Community Research and Development Information Service - CORDIS

ERC

CORRODE Report Summary

Project ID: 615246
Funded under: FP7-IDEAS-ERC
Country: Germany

Periodic Report Summary 2 - CORRODE (Corroding the social? An empirical evaluation of the relationship between unemployment and social stratification in OECD countries)

The CORRODE project is an extensive investigation into the socio-economic repercussions of unemployment. The project is extensive insofar as we concern ourselves with both the consequences of unemployment in the economic domain, i.e. for household incomes and career prospects, and also along broader dimensions of social life, e.g. in terms of divorce risks, delays in family formation, declining political and social participation, or even declining educational opportunities for children of parents who were experiencing job loss. The project also aims for extensive coverage in terms of the countries we are able to study, and thus our research combines in-depth studies of single country cases where the available data permits us to examine social and economic processes in great detail with broad, cross-nationally comparative work that involves data from 20-30 European and North American countries and thereby helps us to shed light on contextual and institutional factors that might mitigate the adverse economic and social impacts of unemployment.

The Financial Crisis and the ensuing Great Recession that has affected many Western economies since 2008 are providing both the motivation and the historical opportunity to study the repercussions of unemployment in conjunction with the worst economic downturn in at least a generation in many countries. To do so, we have harmonized and compiled a unique multilevel database that combines rich longitudinal microdata from representative household panel surveys and contextual information on macroeconomic conditions and policy environments at the regional and national level, thereby containing annual microdata from up to 30 countries since the early 2000s. This database then permits us to trace the life courses of several 100,000s of survey respondents over time periods that range from several years to more than a decade, so that we are able to observe their responses to unemployment, and also how such responses are varying across countries, over time, or also between population groups (e.g. by level of education or social class). We continuously update this database as new survey data becomes available, and we are also working hard to extend our database back to earlier historical periods for a smaller set of countries where suitable survey data exists.

Our analyses of this data do indicate very clearly that unemployment is having significant adverse social and economic effects. Empirically, we find that economic downturns increase economic inequality, and we also find that these adverse effects persist up to a decade after the initial shock. The shock to employment naturally plays a major role in this, as household disposable incomes drop after a job loss. We find incomes to begin rebounding in the 2nd year after the initial event only, and we also find that workers’ job prospects strongly vary with both unemployment duration and with aggregate labour market conditions. Furthermore, even when workers have located new employment, we can document negative effects of unemployment on their future wages, especially in the early years in their new job. And as expected, we also see that economic adversity creates social repercussions. We find, for example, that husband’s unemployment increases the risk of divorce, that unemployment decreases political trust and leads to political if not social alienation, and also that unemployment of parents reduces educational opportunities for their adolescent children in the transition to vocational or higher education. In many of our analyses, we obtain evidence that these adverse implications of unemployment are mitigated in the welfare regimes of Northern Europe that provide more generous support to the unemployed, but that e.g. also feature more effective public support of educational attainment. In current work, we focus e.g. on documenting potential longer-run effects of unemployment, and on identifying further sources of resilience at the household level.

Reported by

JOHANN WOLFGANG GOETHE UNIVERSITAET FRANKFURT AM MAIN
Germany
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