Being Young in Spain and the Scars from Recessions

Evidence from Spanish administrative data suggests that the Great Recession had long-lasting effects on employment and wages, with heterogeneous impacts across different groups of male workers.

Evidence from Spanish administrative data suggests that the Great Recession had long-lasting effects on employment and wages, with heterogeneous impacts across different groups of male workers. To assess the long-run effects of recessions on males’ careers, we develop a statistical model of cyclical fluctuations in the labour market. In the model, young workers are more likely to be employed in temporary jobs than older workers, increasing their likelihood of facing a job separation when a recession hits. Low job-finding rates during recessions imply that displaced workers will likely face a long period of unemployment and lower skill accumulation, feeding into worse future labour-market outcomes. Our results indicate that individuals with less than a high school education entering the economy at the start of the Great Recession suffered the highest lifetime earnings losses of about 12%. High school and college graduates experienced losses of about 9% and 8%. The interaction between skill accumulation and the dual labour market drives the long-lasting effects of recessions.