Born under a bad sign: the consequences of completing education when unemployment is high

Key findings

• The coronavirus pandemic has raised fresh concerns about the potential for a “lost generation”' of young adults who will end up bearing long-lasting scars from entering the labour market at an inopportune time.
  
  
• Using administrative data from Denmark covering the period 1996-2018, we show that young adults who finished education when the not-in-education employment-or-training (NEET) rate was higher than normal experienced lower levels of employment even 8 years later. For example, those completing education age 18 when the NEET rate is 1 percentage point higher than average were 0.5% less likely to be in paid work by age 26.
  
  
• We also find negative – though less persistent – impacts on earnings among those who are in paid work, with those completing education when NEET rates are higher than normal earning between 1.4% and 3.0% less at the start of their working lives.
  
  
• We find that these scarring effects are greater and more persistent for young adults with parents from the lowest-income backgrounds, and especially so for young people from low-income backgrounds who leave school at younger ages.