Unemployment and its medium- to long-term effects

Unemployment and its medium- to long-term effects

A reason to rethink labour market integration support schemes?

Author(s): Matteo Antonini

Key messages:
  • The consequences of a period of unemployment can be felt even after returning to work and are not limited to reduced financial resources.
  • Besides groups traditionally considered vulnerable to the negative consequences of a period of unemployment (e.g. older/low-skilled workers), new groups are emerging, including people with high levels of education.
  • Using an innovative longitudinal analysis shows a new professional instability for highly quali-fied people suggesting that existing social policies and labour market integration schemes should be adapted

Research on the medium and long-term effects of a period of unemployment is scant. Beyond a loss in financial resources associated with this period, we know very little about the types of career paths and risks formerly unemployed people incur once they are able to join again the labour market.

Using data from the Swiss Household Panel, we have created a method to gain insights into these career paths based on two samples that contain in each comparable individual (in terms age, nationality, education, career, etc.) with the difference that in the one sample, they have an experience of unemployment within the past 48 months and in the other they have remained in employment throughout this period. In so doing, we are able to highlight three important consequences.

Above all, while confirming the difficulties that older unemployed workers face, our research also points to the emergence of a new group at risk of long-term unemployment, namely highly-skilled workers. Secondly, occupational mobility appears to affect women differently to men as they are considerably less likely to change to a less prestigious job and more likely to do so after a period of unemployment. Finally, our research also highlights a significant increase in career instability, notably for two specific groups: the least qualified, who once unemployed have an increment of up to 54% in career instability, and workers previously employed in most prestigious occupations with an increment of 79% in career instability.

Taken together, our research clearly shows that labour market integration schemes should be adapted so as to offer more flexible solutions to the employed and avoid the medium and long-term effects of a period of unemployment, i.e. repeated or the long-term exclusion from the labour market and downward professional mobility.

The myth of the unemployed

Public opinion often perceives the unemployed as a compact entity. On the one hand, there is the world of work with its differences, its fluidity and its movements. On the other hand, we find the unemployed, an indistinct entity, interchangeably described as lazy, vulnerable, victim of greater forces or, in the words of Marx, the “reserve army” of capitalism.

However, when we look more closely at the careers of unemployed people in Switzerland, the situation is very different. Above all, there is no such thing as THE unemployed. Behind this label, there are countless stories of a constantly fluctuating population with ever changing new and different members. Despite this, we should be wary of falling into the other extreme and make the mistake of considering these differences as impossible to eliminate.

Taking the long view, the longitudinal perspective we propose in our study is revealing as it highlights the long-term effects of a period of unemployment. In scholarship these effects are well known. Several studies (e.g. Arulampalam 2001) have shown how the consequences of unemployment persist beyond the period of joblessness and may have effects even several years after returning to work. Thus, this so-called “scarring effect”, as it is called in the specialized literature, shows how unemployment not only affects income levels whilst being out of a job but also has lasting consequences on people who are back in the world of work (Dieckhoff 2011).

The longitudinal analysis

By analyzing data from the Swiss Household Panel (SHP), which is a survey that has been running since 1999 and sheds light, among others, on the careers of a large sample of people living in Switzerland, we are able to identify trends and gain insights into the consequences of a period of unemployment on occupational trajectories. Several reasons may be the result of reduced income just like fever may be the symptom of multiple diseases. To understand the possible causes, we analyzed the careers of 532 people residing in Switzerland who were unemployed for at least one month during the observation period. We analyzed these careers over a time period of 8 years, namely 48 months before the first month of unemployment and 48 months thereafter. The period before unemployment informs us about the start situation of each individual, whereas the period thereafter sheds light on the effects of unemployment.

At first glance, we have a major problem. Given the longitudinal nature of the study, how can we distinguish the effects of unemployment from those due simply to the passage of time? Even in the absence of a period of unemployment, careers evolve. For example, at the beginning of a professional career it is not uncommon to observe career progressions towards more prestigious positions within a very short time span. At a certain age, such career progressions become rare and then only involve a minority of the workforce. Moreover, not every period offers favourable circumstances. While career promotions are not uncommon during a period of strong economic growth, they are less frequent during an economic crisis. Therefore, when there is a stagnation in professional career development after a period of unemployment or even a reversal of trend towards less prestigious positions, how will we know whether this is an effect of the period of unemployment or a consequence of the national economic situation, or even the normal career development of a worker who has already reached a very prestigious position? In more general terms: what is our reference point for assessing the effects of a period of unemployment?

A methodology based on pairs of employed and unemployed people

We can overcome this problem by comparing the careers of unemployed people with those of the same gender and age who are employed and have at least two other characteristics in common with regard to cohort, nationality, residence, social origin, education level and job type (taking into account the data before unemployment). If, at a strictly statistical level, the sample composed of workers who have not experienced a spell of unemployment cannot be said to be an “identical twin” to the sample of people who have had a spell of unemployment, these two samples contain individuals that can be compared. For example, the unemployed young woman who has recently graduated from university and has problems finding her way into the labour market, has a “double” in the sample that includes people in employment, i.e. a young graduate who graduated from university at the same time and quickly found a job. Similarly, the manual worker who, after several years of work, found himself unemployed at the age of 50, in the other has a “statistical brother” who has kept his job. Or the highly-specialized worker, young and foreign, who remains unemployed for only one month waiting for a new contract, has a “double” in the other sample who, young and foreign, has not changed jobs. The careers of workers who have not experienced unemployment are set as a reference and they are used to describe the dynamics of the Swiss labour market. For the purpose of our study, they form a “control sample” and provide a reference point for our analysis on the effects of unemployment in the short and medium term. Using this methodology based on pairs of employed and unemployed people, we have been able to identify three negative consequences in relation with a period of unemployment.

Consequence 1: long-term unemployment

Long-term unemployment is generally defined as a period of uninterrupted unemployment of at least 12 months. Our definition is slightly different and is based on the analysis of careers during the 48 months after first being unemployed. If this status is very widely present during this 48 months period, we identify this person as a long-term unemployed person. This definition reduces the impact of short working periods and the risk of underestimating long-term unemployment. In our sample, long-term unemployed workers remain unemployed for an average of 34 months out of 48, although sometimes discontinuously. Long-term unemployment mainly affects older workers (50 years and over) and foreigners. Older workers have a higher probability of being in long-term unemployment than the rest of the population by almost 40 percentage points. Compared to Swiss nationals, foreign residents have a higher probability of long-term unemployment of 7.5 percentage points. Stigmatization and stereotyping are probably the primary sources for the difficulties foreigners face on the labour market. However, another group has a high probability (+15 percentage points) of long-term unemployment, namely workers with a high level of education (university or equivalent). Although this phenomenon remains largely understudied, other studies have also shown the vulnerability of highly skilled people as a result of a period of unemployment (Korber 2013; Li et al. 2000; Oesch/Baumann 2015; Weber 2006). This leads us to suggest that there is a definite need for reflection in terms of labour market integration and social policies for the long-term unemployed.

Consequence 2: the return to work in a less prestigious position

We define the return to work in a less prestigious position by comparing the situation in the 48 months before and after the onset of unemployment, drawing on the prestige categories used in the “Swiss socio-professional categories” (Joye and Schuler 1996). If the position held for most of the time before the onset of unemployment is more prestigious than the position held afterwards, we consider this to be a “decrease” in prestige. We find this negative effect particularly among women. In the absence of unemployment, they have a probability of changing jobs to a less prestigious position nearly 39 percentage points lower than for men. However, after a period of unemployment, the probability is 6 percentage points higher compared to men. Although Swiss women's participation in the labour market is among the highest in Europe, they are still subject to discrimination (Buchmann et al 2013). Moreover, family responsibilities are a burden that rests largely on the shoulders of female professionals. As a result, after a period of unemployment, female Swiss workers may be pushed to choose or target less prestigious but more accessible jobs in an attempt to maximize their chances on the labour market, counterbalance the effects of discrimination and move into lower-responsibility positions that allow for greater ease in terms of reconciling private and professional life.

Consequence 3: increased instability of career paths

We measure increased instability of career paths by counting the number of changes in occupational status and the length of periods of work, unemployment or inactivity. Once again, we compare the 48 months before and after the start of unemployment. Two groups are particularly affected by a significant increase in career instability: (a) people at the lowest levels of the socio-professional scale (low level of education, employed in work that does not require any qualifications); and (b) workers previously employed in most prestigious occupations. In comparison to the rest of the population, the first group experiences an increment between 23 and 54% of career instability, whereas the second group undergoes an increment of 79% in career instability. Given the difference in the economic, social (knowledge, skills, qualifications) and educational (training, experience) capital of these two groups, we can distinguish two forms of instability. For workers at the bottom of the socioeconomic scale, instability probably takes the form of precariousness. Given their situation at the outset, there are no less prestigious positions to get back to in the labour market, but more accessible positions (they are already at the bottom of the ladder), nor can they stay outside the labour market for too long (they have limited economic resources). Their only solution is to rely on all employment opportunities, even short-term contracts. The opposite probably holds true for professionals at the top of the socio-economic ladder, for whom instability takes the form of flexibility. Given the advantageous position occupied by these people, they are able to constantly reposition themselves on the labour market, or even to remain inactive for short periods so as to find the most suitable occupation.

A call for flexible support mechanisms

Our research clearly dispels the myth of the unemployed as a homogeneous group made up of people with the same characteristics (lack of qualifications, vulnerable, etc.) and the same problems to solve with undifferentiated social policies. We have illustrated how different groups of unemployed people suffer different types of consequences due to a period of unemployment. We have identified three of the consequences although there may certainly be others, not necessarily negative. Moreover, we have also shown that in addition to the groups traditionally considered to be vulnerable, new groups are emerging, including, in particular, professionals with a high level of education. Therefore, taking all into account, it seems obvious that we should give preference to labour market policies that allow for support measures adapted to the specific conditions individuals have to face in the event of unemployment.


Dr Matteo Antonini, research assistant at the Institut et Haute Ecole de la Santé La Source, University of Applied Sciences and Arts Western Switzerland; member of the research and teaching lab « Qualité et sécurité des soins ». The content of this policy brief stems from his doctoral thesis and reflects his personal views. Matteo Antonini defended his doctoral thesis at the University of Lausanne as part of the NCCR LIVES doctoral programme. Email: m.antonini@ecolelasource.ch

LIVES Impact (ISSN: 2297-6124) publishes regularly briefs with policy-relevant research findings from studies  conducted at the National Centre of Competence in Research LIVES “Overcoming Vulnerability: Life-course perspectives” (NCCR LIVES). It is aimed at professionals, public officials and representatives active in social policy and related fields.

Series Editor: Pascal Maeder, KTT Officer, pascal.maeder@hes-so.ch 

Archives: www.lives-nccr.ch/impact