Moderators of unemployment and wage scarring during the transition to young adulthood: evidence from Norway

Abstract

Entering the labour force is one of the most significant life events for young adults and is a central element of the transition to adulthood. Employment ideally provides − in addition to material security − social integration, identity and status. The experience of unemployment or employment instability during young adulthood may have long-term negative effects on labour market integration – so called scarring effects – as well as on subjective and objective well-being (Bell and Blanchflower, 2011; Gregg and Tominey, 2005; Luijkx and Wolbers, 2009; Nilsen and Reiso, 2011; Nordström Skans, 2004; Schmillen and Umkehrer, 2013). The effect of scarring is well documented in the research literature, but less is known about the mechanisms behind such effects amongst young workers. The state of scarring on the individual has been explained by either exposure to early unemployment or observed and/ or unobserved individual and family characteristics affecting the job offers or employment possibilities available to young people over time. Individual and family characteristics related to multiple domains may reveal direct and indirect pathways that suggest causal mechanisms of labour market outcomes for young people (Caspi et al., 1998). The direct pathway proposes that personal characteristics may directly affect job-search behaviour and job performance, which in turn influence opportunities for job offers and employment stability in later life. The indirect pathway proposes that individual and family characteristics may negatively affect other life events, such as education – highschool completion and college attendance – that are vital for securing employment (Caspi et al., 1998).