Unemployment and its scarring effect on wages in Germany: evidence from linked employer-employee data

PurposeAssess and compare scarring effects of unemployment in Germany to other countries and to consider firm heterogeneity.Design/methodology/approachThe author uses linked employer-employee data to analyze the effect of unemployment and its duration on future wages in Germany. Using administrative data on workers and firms in Germany and considering registered and unregistered unemployment episodes, the results show long-lasting wage losses caused by unemployment incidences. Furthermore, the estimations indicate that unemployment duration as well as selectivity into firms paying lower wages is of particular relevance for the explanation of wage penalties of re-employed workers.FindingsUnemployment causes massive and persistent wage declines in the future, which depend on the unemployment duration. Furthermore, reduced options of unemployed workers and selectivity in firms contribute to a large part of unemployment scarring.Practical implicationsFindings are relevant for current debates on unemployment and can help design measures to avoid huge costs of unemployment.Originality/valueThis paper analyses long-term unemployment scarring by considering not only unemployment duration but also selectivity in firms and its effect on the scarring effect.

Patterns and Persistence of Educational Mismatch: A Trajectory Approach Using Chilean Panel Data

The misalignment between workers’ educational levels and the educational level typically required for their occupations, namely educational mismatch, has become widespread. However, despite its potential costs, there is little evidence of this situation in developing countries. Using longitudinal and retrospective data of employment histories between 2009 and 2019, this paper conducts sequence analysis to construct a typology of educational mismatch trajectories among Chilean workers. We demonstrate that mismatch is a prevalent and persistent phenomenon. Once people enter the labor market, either as undereducated or overeducated workers, they tend to stay in such positions for extended periods of time. Moreover, we find significant wage penalties for workers in a mismatch situation. Results indicate that females and young, less-educated men are more prone to follow trajectories with longer periods of mismatch or unemployment. New avenues for research and the need for public policies looking at these phenomena are required to avoid people’s dissatisfaction due to a possible false promise that more education can improve their life standards.

Gender, Class and the Cost of Unpaid Care: An Analysis of 25 Countries

This article examines the relationship between gender, class and unpaid care for children and elderly household members across twenty-five countries. Using the microdata files of the 2015–2017 Luxembourg Income Study, we demonstrate that household income quintile shapes the relationship between resident caregiving and a) women’s diminished share of household income and b) the associated “wage penalty” women experience in paid employment, examining dual-headed heterosexual households and grouping countries at varying levels of GDP per capita. Our analyses demonstrate that both eldercare and childcare have a negative impact on women’s economic outcomes, yet the effects of both types of unpaid care vary across class. Overall, childcare has a larger impact for women in lower income households, while eldercare has a larger impact for women in higher income households. However, the wage penalties experienced by wealthier women due to either type of potential care responsibilities are considerably less than those experienced by women in poorer households. Together, these data suggest that unpaid resident caregiving has effects that are both highly gendered and highly classed, leading to intersectional disadvantages for women performing unpaid care within poorer households across countries, and with effects that, in some cases, are further amplified within low-GDP countries.

Education–Occupation Mismatch and Its Wage Penalties in Informal Employment in Thailand

This study examines the incidence of vertical mismatch among formal and informal workers in Thailand. Using the 2011, 2013, and 2015 Thailand Household Socio-economic Surveys, the study analyzes the relationship between vertical mismatch and wage penalties and premiums across four types of workers: formal government, formal private firm, informal private firm, and informal own-account workers. The incidence of overeducation is modest among the oldest cohort (8.7%) but prevalent among the youngest cohort (29.3%). Government employees face the highest overeducation wage penalties (28.2%) compared to matched workers, while in private firms, informal workers have consistently higher overeducation wage penalties than formal workers. Educated young workers are increasingly absorbed into low-skill informal work in private firms and face large overeducation wage penalties. The inability of many young workers to capitalize on their educational investments in Thailand's formal labor market is a concern for future education and employment policy development in Thailand.

Back to work: the effect of a long-term career interruption on subsequent wages in Switzerland

This paper measures the effect of a long-term career interruption on wages after re-employment. Using data from the Swiss Household Panel (SHP) and a fixed effects estimation method allows us to account for time-constant unobserved heterogeneity. We find a significant wage penalty of about 7% in the first year after re-employment if a worker takes up a job with the same characteristics as the job previously held. This wage penalty finally vanishes after 5 to 6 years. Conducting subsample analyses for men and women, we uncover underlying heterogeneity of the effect. Compared to women, men tend to suffer more from a long-term career interruption, both in terms of a higher wage penalty during the first year of re-employment and a larger subsequent recovery time. Our findings support the assumption that human capital depreciation is not the only reason for wage penalties after re-employment.

Do Parental Leaves Make the Motherhood Wage Penalty Worse?

We assess if and how motherhood wage penalties change in response to the design of parental leave regulations. Focusing on Germany, we compare sweeps of reforms inspired by opposite principles. One allowed for longer periods out of paid work in the 1990s, the other prompted quicker re-entry in the labour market in the late 2000s. These reforms may have first exacerbated and later mitigated wage losses for new mothers, albeit each component of leave schemes may trigger separate, and at times zero-sum, mechanisms. We rely on Socio-Economic Panel (SOEP) data and a difference-in-differences design. Focusing on first-time mothers, we find that motherhood wage penalties were substantial (around 20–30 per cent of pre-birth wages) and also changed little during the 1990s. As parental leave reform triggered longer time spent on leave coupled with better tenure accumulation, wage losses for mothers remained stable in this first period. Following parental leave reform in the late 2000s, instead, the wage prospects of first-time mothers improved, thanks in part to shorter work interruptions and increased work hours. We suggest that the nuts and bolts of leave schemes can be fine-tuned to reduce child penalties and, thus, gender wage disparities.

Gender, motherhood, and the perception of just earnings: Results of a multifactorial (vignette) study

Gender pay gaps and wage penalties for mothers are well-established phenomena. Their persistence may be partially explained by the fact that the unequal distribution of rewards between genders is often perceived as just and legitimate. The goal of our study was to establish to what extent and under what conditions motherhood and fatherhood status affect perceptions of just inequalities. Using expectation states theories, we predicted that there would be greater acceptance of the unequal distribution of rewards between women and men with the same job experience in top-level occupations compared with bottom and mid level occupations. We also predicted that being a male or female parent would further accentuate the relationship between gender and occupational prestige, leading to acceptance of even greater income gaps between mothers and fathers. A vignette study conducted in 2017 on a representative sample of Polish respondents active in the labor force, which yielded approximately 38,000 observations, provides evidence partially conforming to our predictions. That is, willingness to tolerate differences in just earnings for men and women is higher in the high occupational status categories than in the medium and low occupational status categories. The effects of parenthood are less clear. Although the legitimized difference in earnings varies by age and parenthood status, we found rather moderate levels of motherhood penalties and much higher premiums for fatherhood, especially at the early stages of men’s careers. In addition, contrary to our predictions, mothers in high-prestige occupations were not penalized more than mothers in low and medium prestige occupations. Perceptions of legitimized inequalities between genders were independent of respondents’ characteristics.

Justice denied: Gender and Motherhood Pay Gaps in Poland

Motherhood wage penalties and the reasons for their persistence have received a great deal of attention in the sociological literature over the past twenty years. Rarely do these studies present results from Central and Eastern Europe, however. Using data from the nationally representative Polish Panel Survey (POLPAN) for the years 1988-2018, we estimate the size of the motherhood penalty in Poland. We show that while mothers and women in Poland incur significant wage penalties compared to men, even after controlling for a range of productivity and human capital characteristics, mothers do not earn less than women with no children. In order to address the argument that such disparities endure because they are viewed as just, we contrast our results with those of a multifactorial (vignette) study of fair earnings. The latter shows that such wage penalties are not perceived as just. In fact, we find no evidence of perceived just penalties for women and mothers with the same characteristics as men and fathers. Our results provide insights into the ongoing discussion of principles of legitimacy of inequality and perceptions of fairness.