Daily Archives: January 12, 2015

Does graduating into a recession affect long-term job quality?

Graduating into a recession may not affect overall employment levels, but could it affect job quality? The theory here is similar to the employment scarring effect. By graduating into a recession, a proportion of graduates don’t acquire jobs that allow them to maintain or develop their skills. This harms their CV, and employers will continue to overlook them as they age, stalling their careers.

In this analysis, I will take professional and managerial employment as a proxy for a quality job. I realise that this is imperfect. Broad job categories can under- or over-state the skills actually required in particular jobs. Job categories are also known not to always match with subjective perceptions of skills use or job satisfaction. But this is the best I can do with readily available data from the census.

As can be seen from the slide below, with dots in the line for the group of most interest, it is hard to see evidence of a scarring effect. It looks like the early 1990s recession cohort are continuing their career climb – not shown, but there is a shift from jobs classified as ‘professional’ to those classified as ‘managerial’, as people move into more senior jobs.

prof and manager 2011

Another test of graduate outcomes is income. Unfortunately the census uses a category of $2,000 a week or more for all higher income earners. But taking this cut-off again we see little evidence (dotted part of the line) that our assumed recession graduates are significantly off-course in their careers. However, by dividing the group into undergraduate degree only and postgraduate we can see one reason why postgraduate study has boomed in recent years.

income 2011

Of course, we can’t rule out that there is some salary penalty hidden in the broad $2,000 a week or more category. But it is hard to argue based on this evidence that there is a significant cohort from the early 1990s who are still doing it tough in 2011.

None of the data sources I have been able to use in analysing this issue are fully adequate. But overall the results I have incline me against the scarring hypothesis. Based on this 1990s recession evidence, employers typically don’t write prospective employees off just because their careers get off to a slow start.