Unemployment and qualifications

By Paul Walker 11/03/2014


Previously I have noted papers that deal with the effects of long-term unemployment on re-employment, see here, here and here. These papers show that being unemployed for a long period of time lowers your probability of get a another job. Do does long term unemployment affect different levels of qualification differently?

There is a paper, by Alexander Mosthaf, forthcoming in the Scottish Journal of Political Economy which asks Do Scarring Effects of Low-Wage Employment and Non-Employment Differ BETWEEN Levels of Qualification? The paper finds that for those with low-qualifications being in a low-wage job incurs a lower risk of future unemployment when compared to being unemployed. But for those with higher qualifications the risk of unemployment is no different given that you are in low-paid worker or unemployed.

The idea underlying the results is that if employers interpret the job search behaviour of workers as a signal for their future productivity – more job search implies lower productivity, if you were high productivity you would have gotten a job quickly – taking up a low-paid interim job as well as being unemployed is associated with negative signalling effects. As the incidence of unemployment and low-wage employment is more typical for workers with lower qualifications, the paper argues that negative signals may be lower for workers with low qualifications and stronger for workers with high levels of qualification.

The paper’s abstract reads:

This study investigates how the effects of low-wage employment and non-employment on wage prospects vary depending on qualification. Based on theories on signalling effects, human capital and job search, we discuss why there may be heterogeneity in state dependence in both labour market states. We find that episodes of low-wage employment incur a significantly lower risk of future non-employment than episodes of non-employment for low-qualified workers. In contrast, for workers with a middle or high level of qualification the risk of non-employment is not significantly different when being low-paid instead of not employed.