Scarring Dreams? Young People's Vocational Aspirations and Expectations During and After Unemployment

Abstract

Young people's early‐career unemployment experience has been found to have long‐lasting effects, resulting in lower earnings even decades later. However, while this so‐called "scarring effect" is well established, there is still little knowledge about the mechanisms through which it comes about. We take a closer look at the period that produces the wounds that later turn to scars. Drawing on a panel survey in which young adults in Austria were interviewed once at the beginning of an unemployment period and again one year later, we study how job aspirations and expectations changed during this period. We find that respondents on average lowered their aspirations and expectations over time, particularly those who experienced latent deprivation during unemployment. Furthermore, while the aspirations and expectations of those who were unemployed at the time of the second interview remained relatively unchanged, those who were employed lowered their expectations and to some extent also their aspirations. Our results suggest that research should pay more attention to the heterogenous effects of early‐career unemployment: It produces scarred dreams for some while others manage to keep their aspirations and expectations alive.