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

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

Mark Regan and Barra Roantree
Report summary

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.

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IFS Working Paper W21/28
This paper provides evidence that finishing school when labour markets are weak leads to poor subsequent labour market prospects, particularly those leaving school at younger ages.