Van Ootegem, Luc; Verhofstadt, Elsy (2017). 'On the long-run impact on well-being of leaving school in a bad economic situation' Paper presented at the annual conference of the HDCA, Cape Town 2017.
For years now, the economic performance of the world economy is not good. The great recession and the accompanied rise in youth unemployment raises fears about “a lost generation” (Bell and Blanchflower, 2011). This kind of fear refers, in general, to the potential long-run negative effects of graduating or leaving education during a period with bad economic circumstances. In general, long-run effects are effects that persist (long) after the economy recovers. There is for the moment only derived evidence that graduating in recessions may also cause scars within non-material domains such as health and well-being. Daley and Delaney (2013) found unemployment throughout adulthood to affect psychological distress at the age of 50. Similarly, Schröder (2013) found some evidence that exogenous job loss early in the career may affect mental and physical health up until 25 years later. Unemployment may also generate long-term effects on health and well-being if it results in persistent feelings of insecurity (Knabe and Rätzel, 2011). Past unemployment causes reductions in life satisfaction during the years after having regained employment (e.g. Clark et al., 2001).
Specifically in this paper, using information of the European ‘Survey of Health, Aging and Retirement’ (SHARE), we will examine if the life situation at present (being 2007 and 2011, wave2 and wave4 of SHARE) of people aged at least 50 years old is depending on the situation in the past when they left education (at a moment between 1925 and 1993). The data offer information about the present life satisfaction (measured on a 0-10 scale), health and wealth and many determinants of well-being ( gender, age, education, living with partner). Also, we measure self-reported or perceived capabilities by using nine of the twelve questions of the CASP-measure. CASP-12 is a multi-dimensional measure of the quality of life and is based on four subscales: control, autonomy, self-realizations and pleasure. The items of the subscale pleasure are not used in the calculation of the capabilities measures as they are not related to capabilities. Using the data of ‘Sharelife’ (Schröder, 2011) Wave 3 (2009), we can create variables that reflect the “past situation”, i.e. the situation at the moment of leaving education and the moment before leaving education (health status when being a child, books at disposal and knowledge of mathematics when being ten years old).
We consider two variables to approximate the situation of the individual when leaving education. First, we have information about the professional situation as it was at the moment of leaving education (work situation, unemployed, looking after family,… ) available in the Sharelife. Secondly, we create a more general economic variable using data from the Maddison project. Each respondent is assigned a ‘personal GDP-growth number’, being the GDP-growth in the year of the end of his full-time education.
We have preliminary findings that show that for both definitions of a bad start, it influences current health and wealth and life satisfaction of 50+ years old people. Through an effect on current health and wealth, there is also an indirect negative effect on life satisfaction. These results hold when we control for health and wealth and circumstances (health or intellectual situation) before leaving school and also for other variables reflecting the current capabilities. This significant long-run impact implies that we under-estimate the negative effect on well-being of the present economic downturn.