances of staying unemployed for longer, with potential adverse effects on skills and employability.

Despite the strong recovery, the consequences of the recession could be with us for a long time yet.

Policy makers need to make sure that measures are in place to support young people emerging into the post-recession labour market.

Mark Bryan is a Senior Research Fellow at the Institute for Social and Economic Research.

This blog first appeared on The Work Foundation website. Mark Bryan will be a keynote speaker at a Work Foundation event: Young People in Recovery; from false stats to rewarding careers  to be held on June 4.

Leave a Reply