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Corroding the social? An empirical evaluation of the relationship between unemployment and social stratification in OECD countries

Final Report Summary - CORRODE (Corroding the social? An empirical evaluation of the relationship between unemployment and social stratification in OECD countries)

The CORRODE project is an extensive empirical investigation into the socio-economic repercussions of unemployment. Motivated by the Great Recession, we have conducted cross-nationally comparative statistical analyses that involve harmonized household survey data from 20-30 European and North American countries. The project is concerned with the economic consequences of unemployment, but also examines its impact along broader dimensions of social life. Besides looking at outcomes like household incomes and workers’ post-unemployment career prospects, the project research is documenting the relationships between unemployment and elevated risks of divorce, postponed family formation, declining political and social participation, and fewer educational opportunities in families where parents are experiencing job loss. Adding a systematic comparative perspective helps to shed light on the structural and policy factors that might mitigate the economic and social impacts of unemployment.

Our empirical research confirms that unemployment is often having significant adverse consequences, but also identifies sources of family-level resilience and broader societal contexts that help buffer citizens from the impacts of unemployment. In the economic domain, for example, we find that recessions lead to higher levels of economic inequality for up to a decade after the initial macroeconomic shock. Following job loss, household incomes drop and only begin to systematically rebound in the second year, but income and earnings prospects also strongly vary with unemployment duration and aggregate labour market conditions. We also obtain evidence that household income trajectories are less volatile in countries with more generous social policy institutions, and that the unemployment-related scars to workers’ longer-term earnings prospects increase under weaker labour market regulations.

Broader social repercussions of unemployment are equally visible in our data, yet again context matters. We find, for example, that on average either partner’s unemployment increases the risk of divorce, but also that husband’s unemployment puts couple relationships under particular stress the more traditional prevailing breadwinner norms in society. Likewise, fertility rates depend on employment status and the aggregate business cycle, but the groups most likely to postpone fertility during a recession are highly educated women in their first years in the labour market as well as women working part-time. We also see that families strive hard to maintain their children’s educational opportunities during a recession, but that reduced chances of access to higher education can result when parents experience unemployment. In addition, we observe the adverse effect of unemployment on the next generation’s educational attainment to be reduced in social democratic policy environments that feature low financial barriers to higher education and generous income protection in the event of unemployment. Finally, we also document important political consequences of unemployment, as deteriorating labour market conditions lower trust in the core institutions of representative democracy, especially in European countries. Among the unemployed themselves, there also is evidence of political alienation, although in particular so in countries that provide objectively more generous income support.