The wage scar from male youth unemployment

We utilise the National Child Development Survey to analyse the impact of youth unemployment upon the wage up to twenty years later. We find a large and significant wage penalty, even after controlling for education, region and a wealth of family and individual characteristics. Our estimates are robust to an instrumental variables technique, indicating that the relationship estimated between youth unemployment and the wage is causal. Our results suggest a scar from early unemployment in the magnitude of 13-21% at age 42. However, this penalty is lower, at 9-11%, if individuals avoid repeat exposure to unemployment. (c) 2005 Elsevier B.V. All rights reserved.