Adverse effects of parental unemployment on young adults’ labour market experience

Wouter Zwysen, ISER, university of Essex

Wouter Zwysen

Unemployment, intergenerational, matching

Both in the academic literature and in the media, the study of intergenerational unemployment and cycles of disadvantage has received a lot of attention. Parental experiences such as being out of work may impact adversely on their children by limiting their opportunities from early on. Previous research has established a correlation between parental unemployment and that of their children using cohort studies. The focus of these studies has been to infer causality, using instrumental variables or joint estimation. We use propensity score matching to construct a comparable control group. Using the first wave of Understanding Society we have rich information on both parents and children to match on. The advantage of propensity score matching is that it does not make parametric assumptions about confounders. It also increases the power of our estimates. We compare labour market experiences of children whose fathers did not work when aged 14 to those of children whose fathers did work, but in a low-paid job, rather than comparing to all working fathers. These two groups are likely to face adversity on the labour market, thus increasing comparability. We also go beyond unemployment to investigate job quality. We find that children of non-working fathers are about 20% less likely to be in employment themselves. When looking at those young adults in employment though, growing up with a non-working father does not have any discernible effect on the quality of a job. Our results indicate that children whose father was out of work at age 14 face a higher risk of being out of work as young adults, but do not get lower quality jobs once employed. We simulate an unobserved confounder which shows that our results are robust to misspecification.